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2014 (7) TMI 636 - AT - Income TaxDevelopment contract expenses – Payment made to subcontractors - Expenses claimed for non-existing company – Genuineness of contract allocation not made by CIT(A) – Held that:- payment itself established and, secondly it is not the case of the assessing authority that the particulars of the persons to whom the amounts were paid could not be furnished - The claim of payment of subcontract is not disqualified for deduction under the Act - the expenditure is not a capital expenditure since the assessee did not acquire any capital asset - this is not the payment relating to personal benefit of any employees or directors of assessee-company, it is not personal expenditure. Whether the expenditure is incurred wholly and exclusively for the purpose of business – Held that:- The decision in Sassoon J. David & Co. Ltd. Vs. CIT [1979 (5) TMI 3 - SUPREME Court] followed - the expression ‘wholly and exclusively’ used in s. 10(2)(xv) does not mean ‘necessarily’ - it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business - Such expenditure may be incurred voluntarily without any necessity and it is incurred for promoting the business and to earn profits, the assessee can claim deduction even though there was no compelling necessity to incur such expenditure - The fact somebody other than the assessee is also benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction under section 10(2)(xv), if it satisfies otherwise the tests laid down by the law – the entire payment of subcontract cannot be disallowed as there is evidence for payment. Whether the assessee has established the payment of subcontract by producing the necessary evidence - Held that:- At that time the sub-contractors might have changed their place of business and non-tracing by the AO cannot be a reason to find fault with the assessee and to disallow the expenditure incurred by the assessee - the payment details had been produced by the assessee-company before the AO - The payment details contained full details of the nature of transaction - the details of all transactions in respect of which the subcontract payment had been paid by the assessee-company are duly recorded in the payment vouchers and other evidence. Assessee submitted that the details furnished before the AO contain the nature of works carried on by the subcontractors - genuineness of the payments was established by the assessee - initial onus and burden of proof was on the assessee - such initial onus and burden of proof has been duly discharged by the Assessee Company by producing its audited books of accounts, payment vouchers and other documents giving full details as to the nature of transactions, which necessitated the payment of such subcontract works and that this was an accepted norm and established in this line of business and that without such payment, it was not possible to survive in this line of business, as well as the prevalent trade practice in the line of business carried on by the Assessee Company all along – Decided against Revenue.
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