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Issues involved: Appeal by Revenue challenging deletion of disallowances on travelling expenses, sundry expenses, and interest under s. 40A(8) of the IT Act, 1961.
Travelling Expenses Disallowance (Issue 1): The ITO disallowed Rs. 5,000 on estimate basis for travelling expenses related to entertainment, specifically taxi hire charges for guests. However, the CIT (A) deleted the disallowance citing lack of material to support it. The ITAT concurred with CIT (A) as the disallowance was based on surmises and conjectures without proper evidence. Sundry Expenses Disallowance (Issue 2): The ITO disallowed Rs. 8,000 as a lumpsum amount to cover sundry inadmissibles based on past practice. The ITAT emphasized that each assessment year is distinct and disallowances should be based on facts of that year, not past practices. The CIT (A) rightly deleted the disallowance as it lacked proper justification. Interest Disallowance u/s 40A(8) (Issue 3): The ITO disallowed Rs. 61,610 (15% of interest paid) under s. 40A(8) as the assessee failed to add back the required amount. However, the CIT (A) found that the interest was on unpaid purchase consideration, not deposits, hence s. 40A(8) did not apply. The CIT (A) allowed relief of Rs. 10,629 (15% of interest) as it was related to property purchased for business purposes. The ITAT upheld CIT (A)'s decision as no evidence was presented to counter the facts considered by CIT (A). In conclusion, the ITAT upheld the CIT (A)'s orders, dismissing the Revenue's appeal as the disallowances lacked proper basis and justification, and the CIT (A) had correctly interpreted the relevant provisions of the IT Act, 1961.
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