Cash payment not sacrosanct for deduction

of business or profession is com ordered by deducting the white plagues from the receipts which ar in the nature of income. The encumbrance for claiming expenditure as a demonstration is on the taxpayer, understanding that it was actually incurred and was wholly and solely in relation to business or profession. In the present-day(a) context one of the convenient modes of proving the fact of expenditure is to get hold of hire by check, preferably account-payee cheque, to show the authenticity of requital and on that pointafter justifying its eligibility for deduction. All payments by cheque need non ineluctably be sacrosanct. The assessing officer (AO) can still master the genuineness and the need for such expenditure, as held in the Schneider electrical India Ltd vs CIT (2008 171 internal revenue agent 177 Delhi) case. In this case, the expenditure towards agency was doubted by the AO and the deduction was denied fleck computing the total income. T he tribunal found factually that on that point was no agreement between the taxpayer and the commission promoter and there was no material on record to show that the commission agent procured any business to the taxpayer. It was held that the payment by account-payee cheque by itself is not sufficient to discharge the onus of expenditure and the decision of the tribunal was affirmed by the appeal.

Payments make to an affiliate concern towards goods or services could be subjected to logical mental test as contained in Section 40A(2)(a) of the Income-Tax Act. The allied or sister concern for the purpose o f applying this reasonable test is cover wid! e by clause (b) of Section 40A(2). In CIT vs Paarel Imports & Exports (P) Ltd (171 Taxman 209), the taxpayer paid service charges to a consultancy firm in which its managing theatre coach and other directors were partners. The services rendered by the allied concern were no different from what was done by the directors of the company. On the basis of facts, the courtyard held that the transaction towards...If you want to get a full essay, put together it on our website: BestEssayCheap.com

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