TMI Blog2011 (12) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts lying to the credit of the following accounts as per the audited balance sheet as on 31-03-2007. a. Sundry creditors Staff A/c Rs. 2,36,927 b. Sundry creditors others a/c Rs. 9,77,652 Tota l: Rs. 12,12,579 3. The Ld. CIT(A) has erred in law and on facts of the case in upholding the action of the Ld. AO in disallowing Rs. 2,44,284 being 1/6th of the following expense: a. Telephone expenses Rs. 6,83,896 b. Senior Partner s Car Expenses Rs. 1,75,080 c. Other car expenses Rs. 3,10,445 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id bills for which no reimbursement was received from the clients and were accordingly payable to the staff/ partners. These expense accounts were only balance-sheet items and had nothing to do with the income of the assessee on cash basis for this year. 2.2. Assessee further explained that: (i) The assessee has claimed only such expenses which have actually been paid by the assessee during the relevant previous year. The details of expenses claimed by the assessee along with their actual payments under the head traveling and conveyance account are attached herewith in the paper book 1 at pages 7 to 16. (ii) The expenses incurred by the staff and partners of the assessee in the nature of traveling, conveyance, hotels, taxi, meals e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel explained the entries and contends that the same are incorporated in the books of accounts as under: A. Recoverable traveling and conveyance expenses account. Debit to staff account. B. When payment is received from the client against the bill of the staff, the following entry is passed: Bank account Debit To recoverable traveling and conveyance expenses account Or The above entry may also be passed by the following two entries: Client Account Debit To recoverable traveling and conveyance expense a/c. AND Bank A/c Debit To client A/c C. When payment is made to the staff: Staff A/c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners car expenses and other car expenses which pertain exclusively to the staff mobility and are incurred for the purpose of business (3) Depreciation on car is consequently to be allowed. 3.3. Apropos telephone expenses, it is contended that the assessee is a very busy professional organization. No partner has any time to use the telephones for personal use. In these circumstances, the expenses should not be disallowed on ad hoc basis. It is pleaded that the staff car expenses are supported by vouchers and for other expenses, like telephone, each and every detail cannot be maintained by a professional firm. The payments are based on telephone bills and in the peculiar facts and circumstances of the assessee, being a professiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional work behind. Under these circumstances, we do not see any justification in any further disallowance of senior partners car expenses. 6.1. Apropos other car expenses also, they are claimed to be incurred on staff travel. No instances have been brought on record to suggest that any item of expenditure was incurred on the private visit of the partners or staff, disallowance is thus uncalled for. In view of above, we delete the disallowance out of depreciation on car also. 6.2. Apropos telephone expenses also, we find merit in the argument of the learned counsel that for a professional firm, it cannot be assumed that the partners will indulge in private telephone calls at the cost of their professional work. The assumption drawn b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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