Commissioner of Income Tax vs Shri Kamal Kishor Lath

Shantanu Kemkar, J.

Heard on the question of admission.

This appeal u/s 260A of the Income Tax Act, 1961 is filed against the order dated 13/19.11.2009 passed by the Income Tax Appellate Tribunal Indore Bench (for short, the Tribunal) in Income Tax Appeal No. 709/ IND/2007 in regard to the assessment year 2004-05. In regard to the deletion of addition made by the Assessing Officer disallowing payment on account of folding/checking and mending charges made to the respondent''s sister concern M/s. Pawan Enterprises in excess of the expenses of the previous year and disproportionate to the increase in turnover, the CIT (Appeal) and the Tribunal had taken note of the fact that the proprietor of the said concern M/s. Pawan Enterprises, who is mother of respondent-assessee had paid due taxes at the same rate as the assessee would have paid and held that there was no avoidance of tax, and therefore, provisions of Section 40A (2) of the Income Tax Act could not have been applied. In support of this proposition of law, the Tribunal placed reliance on the judgment of High Court of Bombay in the case of CIT v. Indo-Saudi Services (Travel) (P) Limited [2008] 219 CTR 562 and the decision of Rajasthan High Court in the case of Commissioner of Income Tax Vs. Udaipur Distillery Company Ltd., as also the circular 6-P dated 6th July, 1968.

Having regard to the aforesaid judgments and the circular, in cur considered view, the Tribunal has committed no error in holding that since no attempt to evade tax was involved, hence, no dis-allowances could be made u/s 40A (2) of the Income Tax Act in respect of payment made to the sister concern.

In the circumstances, the appeal fails and is hereby dismissed.