Income Tax Appellate Tribunal - CuttackAcit, Cuttack vs M/S. Om Oil & Flour Mills Ltd., Cuttack on 5 July, 2017आयकर अपीलीय अधधकरण, कटक न्यायपीठ,कटक
   IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK

 BEFORE SHRI N.S.SAINI, AM & SHRI PAVAN KUMAR GADALE, JM
                आयकर अपील सं./ITA No.169/CTK/2015
            ( धनधाारण वषा / Assessment Year :2011-2012)
 ACIT, Circle-2(1), Cuttack        Vs. M/s Om Oil & Floor Mills
                                       Ltd.,
                                       Type-II/8, New Industrial
                                       Estate,             Khapuria,
                                       Madhupatna, Cuttack.
 स्थायी लेखा सं ./ जीआइआर सं ./ PAN/GIR No. : AAACO 9728 L
 (अपीलाथी /Appellant)              ..  (प्रत्यथी / Respondent)
राजस्व की ओर से /Revenue by             : Shri D.K.Pradhan, DR
धनधााररती की ओर से /Assessee by         : None
सुनवाई की तारीख / Date of Hearing :              03/07/2017
घोषणा की तारीख/Date of Pronouncement             05/07/2017
                             आदेश / O R D E R

Per Shri Pavan Kumar Gadale, JM:The revenue has filed this appeal against the order of CIT(A),

Cuttack, dated 27.01.2015 in I.T.Appeal No.0358/2013-14, wherein the

revenue has raised the following grounds :-01. Whether in the facts and circumstances of the case, the Ld.
      First Appellate Authority is justified in deleting the quantum of
      addition/disallowances made by the AO under the different heads of
      account under the Administrative Expenses such as i) Ruchi Prativa
      Sanmman Samaroha Rs. 18,94,847/- ii) Ruchi Baliyatra Function:Rs.6,80,087/- iii) Advertisement Expenses: Rs.7,22,344 - without
      assigning any specific reasons - Where           as in absence of
      supporting evidences, the claim of the assessee could not be
      accepted as genuine.02.Whether in the facts and circumstances of the case the Ld.First
      Appellate Authority is justified in deleting the additions made by the
      AO under the head 'Admn. expenses' where assessee failed to
      substantiate the genuineness of various expenditure claimed in the
      P&L account in view of the decision of Hon'ble ITAT Chennai Bench
      'A' in the case of K.J.Prabhakar Vrs ACIT in ITA No.703(Mds) of
      2010 dated 08.07.2011 which has upheld that an estimated 25% of
      expenditure on travelling, conveyance, telephone, mobile, vehicle
      maintenance was justified.2ITA No.169/20152.    Brief facts of the case are that the assessee is engaged in the

business of manufacturing of spices and vermicelli and filed return of

income of the assessment year 2011-2012 on 26.9.2011 declaring total

income of Rs.1,96,40,367/-, subsequently the case was selected for

scrutiny and notices u/s.143(2) & 142(1) were issued along with

questionnaire. In compliance to notice ld. AR of the assessee appeared

and produced the details of financial statement, auditor report, ledger

copy of fuel & lubricants, directors remuneration, charity & Donation,

Ruchi Baliyatra Function, Sales promotion, advertisement expenses,

godown rent, vehicles (spices division), details of unsecured loan, details

of subsidy from MFPI grant receivable, details of increase/decrease of

inventories, details of TDS, some bills and vouchers relating to Baliyatra

Expenses and Ruchi Prativa Expenses, bills and vouchers relating to

repair and maintenance, social benefit expenses and travelling expenses,

confirmation from the unsecured loan creditors etc. The AO on perusal of

the profit and loss account found that the assessee has claimed

expenditure in Schedule 15 of the profit and loss account, Rs.18,94,847/-

pertains to Ruchi Prativa Sanmman Samaroha and made observation in

para 3 of the assessment order that the expenses cannot be termed as

sales promotion expenses nor business development expenses nor CSR

expenses and disallowed. The assessee claimed an expenditure of

Rs.13,60,174/- under the head 'administrative expenses' as Ruchi

Baliyatra Function. The AO called for the various documents/evidence

and copy of the functions conducted and found that the explanations3ITA No.169/2015submitted by the assessee are of no relevance and was not incidental to

the business of the assessee. Considering the fact that the expenditure

was incurred by way of payments to various Government organisations

allowed 50% of the claim and disallowed Rs.6,80,087/-. Similarly ld. AO

made disallowance of repairs and maintenance incurred towards the

machinery     Rs.16,42,476/-   and    social   benefit   expenses    of   50%

Rs.64,239/-    and   further   made    disallowance      of   Puja   Expenses

Rs.5,81,230/-. The assessee made donations to various charitable

institutions, whereas these expenses are not incidental to carry on the

business of the assessee and made addition of 50% claim of

Rs.1,79,054/-. The assessee claimed expenditure under Schedule 16 as

selling & distribution expenses, whereas ld. AO found that the expenses

claimed are not properly supported and they are not incidental to the

business and relied on the decision of ITAT and restricted the claim of

assessee to 10% being Rs.11,66,011/- and passed the order u/s.143(3) of

the Act, dated 13.5.2013.3.    Aggrieved by the order of AO, the assessee preferred an appeal

before the CIT(A), whereas the ld. CIT(A) on claim of administrative

expenses of Ruchi Prativa Samman Samaroha of Rs.18,94,847/-, in para

3 of the order has dealt on the facts and also the future benefits and

assessee's turnover and relied on the judicial decisions and directed the

AO to delete the addition. On the ground No.2 of disallowance on Ruchi

Baliyatra Function, the AO has allowed only 50% of the claim which the

assessee had contested before the appellate authority. In the appellate4ITA No.169/2015proceedings ld. AR explained the importance of Bali Yatra Festival in

Odisha which is referred by the CIT(A) in para 4 of the order, and

considering the payment of the rent to the Government, Zilla Sanskriti

Parishad, Electricity charges to CESU, Cuttack Municipal Corporation, the

CIT(A) observed that expenses are in the nature of business promotion

and advertisement of the products of the company and ought to be

allowed and directed the AO to delete the addition. On the ground No.3,

of disallowance of repairs and maintenance, ld. CIT(A) has confirmed the

addition made by the AO and in respect of other grounds of social benefit

expenses, puja expenses, travel expenses, ld. CIT(A) observed that these

expenses cannot be allowed u/s.37(1), and relied on the judicial decisions

and confirmed the additions made by the AO. In respect of disallowance

of   travelling   expenses,   administrative   expenses    aggregating    to

Rs.11,66,011/-, the ld. CIT(A) found that the AO relied on the decision of

Chennai Tribunal and these expenses are incurred for working on

consumer products raw material, telephone and mobile expenses. With

this observations, the CIT(A) directed the AO to delete the claim of

advertisement expenses being part of business expenditure and in

respect of travelling expenditure, directed the AO to disallow 10% of claim

and partly allowed the appeal.4.    Aggrieved by the order of the CIT(A) the revenue has filed the

present appeal before the Tribunal.5.    Before us, ld. DR argued that the CIT(A) was not justified in deleting

the addition under the administrative expenses of Ruchi Prativa Samman5ITA No.169/2015Samaroha and Ruchi Baliyatra Function without specific reasons and in

the absence of evidence, to substantiate the claim of travelling expenses

the CIT(A) erred in directing the AO to disallow 10% and prayed for

restoring the order of AO.6.    None appeared on behalf of the assessee.7.    We heard ld. DR's submissions and perused the finding of lower

authorities and material on record. Prima facie, the additions made by the

AO was due to non-availability of evidence and no explanations were

provided. We find that the CIT(A) has taken an exhaustive view on the

claim of expenditures and substantiated his action with reasonings which

we are of the opinion, are acceptable, considering the nature of business

and activities and the image of the company. Accordingly, we are not

inclined to interfere with the order of CIT(A) who has dealt exhaustively on

the provisions and the facts vis-à-vis explanations of the assessee and

partly allowed the appeal. Accordingly, we uphold the same and dismiss

the grounds of appeal of the revenue.8.    In the result, appeal of the revenue is dismissed.Order pronounced in the open court on this 05/07/2017.Sd/-                               Sd/-
          (N. S. SAINI)                  (PAVAN KUMAR GADALE)
लेखा सदस्य / ACCOUNTANT MEMBER             न्याधयक सदस्य / JUDICIAL MEMBER
कटक Cuttack; ददनांक Dated 05/07/2017
प्र.कु .धि/PKM, Senior Private Secretary6ITA No.169/2015आदेश की प्रधतधलधप अग्रेधषत/Copy of the Order forwarded to :1. अपीलाथी / The Appellant-            M/s Om Oil & Floor                     Mills
     Ltd., Type-II/8, New Industrial Estate
     Khapuria, Madhupatna, Cuttack.2.   प्रत्यथी / The Respondent-ACIT, Circle-2(1) Cuttack3.   आयकर आयु क्त(अपील) / The CIT(A),4.   आयकर आयुक्त / CIT5.   विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कटक / DR, ITAT, Cuttack6.   गाडा फाईल / Guard file.आदेशानुसार/ BY ORDER,
                       सत्याधपत प्रधत //True Copy//

                                                                        (Senior Private Secretary)
                                                                      आयकर अपीलीय अधधकरण, कटक / ITAT, Cuttack