INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Motor car expenses and unverifiable cash expenses - Disallowance for personal use, self-made Vouchers -

Assessee was saddled with adhoc disallowance of motor car expenses and unverifiable cash expenses. During survey operations, it transpired that assessee had 7 motor cars and these cars were purchased on different dates. Against the same, assessee claimed depreciation and vehicle expenses. Assessee admitted that the cars were not used for any specific concern / unit and used for business interests of the group. Further, the cars were used by members of family and for activities of other group concerns. Since no component of personal expenditure was disallowed by assessee, AO proceeded to make adhoc disallowance to account for personal element in usage of cars as well as in view of the fact that the cars were being used by the other group concerns. Assessee submitted that cars were being used by the staff for marketing purposes. However, not convinced, AO estimated an addition against the same. However, AO provided deduction under section 80-IB against the same @25%. Held: Facts as emerging during survey proceedings including sworn statements made by assessee therein, personal element in usage of Motor Cars could not be ruled out. No disallowance was offered by assessee in respect of the same while filing the return of income. Similarly, labour-welfare expenses and conveyance expenses were claimed on the basis of self-made vouchers and assessee could not produce satisfactory evidences in support of the same. Therefore, some adhoc disallowance was justified on the facts and circumstances. Keeping in view the assessee's turnover, Motor Car disallowance was restricted to 20%. Assessee would be entitled for relief of 25% under section 80-IB against both the items. AO was directed to recompute the income of the assessee.

REFERRED :

FAVOUR : Partly In assessee's favour

A.Y. : 2013-14 & 2014-15

INCOME TAX ACT, 1961

Section 37(1)

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