Payment made by account payee cheque is sufficient for claiming business expenditure

Payment made by account payee cheque is sufficient for claiming business expenditure. The High court of Gujarat, on the 25th of February determined that the payment made by account payee cheque, is sufficient for claiming expenditure, even if recipient could not be located. The point considered in such situations would be the viability of the amount paid in respect of product purchased.   

Further to claim the expenditure made for labor charges, establishing the identity of recipient is vital. To establish the identity of the recipient documentary evidence such as election card, driving licence, ration card etc. would serve the purpose.

Assessee was engaged in building and construction activities, and purchased cement from an enterprise. Assessing Officer rejected assessee’s claim in respect of said purchases – Commissioner (Appeals) noted that purchase of cement was by account payee cheque and that seller was a small contractor, who had closed his business and, on account of this reason, assessee could not produce said party inspite of best efforts. It was also noted that purchase of cement was at reasonable rate as compared to rates paid to other parties. He thus deleted dis-allowance made by Assessing Officer. Tribunal confirmed order of Commissioner (Appeals). Whether on facts, no substantial question of law arose from Tribunal’s order. Hence the high court on the first order of conflict ruled in favor of the assessee allowing the claim of expenditure.

The second order of conflict being, assessee made payment towards labour charge  and Assessing Officer rejected assessee’s claim in respect of said payment taking a view that identity of person concerned was not proved. Commissioner (Appeals) was of view that there were sufficient documentary evidence in nature of election card, driving licence, ration card, confirmation of ledger account, etc. by which genuineness of transaction was proved – He thus allowed assessee’s claim – Tribunal confirmed order of Assessing Officer – Whether findings recorded by authorities below being which were in no way perverse, no interference in said findings was called for. Held in favor of assessee.

_____________________________________________________________________________________________

Feel free to write to us,at [info@taxmantra.com] or call us at +91 88208208 11.