The Tax Publishers2020 TaxPub(DT) 0941 (Kol-Trib)

INCOME TAX ACT, 1961

Section 37(1)

Status of assessee being a Company, which was required to comply with the statutory requirement, disallowance of 90% of the expenditure claimed by assessee on account of salary and bonus was highly excessive and unreasonable, therefore it would be fair and reasonable to restrict the disallowance made by AO on account of salary and bonus to 50%.

Business expenditure - Disallowance on account of salary expenditure - Failure of assessee to furnish the relevant details and documents -

Assessee debited a sum on account of salary and bonus. AO called upon assessee to provide the relevant details of salary and bonus claimed to be paid to the nine employees. Although the names of the employees were provided by assessee-company, their Aadhaar Numbers and details of Provident Fund Accounts were not furnished. Even the details of Bank accounts through which salary and bonus to the employees were paid could not be furnished by assessee. AO treated the claim of assessee for expenditure incurred on salary and bonus as bogus and the same was disallowed by him. CIT(A) sustained the disallowance to the extent of 90% allowing the relief of 10%. Held: Assessee was in the business of investment and that recovery of loans and advances was made by assessee-company and the said amount was invested in the equity shares of unlisted companies. Keeping in view the factum and quantum of investment activities carried on by assessee-company during the year, which was duly taken note of by AO in assessment order and having regard to the fact that status of assessee being a Company, which is required to comply with the statutory requirement, disallowance of 90% of expenditure claimed by assessee on account of salary and bonus was highly excessive and unreasonable. It would be fair and reasonable to restrict the disallowance made by AO on account of salary and bonus to 50%.

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2015-2016



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