2010 (7) TMI 1214 - AT - Income Tax

Summary

Issues involved: Disallowance of speed money amounting to Rs. 14,02,508.

Summary:

Issue 1: Disallowance of speed money

The assessee paid Rs. 1,40,25,087 as speed money to labourers at New Mangalore Port Trust (NMPT) through vouchers over and above regular payments. The Assessing Officer disallowed 20% of the payments amounting to Rs. 28,05,017, considering it not genuine. The ld. CIT(A) restricted the disallowance to 10% based on the decision in M/s. Konkan Marine Agency case. The Hon'ble ITAT allowed the appeal in favor of the assessee. The ld. AO agreed that such speed money payment is a trade practice for smooth functioning. The ld. CIT(A) upheld the decision, stating that speed money payments are not illegal and are incurred in the ordinary course of business.

Issue 2: Appeal by Revenue

The Revenue appealed against the order of the ld. CIT(A) regarding the disallowance of speed money. The ld. DR argued that the speed money payments were excessive and should be upheld. However, the Tribunal upheld the decision of the ld. CIT(A) based on the precedent set by the Hon'ble High Court of Karnataka, stating that such payments are for business consideration and not illegal.

In conclusion, the appeal filed by the Revenue was dismissed by the Tribunal, upholding the decision of the ld. CIT(A) to restrict the disallowance of speed money to 10% instead of 20%.