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TMI Blog2018 (12) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming the addition of Rs. 35,000/- on conclusion that the amount was paid not in course of business and there was no obligation on the appellant to pay the same as per the contract of employment. 2. The learned CIT(A) did not consider the submission of the appellant and failed to appreciate that the said gift amount was paid out of commercial expediency to strengthen the relationship with employees and is therefore an allowable business expense u/s 37 of the Act. 3. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee has debited Rs. 35,000/- to the profit and loss account, as gift paid. In response to a query raised by the AO to explain as to why the gift paid which is not a part of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) confirmed the disallowance of gift expenses of Rs. 35,000/-. 5. Before us, the Ld. counsel of the assessee submits that any expense which is incurred wholly and exclusively for the purpose of business needs to be allowed u/s 37 of the Act and it is not necessary that such expense should have an immediate nexus with the income generating apparatus of the assessee. 6. On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A). 7. We have heard the rival submissions and perused the relevant materials on record. In the instant case the assessee has claimed gift expenses of Rs. 35,000/- by debiting it to its P&L account. This is purely personal expense of the assessee. If the assessee chooses to make such gifts out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses and Rs. 4,43,231/- as miscellaneous expenses) in its P&L account. In response to a show cause notice dated 28.12.2015 issued by the AO to explain why the above expenses should not be disallowed due to nature of cash payment and non-verifiability, the assessee submitted a reply on 05.01.2016 stating that these expenses were incurred for business purposes. However, the AO was not convinced with the above explanation of the assessee because it had not maintained any log books and any call details for the use of vehicle and telephone. Also the AO observed that considering the status of the assessee and nature of business, personal use of the vehicle and telephone cannot be ruled out. Also because of the fact that part of the remaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mentioned e.g. payments of Rs. 5,700/- on 08.04.2009, payment of Rs. 6,100/- on 06.05.2009, payment of Rs. 3,000/- on 05.09.2009 etc. There are dozens of such entries. Further there are entries of payment of Rs. 29,480/- made to M/s, Raykar Jewellers etc. which are not explained by the assessee. The arguments of the assesses and the facts of the case are considered. The details filed in the course of the appellate proceedings do not inspire confidence. There are a large number of non-specific entries. Further there are three partners in the assesses firm and their personal use of the vehicle, telephone and other items is not ruled out. The disallowance of Rs. 2,74,683/- is confirmed and the grounds of appeal no. 4 & 5 of the assessee are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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