TaxTMI 
TaxTMI 
2017 (4) TMI 247
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....d no.1 to 3, Revenue has challenged deletion of disallowance in respect of various expenditure made by the AO. 3. With the assistance of the ld.representatives, we have gone through the record carefully. We find that the assessee is a partnership firm. At the relevant time, it was engaged in the business of trading of chemicals which are primarily used in textile process. It has filed its return of income on 21.9.2009 declaring total income at Rs. 14,60,263/- . The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and serve upon the assessee. After scrutiny of the accounts, the ld.AO has passed assessment order under section 143(3) of the Act on 14.12.2011. He made following disallowance a....
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.... personal expenditure of the assessee, and (d) expenditure must be laid out or expended wholly and exclusively for the purpose of business or profession. The expression "wholly" employed in section 37 refers to quantification of expenditure while expression "exclusively" refers to the motive, objective and purpose of the expenditure. In order to appraise ourselves as to how the concept of commercial expendency and business needs are to be appreciated, while considering the allowance or disallowance of expenditure claimed by an assessee, we would like to make reference to the judgment of the Hon'ble Gujarat High Court in the case of Voltamp Transformer Pvt. Ltd. Vs. CIT, 129 ITR 105 (Guj). The following observations are worth to note: "So f....
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....rities below. As far as first issue is concerned,i.e. disallowance of commission paid by the assessee. It emerges out from the record that the assessee has paid commission to 12 persons and it ranges between 6% to 15% of the sales made through them. The AO has disallowed this commission on the ground that in textile business, the commission ranges in between 1% to 3% whereas in the case of assessee the rate of commission is as high as 15.25%. The second reason in the mind of the AO is that person to him commission was paid in last assessment year not paid during this assessment year. The next reason considered by the AO is that outstanding debtors at the end of the year were at Rs. 1,38,67,850/-. At the rate of 15% commission payable on thi....
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....defects. The reference to market rate of commission has no bearing to test the genuineness of the expenditure incurred by an assessee. The ld.CIT(A) has rightly appreciated the circumstances and rightly deleted. As far as salary expenses are concerned, the ld.AO was of the view that the assessee was not required 21 employees. Again we are of the view that this aspect ought to be left to the requirement of businessman. As far as outstanding salaries are concerned, the assessee has pointed out that on account of financial crunch, salary could not be paid in the first view monthly, and ultimately all arrears were cleared. This was not such a strong circumstance which can doubt the existence of employer-employee relationship between assessee a....