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Assessing Authority can’t disallow Business Expenditure incurred in form of Postage, Courier and Stationery Charges: Madras High Court [Read Judgment]
The Madras High Court held that assessing authority cannot disallow Business Expenditure incurred in form of Postage, Courier and Stationery Charges.
The issue involved in this case is in respect of recovery of the expenditure like Postage, Courier Charges etc., from the clients of the Assessee Company, M/s.Share Aids Private Ltd. the total expenditure incurred by the Assessee during the year in question was more and recovery from the clients was less and thus, the net ‘Unrecovered’ amount to the extent of Rs.3,56,949 was claimed as expenditure under the head “Recovery”.
The Assessee claimed that this was the expenses incurred for Postage, Courier, Stationery etc., to comply with the guidelines of SEBI to inform the change of address to the individual investors both by advertisement in prominent newspapers and also by individual communications.
However, since there was closure of business in the year 2000, relevant to Assessment Year 2001-2002, only a part of expenses could be recovered from the clients and the balance amount was claimed as ‘Business Expenditure’ which was disallowed by the tribunal.
The Appellant/Assessee submitted that it was a Business Expenditure in the regular course of business of the Assess at the relevant point of time during the previous year and therefore, the same could not be disallowed by the Assessing Authority as well as the Tribunal.
As the Assessee had duly furnished its audited Balance Sheet before the Assessing Authority and thus the entire expenditure was duly verified by the Auditors as well as Books of Accounts maintained in the regular course of business.
The division bench of Justice Dr. Vineet Kothari and Justice M.S.Ramesh observed that the Books of Accounts regularly maintained by the Assessee in the ordinary course of business have neither been rejected by the Assessing Authority in the present case nor have been otherwise disbelieved.
Therefore, the court held that Expenditure such as Postage, Courier, Stationery, etc. in the hands of the Assessee was required to be allowed by the Assessing Authority. The Tribunal also fell in error in disallowing the same.