Law:

Section:

Section 37(1) of Income-tax Act, 1961 - Business expenditure - Allowability of Where Mother Dairy, a subsidiary of National Dairy Development Board, which is a government of India undertaking, raised a bill which was paid by assessee by means of an account-payee cheque and there was nothing to indicate that Mother Dairy raised an unreasonable bill or that there was some fraud involved, Assessing Officer was not justified in disallowing payment made to Mother Dairy [A.Y. 1998-99]. Mother Dairy, a subsidiary of National Dairy Development Board, which is a Government of India undertaking, raised a bill which was paid by the assessee by means of an account payee cheque. The Assessing Officer required the assessee to prove that the payment was made for the services rendered by the Mother Dairy. The claim of the assessee was that the Mother Dairy was a Government company and a transaction with a Government company is presumed to be above board and since the payment was made by cheque, the assessee had discharged its onus. This contention was not accepted by the Assessing Officer and he disallowed the payment made to Mother Dairy. Held that there can be no doubt that Mother Dairy was a Government organization and the payment was made by cheque. There was nothing to indicate that Mother Dairy raised an unreasonable bill or that there was some fraud involved. In fact, the Tribunal had noted that if there was some doubt and the Assessing Officer wanted to make further enquiries, he should have checked up with Mother Dairy but he did not bother to do so. On the given facts, the assessee had clearly discharged the onus placed upon it and there was no error in the order passed by the Tribunal. J.R. Goel for the Appellant. P.N. Monga for the Respondent. JUDGMENT The Revenue is aggrieved by an order dated February 21, 2005, passed by the Income-tax Appellate Tribunal, Delhi Bench "D" in I.T. A. No. 2667/Del/2001 relevant for the assessment year…

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