INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Ad hoc disallowance of 10% of various expenses - Allowability of -

During the course of hearing, assessee submitted that routine operational expenses were incurred which were required to run business successfully and normally. AO on an ad hoc basis has disallowed 20% of sales promotion, conveyance expenses, miscellaneous expenses and repair & maintenance expenses. Further, CIT(A) had given a finding that AO made disallowance without any evidence on record but had maintained the disallowance to the extent of 10% of expenses. Held: Expenses have been disallowed purely on an ad hoc basis and even CIT(A) had returned a finding that AO had no material to make the subject disallowance. In absence of any finding that expenses were bogus or not incurred for the purposes of assessee's business, the ad hoc disallowance so made was directed to be deleted.

Relied:CIT III v. Kaypee Mechanical India (P) Ltd. in (Tax Appeal No. 186 of 2014, dt. 21-4-2014) : 2014 TaxPub(DT) 2364 (Guj-HC) M/s. Remfry & Sagar Consultants (P) Ltd. v. Asstt. CIT in (ITA No. 5887/Del/2011, dt. 20-7-2012)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

INCOME TAX ACT, 1961

Section 40(a)(ii)

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