INCOME TAX ACT, 1961

Section 37(1) Section 40A(2)

Business expenditure - Allowability - Rent and salary paid to information centers disallowed @ 30% on ad hoc basis -

Assessee company was in the business of healthcare and owns a super specialty hospital in the name and style 'Ashwini Hospital'. AO found that the assessee had claimed rent and salary in respect of information centres located at seventeen places in Odisha and neighbouring states. According to the AO, the expenses were not fully genuine and he disallowed the same. AO allowed 30% of the expenditure claimed by the assessee and added balance of 70% on acocunt of rent and salaries paid to the employees. CIT(A) restricted the disallwonce to 30% of the total expenditure claimed by the assessee.Held: The establishment of information centers, incurring of expenditure towards rent and salary was not in dispute, however, entire claim of the assessee cannot be allowed in absence of supporting documents, bills and vouchers, etc., therefore, the addition was necessary and obvious on failure of assessee in producing the relevant documentary evidence in support of his claim. However, the CIT(A) had confirmed 30% of the amount of claim of assessee which was excessive and seems to be unreasonable, therefore, in the interest of justice, to cover up the possible leakage of revenue the addition confirmed by the CIT(A), i.e., 30% of the total claim of the assessee was reduced to 15% and the AO was directed to recalculate the disallowance accordingly.

REFERRED :

FAVOUR : In assessee's favour (partly).

A.Y. : 2010-2011 to 2015-2016

INCOME TAX ACT, 1961

Section 69A

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