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2016 (9) TMI 401 - AT - Income TaxExpenditures incurred on Crane hire charges, Dredger Transport expenses and Sub-contractor charges - whether are allowable u/s.28 ? - disallowance made u/s.40(a)(ia) - Held that:- CIT(A) had given a relief to the assessee on the reason that no payment is outstanding at the end of the cost of financial year and it is not to be shown as payable in the financial statement of the assessee. Hence, the provisions of the section 40(a)(ia) of the Act is not applicable. However, the Department is not challenging these findings of the CIT(A). The Department challenging only another findings of the CIT(A) in regard to the expenditure on Crane hire charges, Dredger Transport expenses and Sub-contractor allowable u/s.28 of the Act and CIT(A) deleted the disallowance of ₹ 49,69,800/- by overlooking the provisions of the section 37 of the Act which covers these payments. Hence, the ground of Revenue is inappropriate. In our opinion, provisions of the section 40(a)(ia) of the Act cannot be applied in view of the judgment of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM ]. Disallowance made u/s.40A(3) - Held that:- We find that though the payments were made in cash in excess of ₹ 20,000/- on account of business expenditure, as the assessee made the payments at the work place for the purpose of purchase of materials and labourers. Further, the drudging work was carried on at odd hours at sea coast and it cannot be accepted that the material suppliers or labourers would take the cheques from the assessee. The provisions of the section 40A(3) of the Act which itself provides for exception circumstances having regard to the nature and extent of banking facilities available and business expenditure and other relevant factors. In the present case, the facts and circumstances show that the assessee has bona fide reasons to make cash payments in respect of above expenditure. In the present case, the assessee and its team went to a far away place for the purpose of TV serial shooting. The assessee had made cash payments to various parties, technicians, artists etc. for the period of 2 to 6 days under business compulsions. We find that the above payment was made under business compulsions and Therefore, by considering all the facts and circumstances of the case and also taking into consideration of the business expediency, we are of the opinion that sec.40A(3) has no application to the facts of the assessee’s case. Unexplained cash credits u/s.68 - Held that:- Regarding sustaining the addition u/s.68 of the Act in respect of current account balance in the name of Shri Alagappa Vandayar, the assessee is not able to show any proof that Shri Alagappa Vandayar has contributed this amount. In view of the insufficiency of evidence, the addition is to be considered u/s.68 of the Act. The same is confirmed. This ground in Cross objection is dismissed. Disallowance of expenditure at 10% in respect of self-made vouchers - Held that:- The total expenditure was claimed at ₹ 2,49,55,733/-. These payments were self-made vouchers. There is every chance of bifurcating expenditure in selfmade vouchers as it is not supported by third party evidence and self-made vouchers is not 100% full proof. Hence, certain adhoc disallowance is made. Being so, the CIT(A) is very reasonable in restricting the disallowance from 20% to 10% with regard to expenditure covered by self-made vouchers. We do not find any infirmity in the order of the Ld.CIT(A) and the same is confirmed.
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