M/S. M.G.M. MOHANTY,BHUBANESWAR vs. DCIT, CIRCLE-2(1), BHUBANESWAR

S/Shri B.K.Mohapatra/A.K.Sabat, ld ARs appeared for the assessee S/Shri B.K.Mohapatra/A.K.Sabat, ld ARs appeared for the assessee S/Shri B.K.Mohapatra/A.K.Sabat, ld ARs appeared for the assessee and Shri M.K.Gautam, ld CIT DR appeared for the revenue. and Shri M.K.Gautam, ld CIT DR appeared for the revenue. and Shri M.K.Gautam, ld CIT DR appeared for the revenue.

It was the submission that It was the submission that three issues were involved in assessee’s three issues were involved in assessee’s appeal, first being appeal, first being the disallowance of Peripheral Development Expenses to the disallowance of Peripheral Development Expenses to an extent of Rs.36,79,688/ an extent of Rs.36,79,688/-, second being the disallowance of second being the disallowance of business development expenses of Rs.2,47,742/ development expenses of Rs.2,47,742/- and third being the disallowance and third being the disallowance

It was the submission by ld AR that in respect of issue of Peripheral Development Expenses of Rs.36,79,688/-, the said amount involved two portions being the expenses to an extent of Rs.21,24,623/- incurred by the assessee on the direction of the Bhubaneswar Municipal Corporation (BMC) for the purpose of Peripheral Development Expenses and beautification of Bhubaneswar area in and around the Corporate Office of the assessee company. It was the submission that the second portion of Rs.15,55,065/- were the peripheral development expenses incurred by the assessee at the mining area of Keonjhar and Sundargarh. It was the submission that in respect of expenses incurred by the assessee at Bhubaneswar though said expenses were not within 50 kms range of mining operation of the assessee, same was still to be allowed u/s.37(1) insofar as these expenses were incurred by the assessee on the direction of the BMC. It was the submission that the expenses in relation to Peripheral Development Expenses done by the assessee in and around the mining area of the assessee company were in the nature of substantially salary of the teachers which fell within the criteria of education provided under the notification by the Odisha Government. Some portions also related to the plantation expenses which were in the nature of beautification and replanting the mining area. Some expenses were in the nature of payments to the

In reply, ld CIT DR submitted that the expenses have not been incurred through the District Committee as required under the Notification issued by the State Government. It was the submission that the amount of Rs.21,24,623/- in any case cannot be allowed as the expense has not been incurred within 50 kms range of the mining area of the assessee. It was the submission that the order of the Assessing Officer as well as the ld CIT(A) is liable to be upheld.

We have considered the rival submissions. A perusal of the expenses incurred in respect of peripheral development expenses admittedly is being claimed by the assessee as business expenses. Admittedly, the Assessing Officer has not examined the issue in line with whether the same is allowable as business expenses u/s.37(1) . The Assessing Officer has admittedly looked that issue only whether the said expenses are peripheral P a g e 3 | 6

In respect of issue of the expenses incurred by the assessee to an extent of Rs.15,55,065/-, admittedly, said expenditure has been incurred within 50 kms range of the mining area. The said expenses are under the nature of education, health, agriculture, sports and communication. Admittedly, said expenses have not been incurred through District Committee. It is an admitted fact that the expense was incurred only under four heads as the said expenses are incurred within 50 kms range. As the expenses are incurred under the accepted four heads, we are of the view that said expense is allowable under the head “peripheral development expense” and the Assessing Officer is directed to allow same expenses. This issue is partly allowed for statistical purposes.

In respect of next issue of business development expenses, it was submitted by ld AR that the Assessing Officer has disallowed 50% of the expenses. It was the submission that the Assessing Officer mentions that the expenses have not been incurred entirely for the business purposes. Ld P a g e 4 | 6

Ld CIT DR submitted that the expenses have been incurred for entertainment of RTO, Cuttack as also ESI officials at restaurant. It was the submission that the disallowance as made by the AO and upheld by the ld CIT(A) is to be upheld.

We have considered the rival submissions. A perusal of the ledger extract clearly shows that the claim of ld CIT DR is in respect of less than Rs.1500/- out of total expenses of Rs.4,31,895/-. It is an admitted fact that the assessee might have incurred some expenses at the respective offices in the nature of tea and coffee at the canteens. This has admittedly for the purpose of business only. Other expenses being the expenses in relation to official guests were in respect of diaries and pens are allowable expenses. This being so, the disallowance made by the AO and confirmed by ld CIT(A) stands deleted.

Coming to the issue of charity and donation, the assessee was unable to produce any evidence in respect of the same. Consequently, the addition as made by the AO and confirmed by the ld CIT(A) stands upheld.

In the result, appeal of the assessee is stand partly allowed for the statistical purposes.