2010 (7) TMI 1214

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....amounting to Rs. 14,02,508. 3. The assessee had paid Rs. 1,40,25,087 as speed money to labourers at New Mangalore Port Trust (NMPT). These payments were made in cash to various Moopas (gang leaders) through vouchers over and above the regular payment through NMPT. It was observed that the recipients were not identifiable and they are not assessee's employees. Due to the above facts, the Assessing Officer was of the view that expenditure in relation to this payment could be inflated in order to arrive at a lower assessable income. Further, the AO was of the opinion that the speed money would not have been spent wholly and exclusively towards income generating activity during the year. Therefore, 20% of the payments with respect to spe....

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....s) after analyzing the issue in detail decided the issue restricting the disallowance to 10% instead of 20%. The relevant portion of the order is extracted here below:     4. In the case of M/s. Konkan Marine Agency cited, the Hon'ble High Court of Karnataka has held the payment of speed money, made either through labour or workers union, could not be considered to be either prohibited by law or illegal in nature, had been incurred in the ordinary course of business and therefore ought to be allowed as deduction by way of business expenditure. In assessment year 2004-05, the Hon'ble ITAT has confirmed the CIT(A)'s order in the appellant's own case reducing the disallowance of speed money to 10 per cent. Fol....