2024 (8) TMI 343

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....einafter referred to as 'the AO'] under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for the Assessment Year (AY) 2016-17. Facts of the Case: 2. The brief facts of the case are that the assessee is a partner in three firms. He has declared income under the heads of Income from House Property, Profits and gains of Business or Profession and has and Other Sources. The assessee filed his return of income on 06/01/2017 for the AY 2016-17 declaring a total income of Rs. 28,25,340/-. The case was subsequently selected for scrutiny and a notice under Section 143(2) of the Act was issued on 19/09/2017. The Assessing Officer (AO) passed an order under Section 143(3) of the Act on 19/12/2018, mak....

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.... has actually claimed deduction u/s. 80C of Rs. 1,50,000 only and not of Rs. 2,70,507/-, as it is maximum permissible deduction u/s. 80C of the Income Tax Act, 1961. 3. The Learned CIT(A) has erred in law in facts as much as confirming the addition of Rs. 4,44,595/- made by the learned AO without considering the facts that the assessee has earned income which falls under section 28(v) of the Income Tax Act, which is considered as business income and expenditure incurred viz Driver Salary of Rs. 1,92,000/-, Bank Charges of Rs. 555/-, Car Expenses of Rs. 1,42,500/, Depreciation of Rs. 11,555/- and Office and Other Expenses of Rs. 98,540/-, these expenses are very reasonable and incurred for earning business income, which is allowable....

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....sidered the contention of both the parties and perused the material available on record. Section 37 of the Income Tax Act, 1961, deals with the allowability of business expenditure that is not expressly covered by any other specific section of the Act. The concept of reasonability within Section 37 of the Act revolves around ensuring that the expenses claimed are not only genuinely incurred for business purposes, but are also reasonable in the context of the business operations. 7.1. If the transaction is having commercial substance, tax arbitrage need not be a reason to disallow the expenditure. The amount of expenditure should be reasonable in relation to the nature of the business and the benefit derived from it. 7.2. In the presen....

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....ng dependent or independent, minor or major, married or unmarried. For the sake of clarity, we produce the relevant part of the same - (4) The persons referred to in sub-section (2) shall be the following, namely:- (a) for the purposes of clauses (i), (v), (x) and (xi) of that sub-section,- (i) in the case of an individual, the individual, the wife or husband and any child of such individual, and (ii) in the case of a Hindu undivided family, any member thereof; 9.1. Therefore, legitimate claim for deductions under the provisions of section 80C of the Act should not be disallowed without proper justification. Therefore, the ground of the assessee is allowed. Ground No. 3: 10. The assessee's co....