Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (1) TMI 54 - AT - Income TaxApplicability of section 40A(3) – Payment of retrenchment compensation - payment exceeding ₹ 2,00,000/- in cash – allowability of deduction u/s 35DDA - assessee submitted that the expenditure claimed under the head ‘Gratuity, Retrenchment and Notice Pay in assessment year 2003-04 was not allowed by the AO in the assessment. Therefore, they were claimed in the assessment year 2004-05. The AO allowed only 1/5th expenses after reducing the cash payment u/s 40A(3) of the Act. - Held that:- CIT(A) was not justified in confirming the addition u/s 40A(3) of the Act on the basis of cash payment exceeding ₹ 20,000/- In this case Rule 6DD(h) of the Income-tax Rules is applicable wherein the cash payment limit is not exceeding ₹ 50,000/- The Revenue’s grounds are revolving around allowing expenses claimed by the assessee at ₹ 45,13,340/- u/s 35DDA - CIT(A) held that these expenses are not covered u/s 35DDA - as per Section 35DDA, the only expenses are allowed to be proportionate basis i.e. 15th expenditure in connection with voluntary retirement - there was no voluntary retirement in assessee case - the payments were related to Gratuity, Retrenchment and Notice Pay - CIT(A) has rightly decided the case – Decided in favour of assessee. Interest payment on advance paid disallowed – Held that:- AO rightly was of the view that the assessee has shown advance to both the parties i.e. M/s. D.R. Polymers (P) Ltd., New Delhi and M/s. Neel Kanth Corporation, Jaipur and opening balance as on 01-04-2003 was at ₹ 7.50 lacs and ₹ 7.00 lacs respectively and closing balance was at ₹ 5.25 lacs in the case of M/s. Neel Kanth - assessee has not charged any interest on these advances - dealing in the share is not the business of the assessee, hence money borrowed relatable to the advance to M/s. D.R. Polymer (P) Ltd. is not for the purpose of business - Similarly, as interest free advance has been given to M/s. Neelkanth Corporation, it is evident that money borrowed to that extent is not used for the purpose of business – assessee has not brought any evidence to substantiate its claim except the arguments that these payments were made either in the form of share application money or weak financial position of the company - before AO, no reply was filed by the assessee – thus, the matter is remitted back to the AO for fresh adjudication – Decided partly in favour of
|