AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 202
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....ng expenses Rs. 3,62,112/-. The expenditure was incurred for the purpose of business and is allowable deduction. 3. The Ld.CIT(A) has erred in holding that the appellant failed to show what services were rendered by the agent to whom payment of brokerage/commission were made. 4. The Ld.CIT(A) has erred in disallowing the claim of payment of commission/brokerage Rs. 10,08,707/- which was allowable as deduction as the appellant had procured job work through these agents and the assessee had filed supporting evidence. 5. The ld.CIT(A) has erred in holding that the interest subsidy received by the appellant was of revenue nature and hence taxable, it was not of capital nature. 6. The Ld.CIT(A) has erred in holding that the claim of the appellant that subsidy was of capita nature and hence not includible in income could not be allowed as the claim was not made in the return of revised return but made during assessment proceedings after expiry of time allowed for filing revised return. 7. The interest subsidy rupees five lacs received by the appellant from State Government was of capital nature and hence not taxable as held by Hon'ble Supreme Court and High Courts in decisions filed....
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....sis that neither during the assessment proceedings nor during the appellate proceedings the assessee could file any evidence and point out that the people traveled to China actually for the purpose of business. The contention of the assessee is that the Director of the Company Shri Vipul Saraf visited Switzerland and China for the purpose of business. We find that the assessee has placed on record a ledger account of foreign travelling expenses at page 34 of the paper-book. However, no details of the foreign parties has been placed on record suggesting that the assessee had, in fact, gone for business purpose. In the absence of supporting evidence, we do not find any infirmity in the orders of the authorities below. Moreover, the assessee failed to demonstrate that trips undertaken by the Directors of the assesseecompany was for the purpose of business. Thus, ground Nos.1 & 2 of the assessee's appeal are rejected. 5. Ground Nos.3 & 4 of assessee's appeal are against the confirmation of addition of Rs. 10,08,707/- made on account of disallowance of the claim of commission/brokerage. The ld.counsel for the assessee submitted that the authorities below were not justified in making th....
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....ee submitted that the issue is covered by the decision of Hon'ble Apex Court rendered in the case of CIT vs. Ponni Sugars and Chemicals Ltd. reported at (2008) 306 ITR 392 (SC). He also placed reliance on the judgement of Hon'ble Madras High Court rendered in the case of CIT vs. Prasad Art Pictures P.Ltd. reported at 257 ITR 699 (Mad.). 7.1. On the contrary, ld.Sr.DR supported the orders of the Authorities below. 8. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the case-laws relied upon by the ld.counsel for the assessee. We find that the ld.CIT(A) has decided the issue by observing as under:- "6.3.1. I have considered the submission made by the appellant and the observation of the A.O. As cited by the appellant the Hon'ble Supreme Court in the cases quoted above has stated that the character of subsidy receipt has to be determined with respect to the purpose which it is given. There is no doubt about this legal position. I do not agree with the appellant that the interest subsidy received is of capital nature. The decisions relied upon by the appellant are not at all applicable on th....
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.... letter the subsidy has been given on capital account. In the entire scheme dated 10.06.2004 nowhere the Govt.of Gujarat has stated that this interest subsidy is towards purchase of capital goods. Therefore, it is clear that the interest subsidy is basically for reducing the interest burden. This subsidy only reduces the interest which was otherwise claimable by the assessee as revenue expenditure. Hence, I agree with the A.O. that the interest subsidy is purely on revenue nature. Hence the A.O. has rightly taxed the interest subsidy as of revenue nature. 6.3.3 With respect to the argument taken by the A.O. that even though the interest subsidy is taxable as revenue receipt, still the claim of the assessee is not entertainable during the course of assessment proceedings is correct. Any new claim by the assessee not made in the return can only be made by way of revised return. The appellant has not made this claim in the return. The appellant has also not made a revised return as per section 139(5). The time allowed for revising the return has expired. The appellant has not made this claim before the AO also within the time available for revising the return. This amounts to revisin....
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....granted under the scheme of Government of India, respectfully following the judgement of Hon'ble Apex Court rendered in the case of CIT vs. Ponni Sugars and Chemicals Ltd.(supra). The AO is hereby directed to treat the interest subsidy received by the assessee as capital receipt and make necessary charges in the computation of income of the assessee. Hence, the ground Nos.5 and 6 are disposed of as indicated hereinabove. 10. In the result, the appeal of the assessee, i.e. ITA No.615/Ahd/2010 is partly allowed for statistical purposes. 11. Now, we take up the Revenue's appeal in ITA No.1022/Ahd/2010 for AY 2007-08. The Revenue has raised the following grounds of appeal:- 1) On the facts and circumstance of the case and in law, the Ld.CIT(A) has erred in deleting the addition made by the AO of Rs. 26,08,862/- on account of fall in G.P. 2) On the facts and circumstance of the case and in law, the Ld.CIT(A) has erred in deleting the disallowance of interest u/s.40A(2)(b) mae by the AO of Rs. 2,80,572/-. 3) On the facts and in the circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. 4) It is, therefore, prayed that the order of the....
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....2.3 the production has increased 406 times in terms of quantity whereas manufacturing expenses have increased only 344 times. Te personal expenses have increased only 417 times which are comparable with increase in production in quantity terms. The appellant has further stated that the average cost of yarn/jari has increased from Rs. 212.13 per kg. to Rs. 226/- per kg. whereas the job receipt per meter has decreased in the current year to Rs. 39.16 per meter from Rs. 42.80 per meter in the last year. The appellant has stated that in the last year no bonus was paid to the employees whereas in the current year a bonus of Rs. 2,25,900/- has been paid. There was some increase in the salary of employees also. This has accounted for marginal increase in the personal expenses as compared to last year if the same is compared with production in quantity. The appellant has further pointed out that the A.O. has brought no material on record to show that the books of account are not reliable or that they are incomplete and correct profit cannot be deducted from that. The A.O. has brought no material on record to show that the sales were unaccounted for or undervalued or the purchases or other ....
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....he A.O. has compared the rate of unsecured loan of 15% with the rate of loan given by the Bank and not with rate of unsecured loans available in the market. For a disallowance u/s.40A(2)(b) the A.O. is required to compare the market rate. In the case of Binit Corporation (24-TTJ-541), the Hon'ble ITAT, Ahmedabad stated that first of all the A.O. has to satisfy himself whether the expenditure itself is genuine or not and if it is genuine then for the purpose of finding out the portion of disallowance he shall have to find out the fair market value of the services and this would presuppose that services are commonly available for which market value can be known. Thereafter the A.O. shall have to evaluate the legitimate needs of the business at a point of time when the services were rendered and this would involve an inquiry as a business man because in times of dire need services are obtained even at higher cost, the ultimate aim being to earn profit or to maintain the business relations. According to the ITAT, the A.O. shall have to find out what benefit is derived by the assessee and this would not necessarily confine to the year in question but shall have to take overall picture d....