I. Section 37(1), read with sections 44AD and 145, of the Income-tax Act, 1961 - Business expenditure - Allowability of (Job work charges) - Assessment year 2004-05 - Assessee, a contractor was working for National Highway Authority of India - Assessee claimed deduction on account of job work charges paid to three sub-contractors - All payments were made by account payee cheques and sub-contractors admitted that they had received amount from assessee for work done by them and tax had also been deducted in their respective cases - Whether in these circumstances, ad hoc disallowance of job work charges made by Assessing Officer was not proper - Held, yes [Para 13] [In favour of assessee]
II. Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payments (Salary) - Assessment year 2004-05 - Whether it is for an assessee, a businessman, to come to a conclusion as to what remuneration/salary is to be paid to an employee and reasonableness is to be judged from angle of a businessman rather than from angle of Assessing Officer who may not be aware of realities and peculiarities of business - Held, yes - Assessee claimed deduction of Rs. 24 lakhs on account of remuneration/salary paid to Chairman-cum-Managing Director of assessee-company - A sum of Rs. 9 lakh was disallowed on premise that salary paid was excessive as in assessment year 2002-03 it was Rs. 3 lakhs which was increased to Rs. 12 lakh in next assessment year and abruptly increased by double to Rs. 24 lakh during relevant assessment year though there was no major change in his duties and responsibility - It was found that Chairman was sole influential person in getting business for assessee-company and that receipts of assessee had increased from 7.73 crores to 9.92 crores due to his competence - Whether assessee being public company, increase in remuneration was approved after passing a proper resolution in an extra ordinary general meeting of shareholders, and therefore, said increase could not be said to be excessive and disallowance be deleted - Held, yes [Para 11] [In favour of assessee]
III. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Soil testing and surveying expenses) - Assessment year 2004-05 - Assessee had claimed an expenditure on account of Soil testing and surveying expenses - Assessing Officer held that expenditure was disproportionate to income received by way of Soil testing and surveying and therefore, made an ad hoc addition of 10 per cent and made disallowance - Whether there was no reason for ad hoc disallowance, particularly when receipts were substantially higher than expenditure - Held, yes [Para 14] [In favour of assessee]
Refer: HIGH COURT OF RAJASTHAN
Commissioner of Income-tax, Jaipur -II
v.
Consulting engineering Group Ltd
II. Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payments (Salary) - Assessment year 2004-05 - Whether it is for an assessee, a businessman, to come to a conclusion as to what remuneration/salary is to be paid to an employee and reasonableness is to be judged from angle of a businessman rather than from angle of Assessing Officer who may not be aware of realities and peculiarities of business - Held, yes - Assessee claimed deduction of Rs. 24 lakhs on account of remuneration/salary paid to Chairman-cum-Managing Director of assessee-company - A sum of Rs. 9 lakh was disallowed on premise that salary paid was excessive as in assessment year 2002-03 it was Rs. 3 lakhs which was increased to Rs. 12 lakh in next assessment year and abruptly increased by double to Rs. 24 lakh during relevant assessment year though there was no major change in his duties and responsibility - It was found that Chairman was sole influential person in getting business for assessee-company and that receipts of assessee had increased from 7.73 crores to 9.92 crores due to his competence - Whether assessee being public company, increase in remuneration was approved after passing a proper resolution in an extra ordinary general meeting of shareholders, and therefore, said increase could not be said to be excessive and disallowance be deleted - Held, yes [Para 11] [In favour of assessee]
III. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Soil testing and surveying expenses) - Assessment year 2004-05 - Assessee had claimed an expenditure on account of Soil testing and surveying expenses - Assessing Officer held that expenditure was disproportionate to income received by way of Soil testing and surveying and therefore, made an ad hoc addition of 10 per cent and made disallowance - Whether there was no reason for ad hoc disallowance, particularly when receipts were substantially higher than expenditure - Held, yes [Para 14] [In favour of assessee]
Refer: HIGH COURT OF RAJASTHAN
Commissioner of Income-tax, Jaipur -II
v.
Consulting engineering Group Ltd
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