The Hindu Business Line : Tax on unexplained expenditure

Our firm, having a turnover of more than Rs 3 crore, was subjected to scrutiny assessment for the assessment year 2007-08. At the time of assessment, the assessing officer (AO) found that no transport charges were debited in the books of account.

It was explained that the suppliers gave delivery of goods at their own cost and hence no expenditure was incurred towards transport charges. The AO however estimated the expenditure towards transport charges and made an addition under Section 69C. Is he justified?

Rectifying defect in the order while giving effect to appellate order: The appeal pending before the tribunal was decided in our favour. While giving effect to the order of the tribunal, the AO rectified an apparent error in the original assessment order.

The error relates to excess allowance of depreciation in the assessment. Is the AO justified in rectifying his order, while passing an order giving effect to the appellate order?

Claim of deduction in respect of payment for acquisition of leasehold right for 99 years: Our firm having textile showrooms throughout Tamil Nadu entered into lease agreements for 99 years with various landowners for acquiring lease rights.

The idea is to construct showrooms in those sites. We paid lump-sum advance rent towards 99-year leasehold right in addition to monthly rent.

We claimed the lump-sum advance lease rent payments as revenue expenditure, whereas the AO wants the lease rent (including advance lease rent) to be spread over the lease term for allowance of deduction. Who is correct?

Rectification under Section 154 after issue of notice under Section 143(2): Return of income filed by me for the assessment year 2008-09 was processed under Section 143(1) and I got refund also.

The AO issued a notice under Section 143(2) in May 2009 and when the scrutiny assessment was pending, he passed an order of rectification in July 2009 to deny depreciation in respect of some assets.

Is the AO justified in passing an order of rectification under Section 154 after a notice under Section 143(2) has been issued and the scrutiny assessment was pending?

Taxability of private trust specifying definite share to beneficiaries: I created a private trust for my children (all aged above 18 years) by allotting a shopping complex fetching rental income.

As per trust deed, 40 per cent of the income is given to beneficiaries equally and the balance is accumulated.

The future descendants of my children by birth would also become automatic beneficiaries with equal share. The AO has initiated proceedings for assessment of income of the trust under Section 164. Is he correct?

Depreciation on roads: Our company incurred expenditure of Rs 50 lakh towards laying roads within the factory premises.

We wish to claim the expenditure towards laying of roads as revenue expenditure. Is it possible?

(PracticeProblems.blogspot.com)