TaxTMI 
TaxTMI 
2008 (11) TMI 236
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.... however, all these appeals have been admitted only on one substantial question of law, vide different orders. The question as framed in ITA Nos. 12, 99, 124 reads as under, while in ITA No. 142 the language is bit differently worded but in substance that also covers the same controversy: "Whether, on the facts and in the circumstances of the case, deletion of additions made by the Assessing Officer under section 40A(2) (a) of the Act were founded by ignoring the relevant considerations which were required to be taken into account in terms of sub-section (2)(a) of section 40A of the Act ?" 2. The necessary facts in this regard are, that the assessee entered into a lease agreement, to have full finance for purchase of an effluent and a....
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....that in the absence of any proper evidence, and also considering the fact, that it is a contractual liability under a valid agreement, and there is no justification to draw adverse inference arbitrarily. It was also held that the Assessing Officer cannot compel any businessman to take loans from any bank where the interest charged is less than the rate charged by the outsider, and the difficulty to obtain huge loan was understood, and comparable case was not confronted to the assessee. It was held that it is required to be decided by the businessmen themselves, after taking expediency and interest of the business, and it is up to them how to protect their interest of the business. It was also considered that no material evidence was brought....
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....int out this factual position to be incorrect. Thus, with a view to maintain consistency, no interference is required to be made in allowance of the deduction. This is one aspect of the matter. 7. Then, we proceed to independently consider the matter on the merits also, in view of the recent judgment of the hon'ble Supreme Court in C. K. Gangadharan v. CIT [2008] 304 ITR 61 (Appeals Nos. 5210-5216 of 2002 decided on July 21, 2008). 8. To start with we may gainfully quote the provisions of section 40A(2) (a) which read as under:- "(2)(a) 'Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion ....
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....ed to examine this aspect of the matter as well and find that these considerations are also no more res integra. We may straightway refer to the judgment of the hon'ble the Supreme Court in CIT v. Walchand and Co. P. Ltd. [1967] 65 ITR 381, which was rendered by a Bench of three hon'ble judges, wherein the hon'ble Supreme Court were laying down the tests and proper approach for disallowance and the Appellate Tribunal's duty to approach problems in judicial spirit and record reasons in support of its decision. It was held that in applying the test of commercial expediency for determining as to whether an expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjudged from ....
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....t for the purpose of the assessee's business, reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Income-tax Department. It is of course open to the Appellate Tribunal to come to a conclusion either that the alleged payment is not real or that it is not incurred by the assessee in the character of a trader or it is not laid out wholly and exclusively for the purpose of the business of the assessee and to disallow it. It is not the function of the Tribunal to determine the remuneration which in their view should be paid to an employee of the assessee. In that case, the assessee had appointed one V as its general manager at a salary of Rs. 1,000 per month, and commission of 12½ per cent....