Case Law Details
Mahalaxmi Saws Pvt. Ltd. Vs ITO (ITAT Jaipur)
Conclusion:
Once it is established that there was nexus between the expenditure and purchase of the business (which need not necessarily be the business of the assessee itself) the Revenue could not justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much was reasonable expenditure having regard to the circumstances of the case.
Held:
Assessee challenged the order of CIT(A) in confirming the disallowance of Rs. 24,486/- made out of expenses claimed in the P&L account as vehicle and travelling expenses. It was held that assessee being a private limited company, such disallowance for the personal use or for non-business purposes could not be made. Further, during the course of assessment proceedings, books of accounts were produced before AO by assessee, who had not pointed out any specific defect and in fact book results declared by assessee had been accepted. The expenditures on vehicle and travelling were incurred wholly and exclusively for the purpose of business and under the business expediency and AO could not walk into the shoe of the businessman to look into the necessity and purpose. The Hon’ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT(Appeals) 288 ITR I (SC) has held that “once it is established that there was nexus between the expenditure and purchase of the business (which need not necessarily be the business of the assessee itself) the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profits.” Considering the totality of facts and circumstances of the case, AO was directed to delete the addition made and confirmed qua this issue.
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