M/s. Devlok Hatcheries & Poultry Farms, Lucknow V. ITO, Lucknow

ITA 544/LKW/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9174 (ITAT-LUCKNOW)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 16-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANADI VERMA
• Assessee Lawyers: PRAKASH NARAIN; S D SETH
• Keywords: Business income; Depreciation
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A - BENCH, LUCKNOW. BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI, ACCOUNTANT MEMBER I.T.A.NO.544(LKW.)/2010 A.Y.: 2005-06 M/S.DEVLOK HATCHERIES & VS. THE ITO, 1(1), POULTRY FARMS, LUCKNOW. C-187,NIRALA NAGAR, LUCKNOW.226 020 PAN AADFD9612J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH NARAIN, ADVOCATE & SHRI S.D.SETH, ADVOCATE RESPONDENT BY : SHRI ANADI VERMA, SR.D.R. O R D E R PER H.L.KARWA, VICE PRESIDENT THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A)-I, LUCKNOW DATED 10.6.2010 RELATING TO TH E ASSESSMENT YEAR 2005-06 2. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE A ND HENCE NO COMMENTS ARE BEING GIVEN. 3. GROUND NO.2 OF THE APPEAL READS AS UNDER : 2. THAT THE LEARNED LOWER COURT ERRED IN FACTS AND LEGAL ASPECTS OF THE CASE IN TREATING AMOUNT OF RS.27,674 PAID BY ACCOUNT 2 PAYEE PAY ORDER (WHICH IS BANKERS CHEQUE) AS CASH A ND DISALLOWING 20% OF THE SAME U/S 40A(3). 4. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUY ING DAY OLD CHICKS, GROWING THEM AND THEN PRODUCING THE CHICKS. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSES SEE MADE PAYMENT OF RS.27,674 ON 27.10.2004 (PAY ORDER) OTHERWISE THAN ACCOUNT PAYEE CHEQUE/DRAFT TO M/S. RAM SARAN RAKESH SARAN. IN R ESPONSE TO THE QUERY, THE ASSESSEE SUBMITTED THAT NO CASH PAYMENT HAS BEEN MA DE TO PARTY FOR RS.27,674. THE AO, THEREFORE DISALLOWED 20% OF TH E SAME UNDER SECTION 40A(3) OF THE INCOME-TAX ACT,1961(IN SHORT THE ACT ). ON APPEAL, THE LD.CIT(A) CONFIRMED THE ADDITION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI PRAKAS H NARAIN, ADVOCATE AND SHRI S.D.SETH, ADVOCATE,LD. COUNSELS FOR THE AS SESSEE SUBMITTED THAT PAYMENT MADE TO M/S. RAM SARAN RAKESH KUMAR, AS TH E AO HAS HIMSELF STATED, WAS MADE BY PAY ORDER. SHRI PRAKASH NARAIN, ADVOCATE AND SHRI S.D.SETH, ADVOCATE,LD. COUNSELS FOR THE ASSESSEE S UBMITTED THAT THE AUTHORITIES BELOW HAVE FAILED TO UNDERSTAND THE FA CT THAT PAY ORDER IS A BANKER CHEQUE AND IS ACCOUNT PAYEE ONLY AND PROV ISIONS OF SECTION 40A(3) DO NOT APPLY TO PAYMENT BY PAY ORDER. 6. IN VIEW OF THE ABOVE SUBMISSIONS OF SHRI PRAKASH NARAIN, ADVOCATE AND SHRI S.D.SETH, ADVOCATE,LD. COUNSELS FOR THE AS SESSEE, WE ALLOW GROUND NO.2 OF THE APPEAL. 7. GROUNDS NO.3 TO 7 OF THE APPEAL ARE DIRECTED AGA INST THE ACTION OF THE LD. CIT(A) IN DISALLOWING SALARY OF RS.1,86,000. 3 8. THE AO HAS DISCUSSED THIS ISSUE IN PARA 11 OF TH E ASSESSMENT ORDER. THE AO HAS MADE THE ADDITION OF RS.2,23,700 OUT OF SALARY PAYMENTS FOR 12 PERSONS. THE AO VIDE NOTICE DATED 7.12.2007 DESIRED TO RECORD THE STATEMENT OF THESE 12 PERSONS. VIDE LETTER DATED 17.12.2007, A DETAILED EXPLANATION HAS BEEN FURNISHED BY THE ASSESSEE IN THIS REGARD ALON GWITH PLACEMENT DETAILS AND DUTIES OF LABOURS. THE ASSESSEE HAD SUPPLIED A DETAILED CHART SHOWING THE NUMBER OF DAYS EACH OF LABOUR HAD WORKED IN TH E FARM. THE ASSESSEE ALSO SUPPLIED THE DETAILS OF WORKERS PRESENT AT TH E RELEVANT TIME. THE ASSESSEE ALSO SUBMITTED BEFORE THE AO THAT THE LABO URS WORKING IN FARM WERE CASUAL WORKERS AND THERE WAS VERY HIGH TURNOVE R IN THEM. THE AO DISALLOWED THE SALARY OF MS.DIPTI SINGH ON THE BAS IS OF HER STATEMENT. THE AO HAS ALSO DISALLOWED THE SALARY OF MR.KULDEEP MI SHRA ON THE BASIS OF HIS STATEMENT. THE AO ALSO REQUIRED THE ASSESSEE TO PRO DUCE TEN PERSONS, DETAILS OF WHICH ARE GIVEN IN PARA 11 OF THE ASSESSMENT ORD ER FOR VERIFICATION OF SALARY PAYMENTS MADE TO THEM. ACCORDING TO THE AO, THE ASSESSEE NEITHER PRODUCED THEM NOR FURNISHED THEIR COMPLETE POSTAL A DDRESSES AND SALARY PAYMENTS TO THOSE PERSONS, THEREFORE, REMAINED UNVE RIFIABLE. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS ACCEPTED THA T THE NUMBER OF EMPLOYEES IN THE FIRM WAS 40. HOWEVER, HE HAS SHO WN 62 EMPLOYEES. IN VIEW OF THE ABOVE, THE AMOUNT EQUAL TO RS.2,23,700 WAS DISALLOWED OUT OF SALARY AND THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 9. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD. CIT(A) ALLOWE D A PART RELIEF TO THE ASSESSEE OBSERVING AS UNDER : 10.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND HAVE GONE 4 THROUGH THE ORDER OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THE APPELLANT HAS BEEN ABLE TO JUSTIFY TH E SALARY PAID TO SHRI KULDEEP MISHRA AND KM.DIPTI SINGH, BUT REGARDING TH E SALARY PAYMENT OF RS.1,86,200/- TO TEN EMPLOYEES, THE APPE LLANT HAS FAILED TO PROVE GENUINENESS OF THE SAME BY NOT BEING ABLE TO FURNISH THEIR COMPLETE POSTAL ADDRESSES. IN VIEW OF THESE FACTS, THE ADDITION TO THE EXTENT OF SALARY PAID TO SHRI KULDEEP MISHRA AND KM . DIPTI SINGH TOTALING RS.37,500/- (RS.6,000/- + RS.31,500/-) IS DELETED. THE REST OF THE ADDITION,I.E. RS.1,86,200/- IS UPHELD. THESE GR OUNDS ARE PARTLY ALLOWED. 10. SHRI PRAKASH NARAIN, ADVOCATE AND SHRI S.D.SETH , ADVOCATE, LD. COUNSELS FOR THE ASSESSEE POINTED OUT THAT DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE FOLLOWING SU BMISSIONS WERE MADE : THE LEANED ASSESSING OFFICER HAS MADE ADDITION OF RS.2,23,700 OUT OF SALARY EXPENSES AS UNDER : TOTAL SALARY OF 10 PERSONS 1,86,200 PART SALARY OF DIPTI SINGH 31,500 PART SALARY OF KULDEEP MISHRA 6,000 TOTAL 2,23,700 THE LEARNED ASSESSING OFFICER HAD VIDE NOTICE U/S 1 43(3) OF 7.12.2007 DESIRED TO RECORD THE STATEMENT OF THESE 12 PERSONS. EARLIER DURING THE PROCEEDINGS, THE LEARNED ASSESSING OFFIC ER HAS ASKED FOR AND WAS PROVIDED THE DETAILS OF SALARY REGISTER AND ON 8.10.2007 WAS ALSO PROVIDED FOR PHOTOCOPY OF SALARY REGISTER (PAG E 93 TO 127 OF PAPER BOOK).ALL SALARY PAID IS VOUCHED AND VERIFIA BLE THROUGH SALARY REGISTER. IN PAST SALARY WAS NEVER DISALLOWED (PAG E 128 & 129 OF PAPER BOOK).THE COMPARATIVE CHART IS AS UNDER : ASSTT.YEAR TOTAL SALES IN CORE SALARY AND WAGES EXPENSES 2005-06 1.71 7,13,7,33 2004-05 1.57 7,06,171 5 2003-04 1.41 6,45,405 2002-03 0.85 5,33,658 THE SALARY AND WAGES PAID WAS MUCH LESS THAN THE MI NIMUM WAGES AS PRESCRIBED BY THE GOVERNMENT. VIDE REPLY DATED 17TH DECEMBER, 2007 PARA NO. 18 (P AGE 4 TO 9 OF PAPER BOOK) ASSESSEE EXPLAINED THE LEARNED ASSESSIN G OFFICER SYSTEM OF WORKING AND REQUIREMENT OF LABOURS IN FARM. THE LEARNED ASSESSING OFFICER HAS NOT DISPUTED THE FACT THAT MI NIMUM 40 LABOURS ARE REQUIRED ON REGULAR BASIS FOR DAY TO DAY OPERAT IONS IN FARM. THE LEARNED ASSESSING OFFICER HAD ALSO BEEN SUPPLIED A DETAILED CHART SHOWING THE NUMBER OF DAYS EACH OF LABOUR HAD WORKE D IN THE FARM. THE LEARNED ASSESSING OFFICER HAD RELIED UPON SAID CHART BUT HAS WRONGLY CALCULATED THAT TOTAL NUMBER OF LABOURS EMP LOYED ARE 60,HE HAS FAILED TO APPRECIATE THE FACT THAT MANY LABOUR S OUT OF 60 LABOURS WHO HAVE REPORTED FOR DUTY HAVE ONLY WORKED FOR PA RT OF YEAR AND EVEN THOUGH TOTAL NUMBER OF PERSONS EMPLOYED IS 60 AT A GIVEN TIME ARE 40 OR LESS THAN 40 PERSONS HAVE BEEN WORKING. DETAILS OF WORKERS PRESENT ARE AS FOLLOWS: MONTH TOTAL LABOUR MAX.LABOUR ON ONE DAY APRIL 45 35 MAY 46 40 JUNE 42 32 JULY 43 36 AUG. 42 37 SEPT. 40 35 OCT. 43 37 NOV. 44 38 DEC. 39 35 JAN. 40 36 FEB. 40 34 MARCH 40 36 IT WAS ALSO SUBMITTED BEFORE THE LEARNED ASSESSING OFFICER THAT THE LABOURS WORKING IN FARM ARE CASUAL WORKERS AND THER E WAS VERY HIGH TURNOVER IN THEM. AT THE TIME OF HEARING NONE OF T HESE CASUAL LABOURS WHO WERE TO BE PRODUCED. WERE WORKING WITH THE APP ELLANT. IT IS TO BE CONSIDERED THAT IT IS NOW MORE 2 YEARS WHEN THESE L ABOURS WERE 6 WORKING WITH US. THE ADDRESS WAS GIVEN TO THE LEARN ED ASSESSING OFFICER AS WAS PROVIDED TO US BY THESE LABOURS THAT ARE MIGRATORY IN NATURE AND APPELLANT CANNOT FIRST VERIFY THEIR ADDR ESS AND THEN LET THEM WORK ON MANUAL LABOR WORK. THE LEARNED ASSESSING OF FICER HAS DISALLOWED ENTIRE WAGES OF THESE 10 LABOURERS WHO C OULD NOT BE PRODUCED. THE LEARNED ASSESSING OFFICER HAS DISALLOWED THE PA RT SALARY OF MS DIPTI SINGH ON THE BASIS OF HER STATEMENT, DURING E XAMINATION MS DIPTI SINGH HAS REFERRED DEVLOK HATCHERIES AS DEVLO K DISTRIBUTORS AS THE OFFICE IS MORE DOMINANTLY KNOWN AS DEVLOK DIST RIBUTORS AND MAJOR PORTION OF OFFICE IS USED BY THEM AND MAXIMUM STAFF WORKING IN THAT BUILDING BELONGS TO DEVLOK DISTRIBUTORS THIS F ACT HAS BEEN CLARIFIED BY MS DIPTI SINGH IN HER CROSS EXAMINATIO N STATEMENT BUT ITO HAS HOWEVER CHOSEN TO IGNORE THIS FACT. ITO HAS ALSO DISALLOWED THE SALARY OF MR. KULDEEP ON BASIS OF HIS STATEMENT THAT HE DOES NOT REMEMBER HIS EXACT SALARY IN YEAR 2004-05 STILL AN ADDITION OF RS.6,000/- HAS BEEN MADE BY PARTLY DISALLOWING THE SALARY AS THE EXACT SALARY PAID TO HIM WAS RS.2750/- PER MONTH. ITO HAS NOT GOT VERIFIED THE SIGNATURES OF BOTH DIPTI SINGH AND KULDEEP DURI NG THEIR STATEMENT EVEN THOUGH PHOTOCOPY OF SALARY REGISTER WAS AVAILA BLE WITH HIM' 10.1 SHRI PRAKASH NARAIN, ADVOCATE AND SHRI S.D.SETH, AD VOCATE,LD. COUNSELS FOR THE ASSESSEE SUBMITTED THAT THE LD.C IT(A) HAS NOT CORRECTLY APPRECIATED THE ABOVE SUBMISSIONS OF THE ASSESSEE A ND HE, THEREFORE, SUBMITTED THAT THE SAME MAY BE CONSIDERED AND THE ADDITION SUSTAINED BY THE LD.CIT(A) BE DELETED. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IT SEEMS THAT THE LD. CIT(A) H AS NOT CORRECTLY APPRECIATED THE SUBMISSIONS OF THE ASSESSEE WHILE S USTAINING THE ADDITION OF RS.1,86,000. WE FIND THAT THE ASSESSEE HAS PROVIDED THE DETAILS OF SALARY REGISTER AND ALSO SUBMITTED PHOTO COPY OF SALARY REGISTER TO THE AO. THE 7 SALARY PAYMENTS ARE VOUCHED AND VERIFIABLE THROUGH THE SALARY REGISTER. IT IS ALSO SEEN THAT IN THE PAST SALARY WAS NEVER DISALLO WED. IN THIS REGARD, THE ASESSEE HAS GIVEN THE COMPARATIVE CHART IN THE WRI TTEN SUBMISSIONS FILED BEFORE THE LD.CIT(A). SHRI PRAKASH NARAIN, ADVOCAT E AND SHRI S.D.SETH, ADVOCATE, LD. COUNSELS FOR THE ASSESSEE ALSO POIN TED OUT THAT THE SALARY AND WAGES PAID WERE MUCH LESS THAN THE MINIMUM WAGES A S PRESCRIBED BY THE GOVERNMENT. IT IS FURTHER SEEN THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS EXPLAINED THE SYSTEM OF WORKING AND REQUIREMENT OF LABOURS IN THE FARM TO THE AO. WE F IND THAT THE AO HAS NOT DISPUTED THE FACT THAT MINIMUM 40 LABOURS ARE REQ UIRED ON REGULAR BASIS FOR DAY TO DAY OPERATIONS IN THE FARM. IN THIS REGARD, THE ASSESSEE HAS ALSO SUPPLIED DETAILED CHART SHOWING NUMBER OF DAYS E ACH LABOUR HAD WORKED IN THE FARM. IT IS ALSO SEEN THAT THE ASSESSEE HAS EN GAGED CASUAL WORKERS AND NONE OF THESE CASUAL LABOURS WERE WORKING WITH THE ASSESSEE DURING THE COURSE OF ASSESSMENT AND THEREFORE, LAOBURS COULD N OT BE PRODUCED BEFORE THE AO. KEEPING IN VIEW THE ENTIRE FACTS AND CIRC UMSTANCES IN THE PRESENT CASE, THERE WAS NO JUSTIFICATION IN MAKING THE DISA LLOWANCE OUT OF SALARY PAID TO THE LABOURS. WE, THEREFORE, DELETE THE ADDITION OF RS.1,86,200 SUSTAINED BY THE LD.CIT(A). CONSEQUENTLY, GROUNDS NO.3 TO 7 OF THE APPEAL ARE ALLOWED. 12. GROUNDS NO.8 AND 9 OF THE APPEAL READ AS UNDER : 8. THAT THE LEARNED LOWER COURT ERRED IN DISALLOWI NG 10% RS.35,604 OF THE FOLLOWING EXPENSES ON AD HOC BAS IS WHEN THE EXPENSES WERE FULLY SUPPORTED. 1. TRAVELLING AND CONVEYANCE 67,634 2. TELEPHONE 83,443 3. CAR RUNNING 89,946 8 4. CAR DEPRECIATION 1,20,024 9. THAT THE EXPENSES DISALLOWED ARE TOO EXCESSIVE, ARBITRARY AND WITHOUT ANY BASIS. 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE AO FOUND THAT THE ASSESSEE CLAIMED TRAVELLING AND CONVEYANCE EXPENSE S OF RS.67,634, POSTAGE AND TELEPHONE EXPENSES OF RS.83,443 AND CA R AND MOPED RUNNING EXPENSES AT RS.84,946. THE AO ASKED THE ASSESSEE T O FURNISH THE LOG BOOK AND CALL REGISTER TO VERIFY WHETHER THE EXPENSES WERE FOR BUSINESS PURPOSES OR NOT. THE ASSESSEE FAILED TO PRODUCE ANY VOUCHER, CALL REGISTER AND LOG BOOK AND HENCE THE AO DISALLOWED 20% OF T HESE EXPENSES AND ALSO DISALLOWED DEPRECIATION FOR PERSONAL USE AS WE LL AS UNVOUCHED EXPENDITURE AS UNDER : 1. TRAVELLING AND CONVEYANCE 67,634 2. TELEPHONE 83,443 3. CAR RUNNING 89,946 4. CAR DEPRECIATION 1,20,024 RS.3,56,047 X 20% = RS.71,209 14. ON APPEAL, THE LD.CIT(A) REDUCED THE DISALLOWAN CE TO 10% OF THE AGGREGATE OF ABOVE EXPENSES. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE TIM E OF HEARING, SHRI PRAKASH NARAIN, ADVOCATE AND SHRI S.D.SETH, ADVOCAT E,LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION SUSTAINED BY T HE LD.CIT(A) IS ON THE HIGHER SIDE, PARTICULARLY WHEN THE ASSESSEE HAS PRO DUCED ALL THE RELEVANT DOCUMENTS IN SUPPORT OF ITS CLAIM. THE AO HAS NOT P OINTED OUT ANY SINGLE INSTANCE WHEN THE EXPENDITURE WAS INCURRED FOR NON -BUSINESS PURPOSES. KEEPING IN VIEW THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE 9 ARE OF THE VIEW THAT THE DISALLOWANCE OF 5% UNDER T HE ABOVE HEADS WILL MEET THE ENDS OF JUSTICE. THUS, THESE GROUNDS OF APPEAL ARE ALLOWED PARTLY. 16. GROUND NO.10 OF THE APPEAL READS AS UNDER: 10. THAT THE LEARNED LOWER COURT ERRED IN DISALLOW ING RS.7,500 BEING AMOUNT PAID TO STAFF ON DIWALI INCENTIVES. 17. AT THE TIME OF HEARING, SHRI PRAKASH NARAIN, AD VOCATE AND SHRI S.D.SETH, ADVOCATE,LD. COUNSELS FOR THE ASSESSEE D ID NOT PRESS FOR THIS GROUND OF APPEAL AND ACCORDINGLY WE DISMISS THE GR OUND NO.10 AS NOT PRESSED. 18. GROUND NO.11 OF THE APPEAL READS AS UNDER : 11. THAT THE L. LOWER COURT OFFICER ERRED IN FACT S AND LEGAL ASPECTS OF THE CASE IN DISALLOWING RS.20,240 BEING LOSS OF CHIT WHICH WAS EXPENSES FOR RAISING FUNDS FOR THE BUSINESS OF THE ASSESSEE. 19. THE AO NOTICED FORM THE COPY OF ACCOUNT IN RESP ECT OF M/S. KONICA CHITFUND LTD. THAT THE ASSESSEE HAD CLAIMED RS.20,0 40 IN PROFIT AND AND LOSS ACCOUNT WHICH WAS NOT RELEVANT TO THE BUSINESS OF T HE ASSESSEE. HE, THEREFORE, DISALLOWED THE SUM OF RS.20,040. ON A PPEAL, THE LD.CIT(A) CONFIRMED THE ADDITION STATING THAT THERE IS NO MA TERIAL AVAILABLE BEFORE HIM TO ACCEPT THE ASSESSEES CONTENTION THAT THE EXPENS ES WERE WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS PURPOSES. 20. BEFORE US SHRI PRAKASH NARAIN, ADVOCATE AND SHR I S.D.SETH, ADVOCATE, LD. COUNSELS FOR THE ASSESSEE SUBMITTED THAT THE LOSS FROM CHIT OF RS.20,040 WAS CLAIMED IN THE PROFIT AND LOSS ACCOUN T OF THE ASSESSEE AS THE ASSESSEE HAD OBTAINED FINANCE FROM KONICA CHIT FUN D. HE FURTHER SUBMITTED 10 THAT IN THIS REGARD, THE COPY OF ACCOUNT OF KONICA CHIT FUND IN THE BOOKS OF THE ASSESSEE FROM FINANCIAL YEAR 2002-03 TO THE YE AR UNDER APPEAL AND THE VOUCHERS IN THIS RESPECT FOR PAYMENT ETC. WERE FIL ED BEFORE THE LOWER AUTHORITIES. HE, THEREFORE, SUBMITTED THAT THE CLA IM MAY BE ACCEPTED. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ISS UE IS DIRECTLY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE I.T.A.T., DELHI BENCH IN THE CASE OF DY.CIT VS. P. U.R.POLYURETHENE PRODUCTS (P.) LTD., 1999-(64)-TTJ-597 (TDEL),WHEREI N VIDE PARA 11 OF THE ORDER, THE TRIBUNAL HELD AS UNDER : 11. COMING TO THE ASSESSEE'S APPEAL IN ITA NO. 64/D EL/1992 THE FIRST GROUND RELATES TO LOSS ON CHIT OF RS.66,947. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE PARTICIPATION IN THE CHIT FUND DID NOT CONSTITUTE T HE BUSINESS OF THE ASSESSEE AND THE DISALLOWANCE MADE IN THIS REGARD W AS CALLED FOR IN VIEW OF THE DECISION OF THE PUNJAB & HARYANA HIGH C OURT IN THE CASE OF SODA SILICATE & CHEMICAL WORKS VS. CIT, (19 89) 179 ITR 588 (P&H). THE LEARNED CIT(A) CONFIRMED THE FINDING OF THE AO ON THE SAME REASONING AS GIVEN BY THE AO. IN THIS C ONTEXT, WE FIND THAT THE ASSESSEE WAS A REGULAR SUBSCRIBER TO THE C HIT FUND. IT PARTICIPATED IN THE AUCTION OF THE CHIT AND IN THAT PROCESS RECEIVED A FIXED MONEY WHICH WAS USED FOR THE PURPOSES OF BUSI NESS. IN THE PROCESS A LOSS WAS INCURRED BY HIM WHICH WAS CLAIME D AS A DEDUCTION. KIND OF A LOSS CLAIMED BY THE ASSESSEE W AS HELD TO BE NOT ALLOWABLE BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SODA SILICATE & CHEMICAL WORKS (SUPRA). HOWEVER, IN TERMS OF BOARD'S CIRCULAR IN CASE THE FUNDS SO RAISED ARE USE D FOR THE PURPOSES OF BUSINESS, THE LOSS IS HELD TO BE ALLOWA BLE. THE SAME VIEW HAS BEEN REITERATED BY THEM AFTER CONSIDERING THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF SODA SIL ICATE & CHEMICAL WORKS (SUPRA). THIS WAS AS PER INSTRUCTION S F.NO.72- IT(A1) DT. 16TH MAY,1978. THUS AS PER DEPARTMENT'S OWN INSTRUCTIONS THE LOSS SO SUFFERED HAS BEEN HELD TO BE ALLOWABLE. THE 11 AFORESAID VIEW HAS ALSO BEEN TAKEN BY THE ANDHRA PR ADESH HIGH COURT IN THE CASE OF CIT VS. KOVUR TEXTILE CO. (198 2) 136 ITR 61(AP). CONSIDERING THE BENEFICIAL CIRCULAR AS WELL AS THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IN FAVOUR OF THE A SSESSEE, WE WOULD HOLD THAT THE CHIT FUND LOSS CLAIMED BY THE A SSESSEE IS ALLOWABLE AND WOULD ACCORDINGLY DIRECT THE AO TO AL LOW THE SAME. 21.1 RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBU NAL(SUPRA), WE ALLOW THIS GROUND OF APPEAL AND DELETE THE ADDITION. 22. GROUND NO.12 OF THE APPEAL READS AS UNDER : 12. THAT THE L.LOWER COURT OFFICER ERRED IN FACTS AND LEGAL ASPECTS OF THE CASE IN DISALLOWING RS.1,26,000 BEING EXPENS ES INCURRED FOR BUSINESS PROMOTION. 23. THE ASSESSEE SPONSORED GOLF TOURNAMENT AS PART OF ITS ADVERTISEMENT. TOTAL EXPENSES OF RS.1,26,000 WERE ANNUALLY INCUR RED ON THIS TO PROMOTE EGG EATING HABITS AND VARIOUS EGG DELICACIES WERE SERVED. THE EXPENSES, IN QUESTION WERE INCURRED FOR PROMOTION OF CONSUMPTI ON OF EGGS AND BUSINESS OF THE ASSESSEE. THE ASSESSEE ALSO PRODUCED PAMPHLE TS ETC. OF THE TOURNAMENT BEFORE THE LOWER AUTHORITIES. THE AO HAS DISALLOWED TOTAL EXPENSES AND THE ACTION OF THE AO WAS CONFIRMED BY THE LD.CIT(A). 24. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI PRAK ASH NARAIN, ADVOCATE AND SHRI S.D.SETH, ADVOCATE, LD. COUNSELS FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE INCURRED EXPENDITURE IN CONDUCTING GOL F TOURNAMENT. ACCORDING TO SHRI PRAKASH NARAIN, ADVOCATE AND SHRI S.D.SETH, ADVOCATE, LD. COUNSELS FOR THE ASSESSEE, THE TOURNAMENT GAVE A LOT OF PUBLICITY TO THE ASSESSEES BUSINESS AND PROVIDED TO ITS EMPLOYEES T HE AMENITY OF 12 PARTICIPATING IN SUCH SPORT, WHICH ALSO HELPED THE BUSINESS. HE,THEREFORE, SUBMITTED THAT THE EXPENDITURE SO INCURRED WAS ADM ISSIBLE AS A DEDUCTION FOR COMPUTING THE ASSESSABLE INCOME OF THE ASSESSEE. S HRI PRAKASH NARAIN, ADVOCATE AND SHRI S.D.SETH, ADVOCATE, LD. COUNSELS FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE EXPENDITURE LAID OUT WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, PROFESSION OR VOCATION IS AN ALLOWABLE EXPENDITURE AND WOULD INCLUDE THE COST OF ADVERTISEMENT. WE FIN D SUBSTANTIAL FORCE IN THE ABOVE SUBMISSIONS OF SHRI PRAKASH NARAIN, ADVOCATE AND SHRI S.D.SETH, ADVOCATE, LD. COUNSELS FOR THE ASSESSEE AND THEREF ORE, WE ALLOW THE CLAIM OF THE ASSESSEE. GROUND NO.12 OF THE APPEAL STANDS ALL OWED. 25. GROUNDS NO.13 TO 17 OF THE APPEAL ARE GENERAL I N NATURE AND WE, THEREFORE, DECLINE TO GIVE ANY COMMENTS ON THESE GR OUNDS. 26. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY AS INDICATED ABOVE. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.1.11 . SD. SD. (N.K.SAINI) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT JANUARY 21ST ,2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R.,ITAT, LUCKNOW. SRIVASTAVA.