https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=753712 https://www.taxtmi.com/caselaws?id=753712 Disallowance of Business Promotion Expenses - expense towards a get- together organized between the foreign suppliers and local customers - on perusal of the bills the AO noticed that an amount was incurred for food provided for 250 people - AO held mere production of bills does not prove that the expense was incurred wholly and exclusively for the purpose of business - CIT(A) upheld the disallowance stating that the assessee has not been able to prove that there was business connection of the get-together party and that the assessee has not discharge the onus that the expenditure is incurred with a view bring profit or monetary advantage - HELD THAT:- From the perusal of statement of accounts we notice that the assessee has declared substantial revenue from operations and has incurred expenses various expenses for the purpose of business which have been accepted by the AO. AO has not rejected the books of accounts of the assessee. Given the volume of business of the assessee, in our considered view without recording any adverse finding the AO is not correct in making the disallowance of the entire food expenses stating that the same is not incurred for the purpose of business. According to the ld AR the fact that the assessee has made payment to the caterer after deducting tax at source, also goes to substantiate the claim that the expenses incurred are legitimate. When the assessee has submitted the documentary evidence of having incurred the expenditure on which tax is deducted at source and when the related expenses of hotel expenditure is allowed, the AO is not right in disallowing the food expenses for the reason that the same is for large number of people. Therefore, we hold that the AO is not correct in disallowing the food expenses claimed by the assessee as part of business promotion expenses. Accordingly, we delete the disallowance made by the AO. Cessation of Liability u/s 41(1) - amount reflected in the statement of accounts as amount outstanding in the name of M/s Parul Shah and Co. towards professional fees payable - reason for the AO to make the addition is that the liability is outstanding for more than three years and that the assessee has not brought anything on record to show that there is any intention to make payments towards the liability - HELD THAT:- We noticed in assessee s case that the assessee as part of the financial statements reflecting the outstanding liability it would mean that it is an acknowledge liability and that the assessee is intending to settle the liability in the future date. The ratio of the above jurisdictional high Court decision states that addition under section 41(1) cannot made merely for the reason that the period of limitation has expired. Applying the said ratio to assessee s case, we are of the considered view that the AO is not correct in making the addition under section 41(1) of an acknowledged liability of the assessee. Accordingly, we direct the AO to delete the addition. Appeal of the assessee is allowed. Case-Laws Income Tax Tue, 16 Jan 2024 00:00:00 +0530