Preserve proof for expenses which are not wholly for business purpose

There are certain expenses which are incurred both for personal and also for business purpose. Some of expenses can be Vehicle Maintenance , Phone bill, Club Charges and others.  The Income Tax Department always treats these expenses from a  in the profit and loss account of a business as suspicious.  The Income Tax Department invariably disallows full or part of these expenses.  This is also very important for startup companies, wherein many initial payments are being done from the credit card of founders to preserve proof for expenses which are not wholly for business purpose. download Agra Tax Tribunal had recently held that Where no evidence had been filed by assessee to substantiate claim of vehicle running expenses, addition in respect of same was confirmed.  Facts of Case : The assessee claimed expenses amounting to 56.84 lakhs under the head operational expenditure which includes expenditure of Rs. 2.1 lakh under the head vehicle running and maintenance. The Assessing Officer found that the entire expenditure under the head vehicle running expenses was reimbursed in cash to one of the directors of the assessee-company and that Rs. 50,000 was debited on 31-3-2007 in cash and Rs. 7,876 was paid for reimbursement of petrol bill in respect of earlier year March, 2006. The Assessing Officer further found that the assessee had not entered said details into the computer generated books of account produced at the assessment stage. Accordingly, the Assessing Officer disallowed the vehicle running expenses of Rs. 57,856. On appeal, the Commissioner (Appeals) confirmed the order of the Assessing Officer. On consideration of the rival submissions, there is no justification to interfere with the order of the authorities below in making or confirming the addition. The fact remains same, no evidence have been filed to substantiate the claim of vehicle running expenses. In the absence of any evidence on record, there is no justification to interfere with the order of the Commissioner (Appeals). Resultantly, the addition is confirmed, particular when part of the expenditure relate to the earlier year and part of the expenditure was not entered into the books of account of the assessee based on computer generated books of account produced at the assessment stage. This case was reported in Taxmann .   Click here to download full decision  Thanks for reading for this article. Please feel free to write to us, We want to hear it all!Suggestions? Complaints? Feedback? Requests?  at [[email protected]] or call us at +91 88208208 11. We would be more than happy to assist you.