2010 (1) TMI 892

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....ssessing Officer on account of value of free of cost material."   2.1 On this case the AO noted that assessee company has reduced from their Export Sales, a sum of Rs. 15,91,821/- on account of value of raw material supplied by customers on free of cost basis. Upon making enquiry in this regard the AO noted that "vide letter dated 25.8.2008, the AR has submitted copies of a few bills raised by them in respect of Export Sales made. On perusal of these bills invoice no. 10,14,32,82,86,88,100,101,105,109,113) it is apparent that the items received Free of Cost by the assessee company have been subsequently reduced from the Invoice value and thereafter the balance is the Net Receivable Value." Hence he added Rs. 15,91,821/- to net profi....

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....e AO noted as under:-   "The assessee company has earned interest income of Rs. 1,58,366/-. Howeveragainst this sum, the assessee has claimed the following deductions:-   Rs. 50,082/- as interest on bank over draft.   Rs. 10,828/- being expenses claimed @10% of interest income. However Rs. 50,082/- interest on bank over draft has also been debited to the profit and loss account under Finance Charges. Further, the assessee company could not provide any basis for claiming the 10% deduction on account of supposed expenses.   Therefore, a sum of Rs. 60,910/- is being added back to the net profit."   3.2 Upon assessee's appeal ld. CIT(A) accepted the submissions of the assessee and held as under:-   ....

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.... business expenses, it should not have been disallowed in working out the business income. If he had not disallowed Rs. 50,082/-, it would have been right for him to have decreased business income by Rs. 1,58,365/- and assessee Rs. 1,58,365/- as income from other sources, which he had done. In view of the above discussion, disallowance of Rs. 50,082/- incurred as interest on OD in computing business income was not in order and is deleted."   3.3 As regards the disallowance of Rs. 10082/-, ld. CIT(A) held as under:-   "In view of the above discussion, disallowance of Rs. 10,082/- made by the assessee to work out its business income and its setting off against interest income, was in order and addition of Rs. 10,082/- made by ....