ANIL KUMAR KYAL,CUTTACK vs. ITO WARD-2(4), CUTTACK

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ITA 216/CTK/2023Status: HeardITAT Cuttack07 August 2023AY 2012-134 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal allowed expenses for unloading, local taxi, and meals/snacks, acknowledging their business necessity. However, expenses for tips and miscellaneous items were disallowed due to lack of justification.

What were the facts?

The assessee's appeal was delayed by 711 days due to the demise of their previous counsel and record retrieval. The appeal concerned the disallowance of expenses claimed against commission income.

What were the issues?

Whether expenses incurred for earning commission income, specifically for unloading, local travel, meals, tips, and miscellaneous items, are allowable business expenditures.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH CUTTACK

Before: SHRI GEORGE MATHAN

Hearing: 07/08/2023Pronounced: 07/08/2023

O R D E R This is an appeal filed by the assessee against the order of the ld. CIT(A), Cuttack, dated 18/07/2016, passed in I.T.Appeal No.648/2014-15 for the assessment year 2012-2013.

2.

The appeal filed by the assessee is delayed by 711 days. For the delay, the assessee has filed an affidavit, wherein he mentioned that the delay was on account of demise of earlier counsel of the assessee and the subsequent search and retrieval of the records. The affidavit filed by the assessee is not been found to be false. Consequently, the delay in filing the appeal is condoned and the appeal is disposed off on merits.

3.

It was submitted by the ld.AR that the only issue in this appeal of the assessee is against the confirmation of disallowance of Rs.2,98,600/- representing the expenses incurred on the earning of the commission income from West Coast Paper Mills to an extent of Rs.5,42,994/-. It was submitted by the ld. AR of the assessee that the assessee is running an agency for supplying paper to the government organisations. It was the submission that the assessee gets the papers supplied from West Cost Paper Mills to the various government organisations. It was the submission that the assessee has consequently incurred expenditure under the head unloading of material to an extent of Rs.1,62,900/-, local taxi expenses of Rs.60,600/-, meals and snacks expenses to an extent of Rs.31,000/-, tips expenses to an extent of Rs.25,200/- and miscellaneous expenses of Rs.19,294/-, totalling to Rs.2,98,994/-. It was specifically queried to the ld. AR as to why, when the assessee is supplying papers to the various Government agencies and expenditure under the head, tips is required, in this regard, ld. AR submitted that many-a-times tips have been given to the local people for getting the labour, who are faster. In regard to miscellaneous expenses, when the ld.AR was questioned about its nature, he was unable to give detailed break-up.

4.

In reply, ld. Sr. DR submitted that the break-up of these expenditures have not been shown to the ld. CIT(A). It was the submission that the assessee is in the business of earning of commission only and from commission business clearly no expenditure is required. It was the prayer that the disallowance as made by the AO and as confirmed by the ld. CIT(A) is liable to be upheld.

5.

I have considered the rival submissions. Admittedly, the assessee is in the business of organising supply of paper to the various government agencies. It is also an accepted fact that when supplying material expenditures relating to loading and unloading are incurred, consequently the expenses in respect of unloading of material to the extent of Rs.1,62,900/- is acceptable and the AO directed to allow the same.

6.

Coming to the issue of local taxi expenses, it is an accepted fact that the assessee would have to travel to various locations where the supply of materials are made, consequently, the AO is directed to allow this expenditure of Rs.60,600/-.

7.

It is also an admitted fact that there would be expenditure incurred in respect of food for the assessee as also the assessee’s staff in relation to the various locations at which the material is being supplied. Consequently, the expenses of Rs.31,000/- in respect of meals and snacks, is also allowed.

8.

Coming to the issue of tips, admittedly, the same is not allowable expenditure as it is not expected from an assessee to incur the expenses. Thus, the expenditure claimed under this head stands disallowed.

9.

In regard to the expenditure claimed under the head miscellaneous expenses as the assessee has not been able to point out the nature of this expenditure, the disallowance of the same stands upheld.

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