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2005 (8) TMI 587 - AT - Income Tax
Issues:
1. Disallowance of clearing expenses paid to unlisted workers at New Mangalore Port Trust (NMPT).
2. Deletion of partial disallowance in respect of incentives paid to Trailer Drivers, Crane Operators, etc.
Issue 1: Disallowance of clearing expenses paid to unlisted workers at NMPT:
The assessee, a C & F Agent, declared clearing charges receipt and claimed deduction for clearing expenses paid to unlisted workers at NMPT. The Assessing Officer disallowed a portion of the claimed expenses due to lack of evidence. The learned CIT(A) upheld a disallowance of 30% of the total claim, considering the substantial increase in expenditure and unverifiable nature of documentary evidence. The revenue challenged the deletion of disallowance, while the assessee challenged the retention of the balance disallowance. The tribunal found that the expenses were incurred wholly and exclusively for the purpose of business, as the assessee was required to employ unlisted workers as per agreements. The tribunal deleted the disallowance, emphasizing that partial disallowance is not permissible under law when expenses are claimed under section 37(1) of the Act.
Issue 2: Deletion of partial disallowance in respect of incentives paid to Trailer Drivers, Crane Operators, etc.:
The assessee claimed expenditure towards incentives for various workers, which was disallowed by the Assessing Officer due to lack of evidence. The learned CIT(A) restricted the disallowance to 50% of the claimed amount. Both the revenue and the assessee challenged this decision. The tribunal, after considering the details provided by the assessee and the findings on the earlier issue, deleted the disallowance of such payments.
In conclusion, the tribunal dismissed the revenue's appeal and allowed the assessee's appeal, emphasizing the necessity of expenses being wholly and exclusively for the purpose of business and the importance of providing necessary evidence to support claimed expenses.