2020 (3) TMI 1109

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....ss of construction and flat promotion. While completing the assessment for the assessment year 2015-16,the Assessing Officer made disallowances under Sections 36(1)(iii),40A(3) and donations under Section 37 of the Income Tax Act,1961 (in short 'the Act') and completed the assessment. Aggrieved,the assessee filed an appeal before the CIT(A). The Ld CIT(A) dismissed the appeal. Aggrieved against that order,the assessee filed this appeal. 3. The assessee has taken various grounds in the grounds of appeal. However,at the time of hearing,the assessee argued on the following issues only and hence,each of the issues is narrated below and disposed off accordingly. 4. The Ld. A.R. submitted that the assessee made interest free advances to its....

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.... purpose of project at Madurapakkam Project undertaken by its sister concern and the entire expenses was incurred towards them. The A.O. noticed that the assessee company gave interest free funds to its subsidiary to meet out subsidiary's expenditure whereas its subsidiary has not done any contract work or supply of goods or materials to the assessee company. Further,the assessee company has not produced any evidence to show that it has benefitted in any way from the funds advanced to its sister concern. When the A.O. perused the P&L A/c,he noticed that the assessee company has disclosed a meager profit of Rs. .10.41 lakhs from its operations,which is just 1.24% only. Therefore,the A.O. held that one of the reasons for such low profit is....

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....ister concern. The assessee has not placed any material even before us to prove that the impugned transaction was undertaken on commercial consideration. Therefore,we uphold the disallowance made by the A.O. and sustained by the learned CIT(A) subject to verification as directed by the learned CIT(A). Therefore,the corresponding grounds of the assessee on this issue fail. 7. The next issue is relating to disallowance of Rs. .4,56,471/- under Section 40A(3) of the Act. During assessment proceedings,the A.O. on verification of the cash book of the assessee has identified the following items for disallowance. Nature of expenditure Amount in Rs. Pooja expenses 21,763 Gift purchase for Ayuda Pooja 57,828 Payment to Emm....

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....ed the material available on record. We find that the expenditure incurred under the head "Pooja expenses",gift purchases for Ayudha pooja,cash purchases,Sivaranjini Contractor",could be allowed as business expenditure,towards which incurring of cash expenditure could be justified. Therefore,we direct the A.O. to allow these expenses. With regard to payments made under the following heads,Rajshree Associates-labour contractors,Emmkay Associates-labour contractors,Pachyappan-Masonary,Sivaranjini Contractor,Shanugam-centring,since the assessee is not able to establish that these payments did not attract the provisions of section 40A(3) of the Act,we are of the view that disallowances made by the A.O. and as sustained by the learned CIT(A) und....