D.D. BUILDERS LTD.,LADUGAON vs. ACIT, CENTRAL CIRCLE- 2, BHUBANESWAR

S/Shri P.S.Panda/K.K.Agarwal, ld Ars appeared on behalf of the S/Shri P.S.Panda/K.K.Agarwal, ld Ars appeared on behalf of the S/Shri P.S.Panda/K.K.Agarwal, ld Ars appeared on behalf of the assessee and Shri S.C.Mohanty, ld Sr DR appeared for the revenue. assessee and Shri S.C.Mohanty, ld Sr DR appeared for the revenue. assessee and Shri S.C.Mohanty, ld Sr DR appeared for the revenue.

It was submitted by ld AR that there is a delay of 372 days in filing It was submitted by ld AR that there is a delay of 372 days in filing It was submitted by ld AR that there is a delay of 372 days in filing the appeal befo the appeal before the Tribunal. It was submitted that the delay was caused re the Tribunal. It was submitted that the delay was caused due to the various disputes between the assessee, who is due to the various disputes between the assessee, who is due to the various disputes between the assessee, who is a contractor undertaking various contracts with the State Government and the State undertaking various contracts with the State Government and the State undertaking various contracts with the State Government and the State

In reply, ld Sr DR vehemently opposed the condonation of delay. It was the submission that the assessee should have been careful and the delay should not be condoned.

We have considered the rival submissions. The delay of 372 days cannot be considered as inordinate considering the fact that the assessee had been in dispute involved with various State Government Departments and also considering the fact that the person responsible for the taxation matter had left the employment and the matter had to be sorted out with the auditors of the assessee company. In these circumstances, the delay of 372 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.

It was the submitted by ld AR that the assessee does not wish to press Ground No.2, which is in regard to disallowance of interest paid to NBFC amounting to Rs.3,43,728/- u/s.40(a)(ia) of the Act. Ld AR of the assessee has signed in the ground of appeal to that effect. In these circumstances, Ground No.2 of the assessee is dismissed as not pressed.

It was the submission of ld AR that there are three issues in assessee’s appeal which are being contested.

The first issue was in regard to the confirmation of disallowance of Rs.22,05,049/- by the ld CIT(A) under business promotion expenses. It was the submission that this expenditure was in the nature of Diwali gifts and gold coins, etc given to the employees of the assessee company and others. It was the submission that this was allowable welfare expenditure. It was the submission that the Assessing Officer had disallowed the expenditure at 100% but the ld CIT(A) had taken a stand that this expenditure representing gifts to various State Government Departments was opposed to public policy and disallowable u/s.37(1) of the Act. It was the submission that the ld CIT(A) after considering the festive occasions as a matter of custom and tradition the gifts have reduced the disallowance by 25%. It was the submission that there was no gift given to the State Government officials and there was no graft involved in the said gifts. It was the submission that the total expenditure was around Rs.29,40,066/-. It was the submission that the turnover of the assessee itself was in excess of Rs.200 crores. It was the submission that this expenditure was incurred only to keep the morale of the employees high and customary gifts during festivals.

In reply, ld Sr DR submitted that in the written submission, the assessee has specifically stated that the gold coins were distributed to the P a g e 3 | 7

Ld AR submitted that these gifts were given at the time of Diwali. These were customary gifts, which is the prevalent custom during the Diwali , gifts are given to people with whom you have business connection and relation. This cannot be considered as graft.

We have considered the rival submissions. Admittedly, in various parts of the country, it is customary to give gifts to their near and dear ones as also other business associates. This is a custom prevalent in the country. This will not be treated as graft as there is no benefit involved between them. As this is business promotion expenses in the form of custom and tradition which runs in the country, we are of the view that the said expenditure is not disallowable. In any case, the ld CIT(A) has considered this fact and has reduced the disallowance by 25%. The disallowance, admittedly, is on adhoc basis. No specific bills and vouchers has been identified which are not allowable or not produced. This being so,

It was the submission by ld AR that the next issue was in regard to disallowance of donation paid of Rs.3,81,000/-. It was the submission that the said expenditure was in the nature of Puja expenses at the various locations where the assessee has its contracts. The assessee is basically in road construction work. It was the submission that so as to keep the local peoples happy as also the local employees, who works for the assessee company at various locations, the puja expenses at various temples, etc are incurred. It was the submission that same is liable to be allowed.

In reply, ld Sr DR submitted that there is no business connection to this expedniture and this is just gratuitous payment and in the absence of business compulsion, the disallowance as confirmed by the ld CIT(A) is liable to be upheld.

We have considered the rival submissions. It may be mentioned here that the Assessing officer had made 100% disallowance of the said expenditure. The ld CIT(A) has reduced the expenditure to 50%. The assessee, admittedly, is in road construction activity. In the nature of its work, the assessee would be having substantial number of local workers from the local areas, where the contract work of the assessee is being done. It would be in the interest of the assessee to keep the said workers

It was submitted by ld AR that the next issue was in regard to the disallowance of 15% of the miscellaneous expenses. It was submitted that the total miscellaneous expenses was Rs.26,42,545/-. The Assessing officer had disallowed 15% of the same holding that the bills and vouchers were not fully verifiable. It was the submission that the CIT(A) had reduced the disallowance to 5%. It was submitted that the adhoc disallowance may not be made in assessee’s case.

In reply, ld Sr DR submitted that the assessee has not been able to produce all the bills and vouchers to substantiate the claim that the disallowance made by the AO and confirmed by the ld CIT(A) is liable to be confirmed.

We have considered the rival submissions. Admittedly, no adhoc disallowance is permissible under the Income Tax Act. If the assessee has

In the result, appeal of the assessee is partly allowed.