Judgment:
1. This appeal by the Revenue is directed against the order passed by the CIT(A) on 16th May, 2002 in relation to asst. yr. 1992-93.
On the facts and in the circumstances of the case, the learned CIT(A) has erred in law in : (i) deleting the disallowance of Rs. 12,97,632 by allowing the claim under Section 35(1)(iv) of the Act rightly made by the AO as the assessee-company could not produce any evidence that the machinery was used in R&D programme.
(ii) deleting the disallowance of Rs. 1,25,119 made on account of guarantee commission to the directors of the company.
(iii) deleting the disallowance of Rs, 2,17,328 being 1/3rd of the total sales promotion expenses by the AO ignoring the reasons mentioned in the assessment order.
(iv) deleting the disallowance of Rs. 6,61,110 being 1/10th out of telephone and vehicle expenses by the AO for non-business purposes.
3. Both the sides are in agreement that ground No. 1 is covered in assessee's favour by the orders passed by the Tribunal in earlier years. We have perused the order of the Tribunal in assessee's own case for asst, yrs. 1991-92, 1993-94 and 1994-95 in ITA Nos. 115, 116 and 248/JU/1998, dt. 18th Nov., 2004 reported as Dy. CIT v. Metallizing Equipment Co. (P) Ltd. (2005) 92 TTJ (Jd) 95-Ed. in which this issue has been discussed at para 8 of the order dismissing the Departmental ground on this count. Respectfully following the precedent, we uphold the impugned order.
4. Second ground relating to the deletion of disallowance on account of guarantee commission to the directors of the company is also covered in assessee's favour by the aforesaid Tribunal order passed in assessee's own case. This issue is discussed at para 16 of the order in which the guarantee commission was held to be deductible and the assessee's contention was accepted. Following the precedent, we uphold the impugned order, 5. Ground No, 3 is against the deletion of disallowance of Rs. 2,17,328 being 1/3rd of total sales promotion expenses.
6. The AO observed that the total sales promotion expenses claimed in this year at Rs. 6,51,984 were much higher than Rs. 1,68,544 claimed in the preceding year. It was further noticed that the increase in the sales was much disproportionate to the increase in the sales promotion expenses. The AO opined that the expenditure relating to the advertisement items and on insertion of advertisements in the newspapers was not required as assessee's item was not a consumer good.
The AO further required the details of printing and publishing expenses of Rs. 3,11,961 which was duly submitted and the AO observed that the obtaining of bills/vouchers on different bogus letter heads was not uncommon these days. Considering these facts, he made addition at 1/3rd of the total expenditure. In the first appeal, the learned CIT(A) deleted the said addition.
7. We have heard both the sides and perused the relevant material on record. It is obvious that the AO had made the addition simply on conjectures by disbelieving the expenses so claimed, Primarily his view that the advertisement material and insertion in the newspaper was not required by the assessee is wholly untenable because his jurisdiction is confined only to examining as to whether such expenditure has been genuinely incurred and is incidental to the carrying on of the business, He cannot substitute his opinion with that of the assessee on the aspect as to whether such expenditure was required or not. He further held the printing bills of Rs. 3,11,961 as not wholly acceptable on the ground that such bogus letter heads were not uncommon these days. If he was not satisfied with the bills produced before him, he was fully authorized to examine the genuineness of the parties and bills issued. Having not done so, he was under obligation to accept the genuineness of the bills for the obvious reason that the onus to prove the apparent as unreal is on the one who so alleges. In our considered opinion, the learned CIT(A) rightly proceeded in deleting this addition.
8. Last ground on account of deletion of disallowance out of telephone and vehicle expenses is admittedly covered in assessee's favour by the order passed by this Bench in assessee's own case for asst, yr.
1995-96, copy of which has been placed at p. 11 onwards of the paper book in which it was held that no disallowance can be made in the hands of the company for personal use of facilities by the directors for the reason that the company is a separate legal entity distinct from its directors. Respectfully following the precedent, we uphold the impugned order on this score.