Law: Income Tax Act, 1961

Section: 37

[Indian Income Tax Act, 1961)]..........Section 37.Business expenditure ---Assessee engaged in business of transportation undertaking contracts with Civil Supplies Corporation for transporting sugar ---Assessee executing contract by using its own lorries and also engaging vehicles taken on hire ---Assessee claiming expenditure incurred by way of hire charges payable for vehicles taken on hire for transportation work---Expenditure disallowed as assessee unable to produce cogent evidence to prove expenditure---Duty of assessing authority to assess expenditure by best assessment---Tribunal allowing full expenditure in absence of cogent evidence---Not justified---Matter remanded--- The assessee-firm engaged in the business of transportation undertook contracts with the Kerala State Civil Supplies Corporation for transporting sugar. The assessee-firm executed the contract by using its own lorries and also vehicles taken on hire. Every month, the assessee submitted the bills to the Corporation. As per the information furnished by the Corporation, the assessee had presented a bill for January, 1982, for Rs.5,34,635 and another bill for Rs.2,06,112 for March, 1982. The Assessing Officer found that the Corporation had paid the full amount due to the assessee under the January bill in February itself. Similarly, in respect of the bill for March, 1982, the Corporation had paid Rs.1,69,495 in March itself. Thus, the Assessing Officer concluded that a sum of Rs.7,40,747 being the aggregate of the amounts received from the Corporation in respect of the bills presented in January and February, 1982, were not accounted for in the year ended March 31, 1982, relevant to the assessment year 1982-83. Since the assessee was following the mercantile system of accounting, the Assessing Officer added the sum of Rs.7,40,747 to the income of the assessee for the assessment year 1982-83. The assessee claimed before the Income-tax Officer that for earning the gross income of Rs.7,40,747, it had incurred expenditure by way of hire charges payable for vehicles taken on hire for transportation work at Rs.9,31,920 and hence the said expenditure should be allowed as revenue expenditure under…

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