2002 (9) TMI 60 - HC - Income Tax

1. Whether, Tribunal was right in holding that the payments made to K.S. Transports attract the provisions of section 40A(2)? - 2. Whether, Tribunal was right in sustaining the disallowance out of the amounts paid to K.S. Transport on the ground it was excessive and unreasonable? - For the assessment year 1985-86, after the assessee s appeal against the order of assessment was allowed in part by the Commissioner who reduced the extent of the disallowance by 50 per cent. having regard to the increase in the cost of diesel and oil and other costs in that year, that order of the Commissioner was affirmed by the Tribunal. As the partners of the firm are admittedly the director, spouses of two of the directors and the son of a director, section 40A is clearly attracted as all these persons were covered by one or the other sub-clause of section 40A(2)(b). The first question is, therefore, answered against the assessee and in favour of the Revenue. - So far as the second question is concerned, having perused the order of the Commissioner which is affirmed by the Tribunal, we find that it is based upon material and that the disallowance made on the ground that the expenditure was excessive and unreasonable was justified.

Summary

High Court MADRAS High Court Citation: 2002 (9) TMI 60 - MADRAS High Court

Judges: R. JAYASIMHA BABU, K. RAVIRAJA PANDIAN

The court addressed two questions regarding payments made to K.S. Transports under section 40A(2). The firm consisted of directors and relatives, leading to a disallowance of excess payments. The Tribunal upheld the disallowance, citing excessive and unreasonable charges. The court ruled in favor of the Revenue on both questions.