CIT v. Paarel Imports & Exports (P) Ltd.

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The Tax PublishersIT Appeal No. 186 of 2002 2008 TaxPub(DT) 1776 (Ker-HC) : (2008) 024 (I) ITCL 0039 : (2008) 218 CTR 0685 : (2008) 171 TAXMAN 0209 : (2008) 012 DTR 0092 CIT v. Paarel Imports & Exports (P) Ltd. INCOME TAX ACT, 1961 Business disallowance under section 40A(2) - Excessive or unreasonable payments -Avoidance of tax Assessee claimed certain amount paid by way of service charges to a consultancy firm for consultancy offered by it in areas of general administration, marketing, production, finance and management system. It was found that assessee managing director and other directors were partners of said firm and they had received remuneration from assessee for rendering same services as claimed to have been provided by said firm. *Held:* In pursuant of facts, transaction in appeal was clearly a device for avoidance of tax and, therefore, service charges paid by assessee was not allowed. Income-tax Act, 1961, Section 40A(2) A.Y. : 1992-93 Decision: In favour of revenue. Case Law Analysis:Lakshminarayanan Madan Lal v. CIT [1972] 86 ITR 439 (SC) [Para 2], J.K. Steel & Industries Ltd. v. CIT [1978] 112 ITR 285 (Cal.) [Para 2] and McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 /22 Taxman 11 (SC) [Para 4]. CIT v. Paarel Imports & Exports (P) Ltd. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersIT Appeal No. 186 of 2002
2008 TaxPub(DT) 1776 (Ker-HC) : (2008) 024 (I) ITCL 0039 : (2008) 218 CTR 0685 : (2008) 171 TAXMAN 0209 : (2008) 012 DTR 0092

CIT v. Paarel Imports & Exports (P) Ltd.

INCOME TAX ACT, 1961

Business disallowance under section 40A(2) - Excessive or unreasonable payments -Avoidance of tax

Assessee claimed certain amount paid by way of service charges to a consultancy firm for consultancy offered by it in areas of general administration, marketing, production, finance and management system. It was found that assessee managing director and other directors were partners of said firm and they had received remuneration from assessee for rendering same services as claimed to have been provided by said firm. Held: In pursuant of facts, transaction in appeal was clearly a device for avoidance of tax and, therefore, service charges paid by assessee was not allowed.

Income-tax Act, 1961, Section 40A(2)

A.Y. : 1992-93
Decision: In favour of revenue.

Case Law Analysis:Lakshminarayanan Madan Lal v. CIT [1972] 86 ITR 439 (SC) [Para 2], J.K. Steel & Industries Ltd. v. CIT [1978] 112 ITR 285 (Cal.) [Para 2] and McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 /22 Taxman 11 (SC) [Para 4].

CIT v. Paarel Imports & Exports (P) Ltd.