2013 (4) TMI 9 - AT - Income Tax

Tribunal affirms CIT(A) decisions on expense disallowances, dismissing revenue's appeal.

The Dy. Commissioner of Income-tax, Circle 15(3), Mumbai Versus Cargosol

The Dy. Commissioner of Income-tax, Circle 15(3), Mumbai Versus Cargosol - TMI Issues Involved:1. Disallowance of cash expenses included in handling & freight charges.2. Disallowance of expenses claimed under other heads.3. Disallowance of business promotion expenses.4. Disallowance of courier charges.5. Disallowance of staff welfare expenses.6. Disallowance of festival expenses.7. Disallowance of repair and maintenance expenses.Issue-wise Detailed Analysis:1. Disallowance of Cash Expenses Included in Handling & Freight Charges:The Assessing Officer (AO) disallowed Rs. 32,95,669/- on account of cash expenses citing lack of supporting evidence and possible inflation of expenses. The CIT(A) reduced the disallowance to 10% of Rs. 27,02,563/- (correct amount) based on the necessity of such expenses for the business and the credentials of the vouchers. The tribunal upheld the CIT(A)'s decision, noting no error in the reasoning and confirming the disallowance of Rs. 2,70,256/-.2. Disallowance of Expenses Claimed Under Other Heads:The AO disallowed Rs. 3,33,505/- out of Rs. 9,32,852/- claimed under various heads due to personal nature and lack of vouchers. The CIT(A) allowed Rs. 2,41,657/- after considering the business purpose and small voucher amounts. The tribunal upheld the CIT(A)'s decision, finding no reason to interfere with the relief granted.3. Disallowance of Business Promotion Expenses:The AO disallowed Rs. 6,00,000/- out of Rs. 7,94,650/- claimed under business promotion, citing personal nature and lack of vouchers. The CIT(A) reduced the disallowance to 15% of the expenses, allowing Rs. 4,80,202/- after considering the necessity of such expenses for business. The tribunal upheld the CIT(A)'s decision, agreeing with the rationale and confirming the disallowance of Rs. 1,19,198/-.4. Disallowance of Courier Charges:The AO disallowed Rs. 50,000/- out of Rs. 1,44,612/- claimed under courier charges due to lack of vouchers. The CIT(A) restricted the disallowance to Rs. 9,991/- considering the business necessity and common practice of not receiving bills for small courier services. The tribunal upheld the CIT(A)'s decision, finding the 10% disallowance reasonable.5. Disallowance of Staff Welfare Expenses:The AO disallowed Rs. 50,000/- out of Rs. 2,44,392/- claimed under staff welfare due to lack of adequate evidence. The CIT(A) reduced the disallowance to Rs. 25,000/- considering the genuineness of the expenses and the small amount of unsupported expenses. The tribunal upheld the CIT(A)'s decision, agreeing with the reasoning and confirming the reduced disallowance.6. Disallowance of Festival Expenses:The AO disallowed Rs. 43,910/- claimed under festival expenses due to lack of vouchers. The CIT(A) deleted the disallowance, noting the expenses were not personal and were incurred for business purposes. The tribunal upheld the CIT(A)'s decision, agreeing that such expenses are common in business and should not be disallowed entirely for lack of some vouchers.7. Disallowance of Repair and Maintenance Expenses:The AO disallowed Rs. 40,888/- claimed under repair and maintenance due to lack of vouchers. The CIT(A) reduced the disallowance to Rs. 2,265/-, noting that most expenses were paid by cheque and only a small amount was unsupported. The tribunal upheld the CIT(A)'s decision, finding the reduced disallowance reasonable.Conclusion:The tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on all counts, finding them reasonable and adequately supported by the facts and circumstances of the case.