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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM & Shri M. Balaganesh, AM]
Per Shri Mahavir Singh, JM:
This appeal by assessee is arising out of order of CIT(A)-XII, Kolkata vide Appeal No. 212/XII/R-12/08-09 dated 15.03.2013. Assessment was framed by Addl. CIT Circle-12, Kolkata u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2006-07 vide his order dated 31.12.2008.
The first issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of telephone expenses at Rs.6.20 lacs. For this, assessee has raised following ground no.2: “2. That Ld. CIT(A)-XII, Kol failed to understand the circumstances of the fact and was wrong and unjustified in his approach for confirming the disallowance of foreign traveling expenses to the extent of Rs.6,20,000/- as the same was being disallowed by Addl CIT range-12, Kol which has been allowed by his predecessor in earlier years.”
3. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has made disallowance as the assessee could not file any detail or could not prove these expenses that the same are relatable to assessee’s business. According to AO, the foreign travelling expenses has been incurred for the family members of the directors of the assessee company. Before CIT(A) also assessee could not submit any thing. Now before us in assessee’s paper book assessee has filed details which were not available before the lower authorities and even the assessee is unable to prove the business nexus with this foreign travel by assessee or its family members. In the absence of this, we feel that this issue needs reexamination at the level of the A.O. The assessee is free to file evidence in support of its Shree Baidyanath Ayurved Bhawan P. Ltd. AY 2006-07 claim for foreign travel expenses and also proved the business nexus so that the AO can adjudication properly. In term of the above, this issue is set aside to the file of the AO and is allowed for statistical purposes.
The next issue in this appeal of assessee is against the order of CIT(A) in disallowing the expenses to the extent of Rs.1,30,905/-. For this, assessee has raised following ground no.3: “That the Ld. CIT(A)-X,Kol failed to analyze the nature of the expenses incurred under the head miscellaneous expenses and was not justified in disallowing the expenses to the extent of Rs.1,30,905/- which has been allowed by his predecessor in earlier years.”
We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has disallowed the miscellaneous expenses for the reason that the expenses are not relatable to assessee’s business activities. Ld. AR submitted that the expenses had been incurred for operating five branches on account of puja expenses, baksish and entertainment expenses which is essential for business operation of the branches. CIT(A) in absence of complete details restricted the misc. expenses to Rs. 2 lacs and disallowed the remaining amount i.e. Rs.1,30,905/-. We find that the CIT(A) restricted the misc. expenses to Rs. 2 lacs for want of details. But he observed that the misc. expenses are inhabitable for the running of any business organization. Hence, in the interest of justice, we restrict the disallowance at 20% of the addition of Rs.3,30,905/-, which comes to Rs. 66,180/- This ground of appeal
of assessee is partly allowed.
6. The next issue in this appeal of assessee is against the order of CIT(A) in disallowing the directors club fees to the extent of Rs.80,129/-. For this, assessee has raised following ground no.4: “4. That Ld. CIT(A)-XII, Kol was also irrational in his approach for disallowing the directors club fees to the extent of Rs.80,129/- which has been allowed by his predecessor in earlier years.”
We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has disallowed the directors club expenses for the reason that the expenses are purely for personal use of the directors. Ld. AR submitted that the expenses had been incurred for entertaining the customers and develop awareness about company’s products. CIT(A) restricted the disallowance to Rs.90,000/- by observing that the expenses on clubs for business promotion cannot be ruled out. We find that CIT(A) has acknowledged that the expenses on clubs for business promotion cannot be ruled out but without any basis he restricted the disallowance to Rs.90,000/-. In earlier years also the expenses were allowed. Hence, we