9911796707
TMI Blog2015 (1) TMI 1378X X X X Extracts X X X X X X X X Extracts X X X X ..... und No. 3-Ad hoc disallowance of Rs. 1,49,875 being one- third of the aggregate entertainment expenses. Ground No. 4-Ad hoc disallowance of Rs. 1,64,792 being one- third of the aggregate promotional expense. Ground No. 5-Ad hoc disallowance of Rs. 6,99,284 being one- fifth of the foreign travel expenses of employees other than managing director. Ground No. 6-Disallowance of foreign exchange loss of Rs. 4,66,018 arising on account of revaluation of forward contract. Ground No. 7-Commission expenses of Rs. 10,72,801 disallowed in the financial year 2000-01 and reversed during the previous year not reduced from taxable income. Ground No. 8-Interest of Rs. 1,12,24,491 on delayed payment of purchase consideration disallowed on the contention that it is a capi tal expenditure." 3. The rival contentions have been heard and record perused. The facts in brief are that the assessee-company is engaged in the marketing and third party manufacturing of system imaging products, graphic system products, medical diagnostic imaging products and non-destructive imaging products. During the course of scrutiny assessment for the assessment year 2002-03, the Assessing Officer disallowed sales pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not brought to record any evidence to this effect to justify his contention. The disallowance is based totally on surmises and conjectures ignoring the bona fide nature of the expenses and ignoring the audited financial statements of the assessee. 7. We have considered the rival contention and found that the assessee has furnished details in respect of reimbursement of telephone and mobile expenses of its employees vide letter dated March 22, 2005. The genuineness of the expenses incurred was not in doubt and as per the terms of employment, the assessee has reimbursed one-third of the expenses incurred by the employees on telephone and mobile. Even if there are any personal expenses, they can be treated as perquisite in the hands of the employees. As per rule 3(8) of the Income-tax Rules, 1962, reimbursement of telephone expenses is not to be treated as perquisite in the hands of the employees with effect from the assessment year 2002-03. The hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co. v. CIT [2002] 253 ITR 749 (Guj) held that in a case of corporate entity, no disallowance can be made on account of personal use by the director/employees. Respectfully fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Rs. 6,99,284 being one-fifth of the foreign travel expenses of the employees (other than managing director) of Rs. 34,96,174 were attributable towards personal purposes and thereby liable for disallowance in computing the taxable income of the assessee. 12. Reliance was placed by the learned authorised representative on the decision of the hon'ble Delhi High Court in the case of Continental Seeds and Chemicals Ltd. v. Asst. CIT [2003] 1 SOT 393 (Delhi), in the case of Mahendra Oil Cake Industries P. Ltd. v. Asst. CIT [1996] 55 TTJ (Ahd) 711 and in the case of Raymon Glues and Chemicals v. IAC [1993] 46 TTJ (Ahd) 693. 13. The hon'ble Delhi High Court in the case of Continental Seeds and Chemicals Ltd. v. Asst. CIT [2003] 1 SOT 393 (Delhi) held as under : "The Income-tax Appellate Tribunal in this case has held that where the assessee provided all details in respect of foreign travel showing that the same was for business purposes and, the Commis sioner (Appeals), without placing any material or evidence or cogent reason, disallowed a part of such expenditure based on ad hoc and estimated basis, such addition could not be sustained." 14. We have considered the rival co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of exchange loss are common in the assessment years 2003-04 and 2004-05. We have discussed all these issues while disposing appeal for the assessment year 2002-03 and accordingly we direct the Assessing Officer to follow the same reasoning given hereinabove for the assessment year 2002-03. 20. In the assessment year 2003-04, the assessee was also aggrieved by the disallowance of commission expenses of Rs. 13,38,363. In the course of assessment proceedings, the Assessing Officer observed that the assessee had debited Rs. 2.38 crores towards commission. The assessee's representative was requested to file the details of this commission payments giving the specific details of name and addresses of the recipient, purpose for which the commission was paid, the nature of services rendered and also to file confirmation from the recipient. The assessee's representative during the course of assessment proceedings filed the various details called for but could file confirmation letters in respect of payment aggregating to Rs. 2,25,17,597 confirmation only and in respect of the balance payments they could not file confirmation to the tune of Rs. 13,38,363. Since no confirmation was ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
