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of <h1>ITAT directs re-examination of disallowances under tax laws, emphasizes thorough verification</h1> <h3>M/s VRL Logistics Ltd. Versus The Dy. Commissioner of Income-tax, Circle-1 (1), Hubblli. And The Asst. Commissioner of Income-tax, Circle-3 (1), Hubblli. Verus M/s VRL Logistics Ltd.</h3> M/s VRL Logistics Ltd. Versus The Dy. Commissioner of Income-tax, Circle-1 (1), Hubblli. And The Asst. Commissioner of Income-tax, Circle-3 (1), Hubblli. ... Issues:1. Disallowance u/s 40(a)(ia)2. Disallowance towards personal usage of Aircraft3. Disallowance of interest relating to work in progress4. Disallowance of prior period expensesIssue 1: Disallowance u/s 40(a)(ia)The assessee claimed a deduction for a lump sum lease amount paid in an earlier year without deducting tax at source. The AO disallowed the deduction u/s 40(a)(ia), which was confirmed by the CIT(A). The assessee argued for the application of the second proviso to sec. 40(a)(ia) inserted by the Finance Act 2012. The ITAT set aside the CIT(A)'s order, directing the AO to examine the claim.Issue 2: Disallowance towards personal usage of AircraftThe AO disallowed a portion of aircraft expenses for personal use without providing a breakdown. The ITAT held that since the assessee maintained a log book for aircraft usage, the disallowance should be based on actual personal use recorded in the log book. The matter was restored to the AO for verification based on log book records.Issue 3: Disallowance of interest relating to work in progressThe AO disallowed a portion of interest expenditure related to work in progress. The CIT(A) deleted the disallowance, noting that the borrowed funds were not solely used for work in progress. The ITAT directed the AO to verify if the own funds exceeded the work in progress amount before disallowing interest.Issue 4: Disallowance of prior period expensesThe AO disallowed prior period expenses claimed by the assessee while computing book profit u/s 115JB. The CIT(A) allowed the deduction, but the ITAT disagreed, stating that prior period expenses cannot be deducted from net profit under sec. 115JB. The ITAT set aside the CIT(A)'s decision and confirmed the disallowance.In conclusion, the ITAT partly allowed both appeals for statistical purposes, emphasizing the need for proper examination and verification of claims related to disallowances and deductions.
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