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Facts
The appellant, a partnership firm dealing in petroleum products, filed its return for AY 2014-15. The AO completed the assessment, disallowing 10% of expenses for lack of proper vouchers, sales commission for non-deduction of TDS, and delayed ESI & PF remittances. The CIT(A) granted partial relief on bad debts but confirmed other additions, leading to the present appeal.
Held
The Tribunal held that ad-hoc disallowance of expenses is not justified without evidence that the expenditure is bogus. It also held that TDS is not applicable on sales promotion commission paid to employees if it constitutes salary and there is no taxable income, directing the AO to delete these additions.
Key Issues
Whether ad-hoc disallowance of expenses based on self-made vouchers was justified, and whether TDS was applicable on sales promotion commission paid to employees when characterized as salary income without taxable income.
Sections Cited
143(3), 194H
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 04.06.2024 for Assessment Year (AY) 2014-15.
The appellant is a partnership firm engaged in the business of dealing the petroleum products of Indian Oil Corporation Ltd. The return of income for AY 2014-15 was filed on 29.09.2014 declaring income of Rs. 4,84,490/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-V, Alappuzha (hereinafter called "the AO") vie order dated 28.12.2016 passed u/s. 143(3) of the T.C. Fuels Income Tax Act, 1961 (the Act). While doing so, the AO disallowed 10% of the expenses claimed by appellant by holding that the expenses are supported only by self-made vouchers. The AO also disallowed the sales commission expenditure of Rs. 1,29,384/- by holding that the appellant failed to deduct TDS on sales commission u/s. 194H of the Act. The AO also made disallowance of Rs. 2,27,464/- on account of delayed remittance of ESI & PF contributions.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order, while granting relief on bad debts of Rs. 1,11,353/- confirmed other additions.
Being aggrieved, the appellant is in appeal before us in the present appeal.
The learned A.R. submitted before me that having regard to the nature of expenditure no adhoc disallowance of the expenditure can be made. Further, as regard to the disallowance of sales promotion expenditure, it is submitted that this commission was paid to the employees which partake the character of salary income. In the absence of taxable income the question of TDS does not arise.
On the other hand, the learned Sr. DR relying on the orders of the lower authorities submitted that no interference is called for.
I heard the rival contentions of both the parties and perused the material available on record. As regards the disallowance of adhoc expenditure, the AO has disallowed 10% of the expenditure by holding that the expenditures are supported by self-made vouchers. Having regard T.C. Fuels to the nature of expenditure, I am of the considered opinion that in the absence of evidence to show that the expenditure is bogus, the AO is not justified in making the adhoc disallowance. Accordingly, I direct the AO to delete the disallowances on R.F.T., sales promotion, generator exp, repairs-material and repairs and maintenance. Similarly, with regard to disallowance of sales promotion expenditure, in the absence of taxable income, the question of deducting tax at source does not arise. Therefore, I direct the AO to delete the addition on account of sales promotion.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 12th February, 2025. 9.