Gryphon Appliances Ltd Vs DCIT (ITAT Delhi)
ITAT Delhi held that forfeited for loss of commission or short sales cannot be disallowed as TDS deduction against the same is paid by the appellant in the respective financial year.
Facts- The assessment of the assessee was completed after disallowance of various expenses. However, CIT(A) allowed many disallowances, however, confirmed the disallowance of the commission expenses as prior period expenses and disallowance of the business promotion expenses @20% ad hoc was not only sustained but enhanced to whole of the amount. Being aggrieved, the assessee is in appeal before Tribunal.
Conclusion- The bench is of firm view that the ld CIT(A) has fallen an error in not giving due consideration to the letter dated 24.01.2014 of M/s. Hitkari Potteries Pvt. Ltd which specifically mentioned that the amount lying as security is being forfeited has compensation for loss of commission or short sales. The TDS deduction against the same stands paid by the appellant in present FY. Thus, the findings of the ld CIT(A) holding that payment was on account of royalty and a prior period expense cannot be sustained.
Specially, when the expenses incurred are not supported by any vouchers and are on heads that same are generally of personal nature like bills of restaurant, hotels, clothing, fashion accessories, duty free shops, cosmetics, spa, gift shops, it becomes all the more necessary that the expenses are explained with some probability of being spent for business promotion and not just personal or for superfluous social networking. Thus Ld AO was not justified to restrict the disallowance to ad hoc 20% and Ld. CIT(A), following due process of law has rightly enhanced the same.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The present appeal has been preferred by the Assessee against the order dated 31.01.2019 of Ld. CIT(A)-4, New Delhi (hereinafter referred as Ld. First Appellate Authority) arising out of an appeal before it against the assessment order dated 30.12.2016 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as „the Act‟) by the AO, Dy. CIT, Circle-10(2) New Delhi (hereinafter referred as the Ld. AO).
2. Facts of the case are that the assessee is a Public Limited Company under the name and style Gryphon Appliances Limited. During the financial year relevant to the Assessment Year 2014-15, the year in respect of which appeal is preferred, the appellant was carrying on the business of Trading/distribution of a range of domestic kitchen appliances products of Black & Decker. Gryphon & Hitkari. Return declaring Income of Rs. 32,52,680/- was filed on 26.11.2014. The same was processed u/s 143(1).
The assessment has been completed u/s 143(3) by making certain additions as follows:
