The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has partly upheld the appeal of Kartakeya Enterprises, a partnership firm, for the assessment year 2015-16. The ITAT found that the assessee had substantiated the claim of its expenses with documentary evidence. However, the ITAT sustained the disallowance of 50% towards petrol and maintenance expenses of the car.
The assessee is a partnership enterprise that sells kitchen tools and cookware. He claimed certain expenses in his income tax return for the financial year 2015-16. The ITO disallowed some of these expenses, including interest paid on the loan, commission paid to Shri Rakesh Tiwari, brokerage paid to Shri Sumit Chitkara, and professional charges paid to Shri Rajiv Dutta. The Commissioner of Income Tax (Appeals)[CIT(A)] upheld the ITO’s decision. The assessee appealed to the ITAT.
The assessee contended that the expenses claimed were reasonable business expenses authorized under Section 37(1) of the Income Tax Act of 1961. The assessee also argued that the conditions prescribed under Section 37(1) had not been violated by the assessee and the ITO and the CIT(A) had not specifically stated anything to support the disallowances/ additions made.
The ITO claimed that the assessee had failed to establish its expenditure claim with corroborative documentary proof. It further claimed that the assessee had not submitted any details concerning the commission rate and that Shri Rajiv Dutta’s professional fees were excessive.
The CIT(A) supported the ITO’s arguments and claimed that the assessee had not submitted any details regarding how the car was used and stated that the disallowance of 50% for petrol and automobile maintenance charges was a realistic assessment of the car’s personal usage.
The ITAT observed that the assessee had substantiated the claim of its expenses with corroborative documentary evidence and also noted that the ITO and the CIT(A) had not pointed out anything specific to justify the disallowances/additions made.
The Two-member bench comprising Saktijit Dey (Vice-President) Girish Agrawal (Accountant Member) deleted the disallowances/additions made by the ITO and the CIT(A) for interest paid on loan, commission paid to Shri Rakesh Tiwari, brokerage paid to Shri Sumit Chitkara, and professional charges paid to Shri Rajiv Dutta and the ITAT sustained the disallowance of 50% towards petrol and maintenance expenses of car.
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