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Issues:
1. Disallowance of transportation expenses under section 40A(2)(b) 2. Disallowance of depreciation on car for personal use Issue 1: Disallowance of transportation expenses under section 40A(2)(b) The appellant, a private limited company engaged in the brick business, declared a low net profit prompting scrutiny. The company purchased bricks from two concerns owned by its directors and sold them. The transportation of bricks involved two trucks leased from the directors. The Assessing Officer disallowed Rs. 1,65,145 as excessive transportation expenses under section 40A(2)(a). The CIT(A) deleted the disallowance, considering it unjust. The appellant argued that owning trucks was necessary for quick service, comparing lease costs with hiring charges. However, the Tribunal found the urgency claim unsubstantiated as the nature of goods did not require 24-hour truck availability. The appellant's comparison with owning trucks was deemed irrelevant as the Assessing Officer focused on excess charges, not truck ownership. The Tribunal rejected arguments on selective application of section 40A(2)(a) and lack of data on hired trucks. The Tribunal upheld the Assessing Officer's decision, emphasizing the need to consider the entire cost of services, not just lease rent. Issue 2: Disallowance of depreciation on car for personal use The appellant purchased a car, incurring petrol expenses and claiming depreciation. The Assessing Officer disallowed half of the depreciation due to potential personal use. The Tribunal deemed such disallowance unjustified for a company, especially without evidence of personal use or ownership of a personal car by the Director. Consequently, the Tribunal upheld the appellant's argument and partially allowed the appeal. In conclusion, the Tribunal upheld the disallowance of transportation expenses under section 40A(2)(a) and rejected the disallowance of depreciation on the car for personal use, partially allowing the appeal.
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