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TMI Blog2015 (2) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) disallowance of 40% of trip expenses and road expenses of Rs. 34,93,255/- [Ground No. 2] (iii) addition of Rs. 12,81,000/- being transportation charges which was salary paid by the directors to the drivers engaged by them. 3. The brief facts are that assessee company is engaged in the business of trading, transport contractors and commission agent. Regarding driver's bhatta charges, the AO noted that, assessee has debited sum of Rs. 56,58,570/- in the P/L Account, which were mainly incurred through cash vouchers paid to various drivers. In response to the show cause notice, the assessee submitted the details of the driver and the free meal provided to the drivers. It was also submitted that the salary of a drivers were below tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be restricted. Such a disallowance is not called for and in any case such a disallowance is quite excessive. 6. On the other hand, Ld. DR strongly relied upon the reasoning given by the Ld.CIT(A) and held that disallowance confirmed by the Ld.CIT(A) is quite reasonable. 7. After considering the rival submissions and also on the perusal of the finding given by the AO as well as Ld.CIT(A) and the material placed on record, we find that the only basis for disallowance is that expenses have been incurred in cash. The assessee had explained that in the nature of transport business the cash payment to the drivers is inevitable as they are not ready to accept account payee cheques for small amounts ranging from Rs. 200 to Rs. 500. It has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers have been obtained who were under the control and management of the company. Thus, AO disallowed 50% of trip expenses and road expenses and disallowed the sum aggregating Rs. 43,66,569/- 9. Before Ld.CIT(A), the assessee again gave details submissions and various evidences in support of the claim of these expenses. These explanation along with the evidences was subject matter of remand proceedings. The AO submitted his remand report which have been dealt by the Ld.CIT(A) in para 8.1. After considering the assessee's submissions and remand report of the AO, the Ld.CIT(A), restricted the disallowance to 40%. 10. Before us, learned counsel submitted that in scrutiny proceedings for the A.Ys. 2001-02 and 2002-03, no such disallowance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2)(b). The AO has incorporated the details of the charges paid to these persons and also show truck charges, salary, interest, depreciation debited by them and the net income and gross taxable income of these persons from the said transport charges received by them paid. He noted that, as against the transport receipt of Rs. 46,39,000/-, net income in the hands of the related persons stood at Rs. 13,07,148/-. After analyzing these payment AO held that the payment, made was excessive and was primarily to suck the profit of the assessee company. The assessing officer's detailed analysis and reasoning have been given in para 11 to 11.5 of the assessment order. 14. Before the Ld.CIT(A), detailed submission were made by the assessee on which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drivers by these related persons were on the same rate as paid by the assessee to its own drivers and the basis on which the assessee company had paid the hire charges cannot be doubted or said to be not genuine. In some of the cases of the directors, which were assessed under scrutiny proceedings, no disallowance has been made on account of payment of salary to the drivers. Thus no disallowance should be made. 16. On the other hand, Ld. DR strongly relied upon the order of the Ld.CIT(A) and submitted that the AO and Ld.CIT(A) has examined the agreement with these persons, which does not mention about the payment of driver charges in respect of vehicles engaged by the directors/related persons and the AO has also analyzed the dates of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted persons, then how much salary has been paid to the drivers by the related person for the transportation done by them, cannot be questioned by the assesse, unless there is some direct evidence that assessee was paying the salary of the drivers employed by these persons. Whether the hire charges paid to these persons were excessive has to be examined from the angle, whether such a payment is unreasonable looking to the market value of services rendered by the related persons having regard to the other comparable instances under uncontrolled conditions. To hold that such related persons have not paid the salary to the driver and disallow the same in the hands of the assessee does not seem to be rational basis sans any material on record. W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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