Disallowance in income tax

[madhavvan n]

if an individual makes some capital purchases and expenditure thru its sister concern which is also individual is there any disallowance in income tax ( both are subject to tax audit) the amounts are credited and debited to the sister concerns account and shown as balance receivable/ payable

[Ravi Chopra]

In case of purchase through sister concern, you need to read the provisions of Section 40A(1) thoroughly. Otherwise, if the transaction is on one to one basis and at arm's length, it appears there is no difficulty. But in certain situations you may be required to disclosed the facts in the forms or statements, as and when required to desired.

AI Summary

Tax Audit: Can Capital Purchases via Sister Concern Be Disallowed? Check Section 40A(1) for Arm's Length Transactions. An individual inquired about potential disallowance in income tax when making capital purchases and expenditures through a sister concern, with both entities subject to tax audit. The response advised reviewing Section 40A(1) of the Income Tax Act, noting that if transactions are at arm's length and one-to-one, there should be no issues. However, disclosure of facts may be necessary in certain forms or statements as required.