2015 (9) TMI 966 - HC - Income Tax

Addition on interest in respect of loans advance to sister concerns - CIT(A) deleted addition - Held that - S.A. Builders Vs. CIT(A) 2006 (12) TMI 82 - SUPREME COURT wherein it has been held that what has to be considered is whether the advance was given as a measure of commercial expediency on the part of the respondent-assessee. The Court observed that the revenue cannot put itself in the arm chair of businessman and decide how the business is to be conducted. If the expenditure has been incurred on account of commercial expenditure, then even if there is no legal obligation to incur it, the same is to be allowed. In the above view, the question as proposed does not raise any substantial question of law. - Decided in favour of assessee. Commission paid to related parties - TDS deduction - Tribunal deleted the addition - Held that - This issue of payment of commission, concurrent finding of fact arrived between the CIT(A) and the Tribunal holding that the commission as claimed had been paid. The view taken by the Tribunal is a plausible view and the same has not been shown to be perverse.- Decided in favour of assessee. Disallowance towards cash expenses - Tribunal allowed part relief - Held that - We find that the CIT(A) and the Tribunal have reached concurrent findings of fact in restricting the disallowance to the extent of 10% of the cash expenditure. This results in reversing the ad-hoc disallowance of almost 70% done by the Assessing Officer without any justifiable reasons. Moreover, for the subsequent years also the Assessing Officer has himself disallowed the expenses of similar nature only to the extent of 10% as done by CIT(A) and the Tribunal by the impugned order. - Decided in favour of assessee.

Summary

Issues:
1. Challenge to order of Income Tax Appellate Tribunal for Assessment Year 2007-08.
2. Questions of law framed by revenue regarding interest on loans to sister concerns, commission paid to related parties, and cash expenses disallowance.

Analysis:

Issue 1: Challenge to Tribunal Order
The appeal under Section 260A of the Income Tax Act, 1961 challenges the order of the Income Tax Appellate Tribunal (Tribunal) dated 11 January 2013 for Assessment Year 2007-08.

Issue 2: Questions of Law

Question 1: Interest on Loans to Sister Concerns
- The respondent-assessee advanced a sum to a sister concern and paid interest on it.
- The CIT(A) held that the advance to the sister concern was for business purposes, thus deleting the disallowance of interest.
- The Tribunal upheld this decision, citing commercial expediency and emphasizing that the revenue cannot dictate business conduct.
- The question raised by the revenue was not entertained as it did not present a substantial question of law.

Question 2: Commission Paid to Related Parties
- The Assessing Officer disallowed commission payments due to lack of evidence.
- The CIT(A) found the Assessing Officer's inquiry insufficient and allowed the commission payments.
- The Tribunal upheld this decision, noting that the commission was paid by cheque with TDS deducted.
- The Tribunal's decision was considered plausible, and the question raised was not deemed a substantial question of law.

Question 3: Disallowance of Cash Expenses
- The Assessing Officer disallowed a portion of cash expenses due to lack of supporting vouchers.
- The CIT(A) upheld part of the disallowance related to personal and vehicle expenses.
- The Tribunal agreed with the CIT(A), emphasizing that major expenses in the appellant's business are typically paid in cash.
- The Tribunal reversed the ad-hoc disallowance by the Assessing Officer, limiting the disallowance to 10% of cash expenditure.
- The Tribunal's decision was supported by concurrent findings of fact, and the question raised did not present a substantial question of law.

Conclusion
The appeal was dismissed, and no costs were awarded.

This detailed analysis covers the issues involved in the legal judgment, providing a thorough examination of the questions of law raised by the revenue and the decisions reached by the CIT(A) and the Tribunal for each issue.