2011 (4) TMI 1437 - AT - Income Tax

Summary

Issues involved: Determination of the justification for upholding the disallowance of cash subvention expenses u/s 143(3) of the Income Tax Act, 1961 for the assessment year 2006-07.

Summary:

Issue 1: Disallowance of Cash Subvention Expenses

The appeal was filed against the order passed by the CIT(A) regarding the disallowance of cash subvention expenses. The Assessing Officer rejected the claim of deduction for cash subvention expenses amounting to Rs. 92,04,873. The CIT(A) upheld this decision, stating that the expenditure claimed was abnormally high without sufficient evidence. However, upon further examination, the ITAT found that the subvention expenses were a legitimate business expense incurred by the assessee for marketing auto loans. The ITAT observed that the payments were made through banking channels, properly documented, and linked to specific customers and transactions. The ITAT concluded that there was no valid reason to disallow the cash subvention expenses and directed the Assessing Officer to delete the disallowance.

Issue 2: Consistency with Previous Decision

The ITAT noted that a similar issue was decided in favor of the assessee for the assessment year 2003-04. Based on the consistency of the facts and legal position, the ITAT upheld the grievance of the assessee and directed the Assessing Officer to delete the disallowance of Rs. 2,73,32,019.

In conclusion, the appeal was allowed, and the disallowances of both Rs. 92,04,873 and Rs. 2,73,32,019 were directed to be deleted by the ITAT.