Disallowance under s 40(a)(ia)

The assessee is not required to deduct tax at source under s 194J and expenditure thereof is deductible under s 40(a)(ia) as the payments are actually made to employees of the company on account of salary due to them — as held by KolTrib in Jayshree Motors Private Limited v ITO — In favour of: The assessee.

Bad debt — Expenditure incurred by assessee engaged in trading of cars on account of discount on the sale value of car, on car insurance, on registration, and on spare parts is commonly written off as irrevocable and is allowable under s 36(1)(vii).

Interest on loan — The onus to establish that the loan funds on which the assessee is paying interest are not utilised in giving the loans to the sister concern is on the assessee. In a case where the assessee fails to discharge its onus, notional interest could be disallowed.

In favour of: The revenue.

Decided on: 23 September 2011.