TMI Blog2021 (8) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been maintained and expenses have been incurred in cash - HELD THAT:- Even before the ld CIT(A) or during the present proceedings, nothing has been brought on record in support of said claim of expenses in form of terms of AMC arrangement/contract and the invoices/bills raised by the vendor towards the AMC. Inspite of the same, we find that the AO has been reasonable enough in disallowing a sum of ₹ 35,000/- only out of total expenses of ₹ 3,86,352/- and which has already been restricted to ₹ 17,500/- by the ld CIT(A). Therefore, we donot find any infirmity in the findings of the lower authorities and the disallowance so made and sustained by the ld CIT(A) is hereby confirmed. Disallowance of visiting faculty expenses - non-production of the faculty members for examination and the fact that the amount has been paid to them in cash - HELD THAT:- Faculty member couldn t be representative of 26 faculty members and the assessee could have ensured presence of few more faculty members to give credence to his claim and the AO could have been requested to examine them and only in a situation, where the AO is not fully satisfied, other faculty members could have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case and under the law the impugned order passed by the Learned CIT(A) is not maintainable and liable to be cancelled. 2. That the learned CIT(A) failed to appreciate that in this case books of accounts were not rejected by the AO and the learned CIT(A) further failed to appreciate that without rejection of books of accounts no disallowance of business expenses could have been sustained. 3. That the learned Commissioner (Appeals) erred in sustaining disallowance of ₹ 10,94,370/- with regard to Sikkim Manipal University (SMU) admission expenses (which inter alia include discount and referral bonus given to the students, waiver of late fees etc), which sustaining of disallowance of ₹ 10,94,370/- is most arbitrary, unjust, untenable in fact and in law and in the alternative excessive w.r.t facts and circumstances of the case. 4. That the learned Commissioner (Appeals) erred in confirming disallowance of ₹ 87,687/- being 50% of total disallowance of expenses of ₹ 1,75,374/- (out of computer installation expenses at ₹ 35,000/- plus out of cash payments of ₹ 3,61,500/- made to various persons in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised various contentions and relied on the written submissions which read as under:- Ground of Appeal No. 1 1. That the learned CIT(A) ought to have held that the relavant assessment order passed by the A.O. was vitiated and bad and not maintainable in fact and in law because it was passed by the AO without making any inquiries. 2. That the learned CIT(A) failed to take into considerations the fact that the assessee duly discharged its burden of proof by providing basic details before the A.O. which he asked the assessee to produce in the course of assessment proceedings. Ground of Appeal No. 2 1. That the learned CIT(A) failed to appreciate that the assessee regularly maintained books of account consisting of cash book, ledger, stock register, purchase/sale invoices and vouchers for expenses during the previous year relevant to assessment year under appeal and the same were produced before him. 2. That the books of accounts are duly audited by a Chartered Accountant and Tax audit report u/s. 44AB stood already filed before the A.O. 3. That neither the A.O. nor the learned CIT(A) has given a single finding that such and such expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery competitive market in the field of distance education program and for getting maximum number of students, the assessee had to take all possible business decisions which not only included giving advertisements and online marketing but also have to offer discount to students and also to give incentive to existing students for bringing their friends for new admissions. As regards AO s observation in the course of assessment proceedings that why the amount was mostly paid in cash and not by cheque in this regard it is submitted that SMU (Sikkim Manipal University) doesn t accept fees in cash. In such a situation where most of the students bring a demand draft prepared in the name of SMU from their parents for payment of fees and then they go to different centres bargaining for more discounts. Since DD for the fees stands already made the assessee is forced to return the amount of discount to the student in cash. As most of the students don t have bank account and many of them also don t like to give the amount of discount back to their parents who arranged fees for their education the assessee is compelled to pay the students the amount of discount in cash and such amount of discou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e insurance commission. f. The above modus operandi may also be termed as an advance version of advertisement wherein direct benefit is given to the client by avoiding heavy expenditure on advertisement through print media and/or other means of mass communication like TV, radio etc. This direct benefit is given to the clients by giving them discounts, referral schemes, cash backs, reward points and waiver of late fees etc. In other words this is simply an advertisement through mouth publicity. g. The discount and referral amount was given between the ranges of ₹ 1000/- to ₹ 5000/- depending upon the payment of fees recovered from the students. Sometimes students deposited lower amount towards there admission fees by deducting the discount amount suo-moto and in such cases appellant had to deposit the full amount of fees to the Sikkim Manipal University. Sometimes the appellant had to return the discount and/or referral amount to the discount claimers after receiving the income from the Sikkim Manipal University. h. It will not be out of place to mention that while disallowing the SMU admission expenses reliance has been placed by lower authorities on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 74,872/- plus interest on car loan ₹ 53,539/- plus Depreciation on vehicles ₹ 1,52,318/-). 4,22,780/- 30,000/- 15,000/- Telephone/mobile expenses 1,92,015/- 20,000/- 10,000/- The humble appellant craves leave to submit a very brief explanation in regard to abovementioned expenses as under:- i. Disallowance out of Computer installation expenses: a. These expenses of ₹ 3,86,352 were incurred by the assessee on account of AMC (Annual Maintenance charge ) of computers installed in the business premises of assessee. b. Total expenditure of AMC IMC is ₹ 5,20,865 (AMC ₹ 3,86,352 + IMC ₹ 1,34,513). As against this the receipts under this head of AMC/IMC are of ₹ 14,09,067. ii. Disallowance out of Visiting faculty expenses a. That the appellant assessee is running a distance education centre of Sikkim Manipal university (SMU). During the year under consideration appellant incurred an expenditure of ₹ 4,00,100/- in relation to payment to various persons (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisputed fact that happiness and efficiency of employees of an establishment is a key to good health of the business. Keeping in view this universal truth businessmen always try to keep his employees happy and efficient. 2. Keeping in view the above proposition the appellant assessee incurred an expenditure of ₹ 36,270/- in the whole year towards birthday celebration of his staff members and debited it in P L account under the head, birthday celebration expenses . These expenses are nothing but staff welfare expenses and it is prayed that this disallowance should be deleted. 3. It is further submitted that the A.O. as well as the learned CIT(A) failed to note that all these expenses are incidental to and directly related to the business and as such are allowable expenditure. In this regard the assessee s respectful submissions are as under: i. All the above referred expenses have been incurred in the course of carrying on of regular business activities. It is not the case of the learned A.O. that these expenses are not related to the carrying on of regular business activities. ii. That all supporting evidence in the form of invoices and vouchers were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in the case of appellant assessee himself in assessment year 2005-06 the Hon ble ITAT, JAIPUR BENCH, Jaipur in ITA No. 133/JP/2020 for A.Y. 2005-06 in the case of Manoj Kumar Gupta vs. The ITO, Ward 5(2), Jaipur vide order dated 23/11/2020 held that the action of the Ld. CIT(A) in sustaining 50% of the disallowances made by the Assessing Officer that too on adhoc basis is not justified and accordingly, deleted the same( relevant observation made in para 14 at page-9). 6. That it is submitted that in view of above facts and legal position the disallowances sustained by the learned CIT[A] may be cancelled and in the alternative it is respectfully submitted that the same may be substantially reduced. 6. Per contra, the ld DR relied on the finding of the lower authorities and our reference was drawn to the findings of Assessing Officer which read as under: 1. Disallowance out of SMU admission expenses: The assessee runs a distance education centre of Sikkim Manipal University (called as SMU) wherein the assessee provides distance programs in IT and management. In the P L a/c, the assessee has shown income from SMU amounting to ₹ 65,53,723/-. Against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 206 (SC). In view of the above facts and circumstances of the case, I disallow a sum of ₹ 11,07,370/- (₹ 11,47,370 - ₹ 40,000) which are claimed on a/c of discount and referral amount paid to student treating ingenuine u/s 37 of the Income-tax Act, 1961 in view of decision of decision of Hon ble Supreme Court in cases of Chaturbhuj Panauj AIR 1969 (SC) 255, Sumati Dayal V/s CIT, 214 ITR 801 (SC), C. Vasant Lal Co., 45 ITR 206 (SC). 7. Further, our reference was drawn to the findings of the ld CIT(A) and submitted that the ld CIT(A) has already allowed partial relief to the assessee and no further relief is warranted in the instant case in absence of necessary substantiation. The relevant findings of the ld CIT(A) read as under: 2.3 Ground No. 01 to 08 are being taken up together which are interrelated. I have perused the facts of the case, the assessment order and the submissions of the appellant. It is seen that appellant claimed Sikkim Manipal University (SMU) admission expenses of ₹ 11,47,340/-out of which the Assessing Officer disallowed ₹ 11,07,370/- as payment was made in cash and none of the recipient of payment of referral f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard, we note that the assessee under an arrangement with Sikkim Manipal University is running the distant education centre and has thus been authorized to run such a centre. The question that arises for consideration is whether the act of the assessee as so claimed in form of offering the discount, referral bonus, etc to the students is authorized by Sikkim Manipal University and in accordance with the terms of the engagement pursuant to which the distant education centre is being run by the assessee and in the alternate, are there any disability obligations cast on the assessee in offering such discounts. Where it is determined that such a practice is authorized by Sikkim Manipal University and/or the assessee is free to offer such discounts, referral etc, the second question that arises for consideration is nexus of such expenditure with the actual admission of students to various courses/programmes during the year through the assessee distant education centre and details thereof and how the corresponding revenues are determined and recorded. 10. In the instant case, we find that all that has been submitted by the assessee to this effect is a ledger account of SMU admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld CIT(A), the assessee has submitted that he is running the distance education centre of Sikkim Manipal University and has received certain amount for faculty arrangement and during the year under consideration, has incurred an amount of ₹ 4,00,100/- on account of arrangement of 26 faculty members for resolving the doubts of the students which is not a huge amount as compared to amount received from the University. The case of the Revenue however is that during the assessment proceedings, the assessee was asked to produce visiting faculty members for verification, however, the assessee has produced only one faculty member and has failed to produce any of other persons for verification. Further, out of total claim of ₹ 4,00,100/- towards visiting faculty expenses, an amount of ₹ 3,61,500/- has been paid in cash. In such circumstances, the AO has rightly disallowed 25% of cash expenses amounting to ₹ 90,375/- in absence of proper verification which on appeal has already been restricted to ₹ 45,187/- by the ld CIT(A) and no further relief is warranted. 13. In our view, the quantum of expenditure so claimed vis- -vis receipts offered to tax could be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve credence to his claim and the AO could have been requested to examine them and only in a situation, where the AO is not fully satisfied, other faculty members could have been asked for appear or in the alternative, any other credible verifiable documentation in terms of their engagement with the assessee as part of his distant learning centre could have been submitted to the satisfaction of the AO, however, we find that there is nothing on record. In such facts and circumstances of the case, where the AO has only disallowed a sum of ₹ 90,375/- out of ₹ 400,100/- and which has further been restricted to ₹ 45,187/- by the ld CIT(A), we find that the authorities below have been more than reasonable in their approach and keeping the entirety of facts and circumstances, we are of the considered view that such findings are just and proper and we are not inclined to interfere with the said findings. The addition so made and confirmed by the ld CIT(A) amounting to ₹ 45,187/- is accordingly confirmed. 15. Regarding disallowance of vehicle running and maintenance expenses, the case of the Revenue is that the expenses have been incurred in cash and no logbook has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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