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2011 (9) TMI 655 - HC - Income TaxAdmissibility of expense claimed towards refund of the sales tax - Mercantile system of accounting - Held That:- mercantile system means revenue and expenditure is determined by accrual and not on actual basis. Expenses shall be claimed in year of deduction and income in year of grant of refund. Disallowance of expense on Net Profit ratio - Held That:- Disallowance was made ignoring books of a/c, vouchers further AO ignored the fact that NP at 3.21%, on a substantially higher turnover of this year, was higher than NP of 2.95% in the immediate preceding year. Therefore disllowances amounting to 74% was unjustified.
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