Estimated expense disallowance reduced, but late employees' provident fund and ESIC payments remained non-deductible.

Where expense claims for telephone, travelling, vehicle and depreciation were not fully supported by verifiable bills, vouchers or usage records, the disallowance was held excessive and was reasonably restricted on an estimated basis, granting partial relief. However, employees' contributions to provident fund and ESIC deposited after the statutory due date were not eligible for deduction, and that disallowance was sustained. The appeal was therefore partly allowed only on the estimated expenditure issue, while the late payment of welfare fund contributions continued to be disallowed.

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Issues: (i) Whether the disallowance of expenses on account of telephone, travelling, vehicle expenses and depreciation should be restricted on an estimated basis; (ii) Whether the disallowance of employees' contribution to provident fund and employees' state insurance paid after the due date was sustainable.

Issue (i): The expenses were found to be partly unsupported by fully verifiable bills and vouchers, and there was no proper logbook or record for vehicle and telephone usage. On the facts, the disallowance was considered excessive and was reasonably restricted to a lower amount.

Conclusion: The disallowance was reduced to Rs. 4,00,000 and the assessee obtained partial relief.

Issue (ii): The employees' contributions to provident fund and ESIC were deposited after the due date prescribed under the respective welfare statutes. In light of the governing legal position, payment beyond the statutory due date was not acceptable for deduction.

Conclusion: The disallowance of Rs. 3,77,546 was upheld and the assessee's challenge failed on this issue.

Final Conclusion: The appeal was partly allowed by granting relief only on the estimated expenditure disallowance, while sustaining the disallowance relating to late payment of employees' PF and ESIC contributions.

Ratio Decidendi: Where expenditure claims are not fully verifiable, an appellate authority may sustain only a reasonable estimated disallowance, and employees' contributions to welfare funds deposited beyond the prescribed due date remain disallowable.

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