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2020 (3) TMI 1109 - ITAT CHENNAIDisallowance u/s 36(1)(iii) - interest free advances to its sister concern - diversion of funds - HELD THAT:- Assessee has borrowed interest bearing funds and claimed the corresponding interest as expenditure. It advanced interest free loan to subsidiary concern but has not established the commercial expediency on the transaction with its sister concern. The assessee has not placed any material even before us to prove that the impugned transaction was undertaken on commercial consideration. Therefore,we uphold the disallowance made by the A.O. and sustained by the learned CIT(A) subject to verification as directed by the learned CIT(A). Therefore,the corresponding grounds of the assessee on this issue fail. Addition u/s 40A(3) - Proof of single payment,which is exceeding ₹ 20,000/- - HELD THAT:- Expenditure incurred under the head “Pooja expenses”, gift purchases for Ayudha pooja,cash purchases,Sivaranjini Contractor”,could be allowed as business expenditure,towards which incurring of cash expenditure could be justified. Therefore,we direct the A.O. to allow these expenses. With regard to payments made under the following heads,Rajshree Associates-labour contractors,Emmkay Associates-labour contractors,Pachyappan-Masonary,Sivaranjini Contractor,Shanugam-centring,since the assessee is not able to establish that these payments did not attract the provisions of section 40A(3) we are of the view that disallowances made by the A.O. and as sustained by the learned CIT(A) under this heads do not require any disturbances and hence,such disallowances are confirmed. Thus,the corresponding grounds are treated as partly allowed on this issue. Donations disallowance u/s 37 - HELD THAT:- We find that the assessee has incurred the impugned expenses wholly and exclusively for the purpose of business and hence,the disallowance made by the A.O is not warranted. Therefore,we direct the A.O to allow the expenses claimed by the assessee under Section 37 of the Act. Corresponding grounds of the assessee are allowed.
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