2013 (1) TMI 888 - AT - Income Tax

Summary

Issues involved: Appeal against disallowance of cash expenses u/s 40A(3) of the Income Tax Act, 1961 for the assessment year 2008-09.

Summary:

Issue 1: Disallowance of cash expenses u/s 40A(3)
The assessee, a firm in film distribution and TV serial production, filed a return of income for the assessment year admitting total income of `41,43,170/-. During a survey, it was found that cash payments were made at shooting sites due to business compulsions. The Assessing Officer disallowed `6,88,366/- u/s 40A(3) of the Act. The CIT(Appeals) upheld the disallowance, stating that the payments were not voluntarily offered for taxation. The Tribunal considered the business expediency and the nature of payments made under section 40A(3) and 40A(3A) proviso. It was concluded that the cash payments were made under business compulsions and thus, section 40A(3) did not apply. The Tribunal reversed the CIT(Appeals) order and allowed the appeal filed by the assessee.

In conclusion, the Tribunal allowed the appeal filed by the assessee against the disallowance of cash expenses u/s 40A(3) for the assessment year 2008-09, based on the business expediency and nature of payments made at shooting sites.