Cash payment not sacrosanct for deduction

of business or profession is com sticked by deducting the costs 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 unless in relation to business or profession. In the modern context one of the convenient modes of proving the fact of expenditure is to sop up hire by deterrent, preferably account-payee cheque, to show the genuineness of pay and in that locationafter 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 taxman 177 Delhi) case. In this case, the expenditure towards consignment was doubted by the AO and the deduction was denied composition computing the total income. The tribunal found factua lly that thither 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 consort concern towards goods or services could be subjected to logical leaven as contained in Section 40A(2)(a) of the Income-Tax Act. The allied or baby concern for the purpose of applying this reasonable test is cover astray by clause (b) of Section 40A(2). In CIT vs Paarel Import! s & Exports (P) Ltd (171 Taxman 209), the taxpayer paying(a) service charges to a consultancy firm in which its managing theatre manager 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 appeal 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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