1978 (7) TMI 182 - AT - Income Tax

Summary

Issues:
1. Allowance of brokerage as deduction under section 41(2) of the IT Act.
2. Deletion of credit of Rs. 5,000 in the name of an employee.
3. Deletion of addition of unexplained cash credit in the name of a third party.

Detailed Analysis:
1. The first issue revolves around the allowance of brokerage as a deduction under section 41(2) of the IT Act. The appellant, a transport operator, claimed brokerage expenses of Rs. 700 in the sale of vehicles, which the Income Tax Officer (ITO) disallowed. However, the Appellate Assistant Commissioner (AAC) allowed the deduction, considering the sale price to be reduced by the brokerage amount. The Department argued that as per a decision of the Mysore High Court, brokerage on the sale of vehicles is not an admissible deduction under section 41(2). Nonetheless, the AAC's decision was upheld on the grounds that the brokerage, though not allowable under section 41(2), should be allowed as a business expenditure since the sales were part of the assessee's business assets.

2. The second issue pertains to the deletion of a credit entry of Rs. 5,000 in the name of an employee, Joseph Kunju. The appellant contended that there was no such credit in Joseph Kunju's account on the specified date. The Department confirmed the absence of the credit entry and acknowledged its deletion based on the lack of veracity, thereby confirming the deletion for alternative reasons.

3. The final issue involves the deletion of an addition of unexplained cash credit in the name of Thirunavukarasu Chettiar. The ITO had added Rs. 9,000 as unexplained cash credit, which the AAC deleted, citing insufficient evidence to prove the credit was not genuine. However, upon further scrutiny, it was revealed that the credit belonged to a relative of the assessee's partner, with an opening credit of Rs. 12,000. After adjustments, a sum of Rs. 6,000 remained unexplained. Consequently, the addition of Rs. 6,000 was upheld, as the source of the credit could not be explained by the appellant. Thus, the Department's appeal was partially allowed, confirming the addition of Rs. 6,000 in this instance.