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2020 (3) TMI 1109

..... as expenditure. It advanced interest free loan to subsidiary concern but has not established the commercial expediency on the transaction with its sister concern. The assessee has not placed any material even before us to prove that the impugned transaction was undertaken on commercial consideration. Therefore,we uphold the disallowance made by the A.O. and sustained by the learned CIT(A) subject to verification as directed by the learned CIT(A). Therefore,the corresponding grounds of the assessee on this issue fail. Addition u/s 40A(3) - Proof of single payment,which is exceeding ₹ 20,000/- HELD THAT:- Expenditure incurred under the head “Pooja expenses”, gift purchases for Ayudha pooja,cash purchases,Sivaranjini Contract .....

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..... 3.2019 for the assessment year 2015-16. 2. The assessee,M/s.Rajkham Builders Pvt Ltd.,is engaged in the business of construction and flat promotion. While completing the assessment for the assessment year 2015-16,the Assessing Officer made disallowances under Sections 36(1)(iii),40A(3) and donations under Section 37 of the Income Tax Act,1961 (in short the Act ) and completed the assessment. Aggrieved,the assessee filed an appeal before the CIT(A). The Ld CIT(A) dismissed the appeal. Aggrieved against that order,the assessee filed this appeal. 3. The assessee has taken various grounds in the grounds of appeal. However,at the time of hearing,the assessee argued on the following issues only and hence,each of the issues is narrated below and d .....

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..... ing in the books of the assessee and found that funds received from the assessee company are used for the purpose of project at Madurapakkam Project undertaken by its sister concern and the entire expenses was incurred towards them. The A.O. noticed that the assessee company gave interest free funds to its subsidiary to meet out subsidiary s expenditure whereas its subsidiary has not done any contract work or supply of goods or materials to the assessee company. Further,the assessee company has not produced any evidence to show that it has benefitted in any way from the funds advanced to its sister concern. When the A.O. perused the P&L A/c,he noticed that the assessee company has disclosed a meager profit of ₹ .10.41 lakhs from i .....

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..... free loan to subsidiary concern but has not established the commercial expediency on the transaction with its sister concern. The assessee has not placed any material even before us to prove that the impugned transaction was undertaken on commercial consideration. Therefore,we uphold the disallowance made by the A.O. and sustained by the learned CIT(A) subject to verification as directed by the learned CIT(A). Therefore,the corresponding grounds of the assessee on this issue fail. 7. The next issue is relating to disallowance of ₹ .4,56,471/- under Section 40A(3) of the Act. During assessment proceedings,the A.O. on verification of the cash book of the assessee has identified the following items for disallowance. Nature of expenditure .....

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..... ties. 9. We have heard the rival submissions and perused the material available on record. We find that the expenditure incurred under the head Pooja expenses ,gift purchases for Ayudha pooja,cash purchases,Sivaranjini Contractor ,could be allowed as business expenditure,towards which incurring of cash expenditure could be justified. Therefore,we direct the A.O. to allow these expenses. With regard to payments made under the following heads,Rajshree Associates-labour contractors,Emmkay Associates-labour contractors,Pachyappan-Masonary,Sivaranjini Contractor,Shanugam-centring,since the assessee is not able to establish that these payments did not attract the provisions of section 40A(3) of the Act,we are of the view that disallowances made b .....

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..... ey are allowable as an expenditure under Section 37 of the Act. Hence,Ld. A.R. pleaded that the assessee s plea may be allowed. On the other hand,Ld. D.R. supported the orders of the lower Authorities. 11. We have heard the rival submissions and perused the material available on record. We find that the assessee has incurred the impugned expenses wholly and exclusively for the purpose of business and hence,the disallowance made by the A.O is not warranted. Therefore,we direct the A.O to allow the expenses claimed by the assessee under Section 37 of the Act. Corresponding grounds of the assessee are allowed. 12. In the result,the appeal of assessee is partly allowed. Order pronounced in the open court on 13th March ,2020,at Chennai. - Income .....

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