No Ad-hoc Disallowance for Railway Site Expenses without Rational Basis

Durga Signal Infra Pvt. Ltd. Vs ACIT (ITAT Kolkata) Introduction: The Income Tax Appellate Tribunal (ITAT) Kolkata, in the case of Durga Signal Infra Pvt. Ltd. vs ACIT, has ruled that no disallowance should be made under Section 37(1) of the Income Tax Act on site expenses incurred for railway business. This decision came in response to an ad-hoc disallowance made by the Assessing Officer, which was further upheld by the Commissioner of Income Tax (Appeals). Analysis: The crux of the case was the ad-hoc disallowance @ 20% of total site expenses amounting to Rs.3,67,37,203/-. The Assessing Offi...