TaxTMI 
TaxTMI 
2014 (9) TMI 1133
X X X X Extracts X X X X
X X X X Extracts X X X X
....facts and in law in directing the AO to recompute the FBT payable by the assessee on gifts to dealers and others, staff welfare expenditure, sales promotion expenditure, general charges expenses and social welfare expenditure by holding that FBT on assessee would be leviable only on the balance amount after reducing the amount disallowed out of total expenses instead of deleting the disallowances made under these heads when FBT on the same is paid and assessed by the AO." 3.1 The Revenue has raised following grounds in its appeal. "On the facts and in the circumstances of the case, the ld. CIT(A) has erred in:- (i) deleting disallowance of Rs. 33,47,732/- made u/s 43B; (ii) deleting disallowance of Rs. 4,75,121/- made on account of additional expenditure; (iii) reducing the disallowance from 50% to 20% made on account of staff welfare expenses." 4.1 During the course of hearing, both the parties agreed that grounds raised by the assessee's appeal is related to Ground No. (iii) of the Revenue's appeal. 5.1 The brief facts of Ground No. (i) of Revenue's appeal are that during the year under consideration, the assessee company took term....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entitled to a particular deduction or not will depend on the provision of law relating thereto land not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter." In view of the Hon'ble Supreme Court, irrespective of entries in the books of account as the expenditure relates to this year the same is allowable in the year under consideration. The Assessing Officer is therefore, directed to delete the addition." 7.1 Apropos Ground No. (iii) of the Revenue which is common to Ground No. 2 of the assessee. The brief facts of the case are that the assessee claimed following expenses. S.N. Particulars Amount 1. Gifts to dealer/mason on dealers/mason meet 9,72,884/- 2. Sweets etc. on occasion of festivals/visits of guest/Govt. Officials 63,443/- 3. Gifts to Govt. Officials/Guests on festival/visit 13,65,507/- Total 24,01,834/- The AO made adhoc disallowance of 50% out of the claimed expenses i.e. Rs. 12,00,917/- by observing that the expenses are unverifiable as the assessee company failed to file the complet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee. The assessee has given description of various expenditure incurred under this head. However, no details to whom these gifts were given and how they are wholly and exclusively spent for the purpose of business was not explained. For example an amount of Rs. 11,06,363/- was shown to have been paid to M/s. Jhalani Sons, Jaipur towards Diwali gift to Government Officers. However, no details of gifts distributed and purpose was furnished before the undersigned. Considering all the facts of the case a disallowance of 50% out of total expenditure of Rs. 24,01,834/- is considered reasonable and confirmed. 7.4 However, the ld. CIT(A) directed the AO to recompute the FBT payable by the assessee by following observation. "The assessee also contends that assessee has already paid FBT on these amounts and so no disallowance should be made under this head. As per Boards Circular No. 8/2005 dated 29-08-2005, issued in the form of question answer, any expenditure incurred for personal purpose is not allowable as deduction. However, such deduction would not be liable for FBT. Accordingly, in this case FBT on assessee would be leviable only on the balance amount out....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s also not an obligation which but for such payment would have payable by the employee as specified clause 17(2)(iv). Hence Section 10(10CC) has been incorrectly applied by the AO for making the disallowance. Otherwise also, these expenditure incurred by the assessee is for the purpose of business. In past, the same has been allowed to the assessee. Hence, the disallowance made by the AO out of such expenses is unjustified." 8.3 The ld. CIT(A) partly allowed the addition by following observation. "4.42 I have gone through AO's finding and assessee's submission. I have also gone through the ledger account related to the expenditure. It was noted that in many cases, the expenditure was not supported by any external document. There were various items of expenditure which were personal in nature for example gifts on marriage. Considering the facts of the case a disallowance of 20% out of these expenditure is considered reasonable and confirmed. The assessee also contended that assessee has already paid FBT on these amount and so no disallowance should be made under this head. As per Board Circular No. 8/2005 dated 29-08-2005, issued in the form of ques....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s expenditure as held in various cases referred in Ground No. 3 above. Further, we agree with the contention of the assessee that once FBT is paid, the expenditure cannot be subject matter of disallowance as held by this bench in case of M/s Natural Slate & Sandstone Exports (P) Ltd. in ITA No 1090/JP/10 dated 04.02.2011. The finding of ld CIT(A) that to the extent the expenditure is disallowed, FBT should not be charged is therefore not correct. We, therefore, delete the various adhoc disallowances made by the AO and confirmed by the ld. CIT(A). Thus, Ground No.4 and 5 of the assessee's appeal are allowed and the solitary ground raised by the Revenue in its appeal is dismissed." It is further pleaded that assesse has paid FBT on an amount higher than this. In view thereof, neither the AOs action of 50% ad hoc disallowance nor CIT(A)'s direction to reduce the disallowance to the extent of 20% and allow corresponding reduction from FBT tax are sustainable. Thus the entire disallowance should be deleted in view of ITAT judgment consequently the direction to give reduction in FBT will become non est. 8.7 We have heard the rival contentions and perused the material available on t....