The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the petty expenses relating to telephone expenses, advertisement expenses cannot be disallowed on ad-hoc basis in case of a corporate entity.
The assessee, YKM Holdings Pvt. Ltd. is engaged in the business of investment in securities and lending of money. It has shown income from rent; consultancy charges; interest income; miscellaneous income; and dividend income.
The Assessing Officer required the assessee to explain the purpose of travelling, which was claimed and also the miscellaneous expenses out of sums aggregating Rs.2,83,172/-. The Assessing Officer held that no vouchers have been produced for verification and the purpose for the visit in travelling account and other misc. expenses. Accordingly, he proceeded to make an ad-hoc addition.
The coram headed by the President, G.S.Pannu held that if the assessee has stated that it had undertaken travelling for getting consultations with solicitors for litigation connected with the business of the assessee and has produced the booking of tickets and other details to substantiate, there is no reason why ad-hoc disallowance should have been made.
“Similarly with regard to miscellaneous expenses also, as noted above, these are petty expenses and mostly relating to telephone expenses, advertisement expenses etc. Such expenses could not be disallowed on an ad-hoc basis especially in the case of a corporate entity. The ad- hoc disallowance made by the Assessing Officer and the CIT (Appeals) are deleted,” the ITAT added.
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