TaxTMI 
TaxTMI 
2014 (11) TMI 645
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....Rs. 5,00,000/- made by the A.O. on account of Freight &Forwarding expenses, without appreciating the facts of the cases. 5. The appellant craves to add, amend, alter, delete or modify the above grounds of appeal before or at the time of hearing." 3. Ground No.5 is general in nature, so do not require any comments on our part. Vide Ground No.1, the grievance of the Department relates to the deletion of addition of Rs. 9,95,400/- made by the Assessing Officer on account of interest. 4. Facts relating to this issue, in brief, are that the assessee was engaged in the business of manufacturing of asbestos cement sheets and cement pressure pipes. The assessee entered into a partnership with M/s. Saraf Projects Pvt. Ltd. to run a restaurant in the name of M/s. Lizard Lounge and introduced a capital of Rs. 82,95,000/-. The Assessing Officer was of the view that memorandum and article of association of the assessee did not authorize the assessee to become a partner in a firm, so this capital could have been used by the assessee in a routine business and if the assessee had not been introduced the said capital of Rs. 82,95,000/- into the partnership for running M/s. Lizard Lounge then the....
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....14A say that no deduction shall be allowed in respect of expenditure incurred by assessee in relation to income which does not form part of the total income under this Act. And your honour will find that the assessee has not claimed any interest payment on the amount invested in the partnership firm rather loss/income of this partnership was offered for taxation under section 10(2A) of IT Act. Non charging of interest on loan given by the assessee cannot itself be a sufficient ground for disallowance of interest paid by an assessee on loan taken by it in the absence of any nexus between borrowed capital and interest free advances or in the absence of any finding that borrowed funds or part thereof was diverted towards interest free advances. Meenakshi Synthetics P Ltd. v/s CIT - 84 ITD 563 ITO v/s Naresh Fabrics - 75 TTJ (Jod) 386 CIT v/s Bharti Tele Venture Ltd., - 51 DTR 98 The assessee has interest free funds as well as interest bearing fund on its disposal, then presumption would be that investment were made from interest free funds at disposal of assessee. Therefore even investment for non business purpose is out of interest free funds then there cannot be disallowance of ....
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....ies and further, there was no direct nexus between interest bearing borrowed fund and such investment, no disallowance of interest expenditure could be made u/s 14A. In view of above all we request your honour to kindly delete the addition on account of disallowance of interest to the tune of Rs. 9,95,400/-. Further assessee submitted as under: 1. "That the assessee entered in partnership business as per partnership deed dated 22nd day of Feb, 2007. The copy of partnership deed is enclosed. 2. That the assessee invested a sum of Rs. 129.53 lacs in this partnership as mentioned on page 18 in Schedule-6 of the enclosed balance sheet of 31st March. 2007. 3. That during the year i.e. year of investment in partnership as per copy of balance sheet attached, the own fund of the assessee company was for a sum of Rs. 4341.65 lacs please refer page 14 shareholders fund. Thus it is clear that the investment was much lesser than the own fund i.e. investment was made from its own fund on which no interest was paid by the assessee. " 6. The learned CIT(A), after considering the submissions of the assessee, observed that the total amount invested in the partnership firm to run M/s. Lizard L....
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....usiness, therefore, disallowance made by the Assessing Officer on account of notional interest was arbitrary and the Ld. CIT(A) rightly deleted the same. 9. Next issue vide Ground No.2 relates to the deletion of addition of Rs. 1,50,000/- made by the Assessing Officer on account of disallowance out of rebate and discount. 10. Facts relating to this issue, in brief, are that the assessee claimed rebate and discount of Rs. 154.04 Lac. The Assessing Officer pointed out that the assessee had allowed trade discount of Rs. 10,200/- on 19/03/2009 to M/s. Mahadev Suppliers while there was no narration of discount on the bill dated 03/01/2009 for sales of Rs. 1,34,400/-. He further observed that the discount was allowed on the same pattern to many tradeRs.The explanation of the assessee was that such trade discount was allowed to increase the sales in competitive market. The Assessing Officer was not satisfied with the reply of the assessee and made a lump sum addition of Rs. 1,50,000/-. 11. Being aggrieved, the assessee carried the matter to the ld. CIT(A) and the submissions made as incorporated in para 4.2 of the impugned order were as under:- "The AO stated that on the examination o....
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.... 9, 700/- as stated above was debited in Profit & Loss account in the head of rebate and discount. The copies of credit note alongwith enclosures are attached herewith for your ready reference please. Please refer Page No.1 to 8 enclosed. " Further assessee has given the common submission regarding disallowance of expenses made in Ground No.2, 3 and 4 as under: "Adhoc disallowance under the head of rebate and discount Rs. 1,50,000/- sales promotion expenses Rs. 1,20,000/- and freight and forwarding expenses Rs. 5,00,000/-. In the above reference we submit that during this year the expenses under above head were either almost same or less in comparison of assessment year 2008-09 as detail given below: Sales includes excise Asstt. Yr Sales Rebate/Discount Amount % on sale Sales Promotion Amount % on sales Transportation Amount % on sales 2008-09 17918.94 150.97 0.84% 19.18 0.11% 1356.18 7.57% 2009-10 17936.15 154.00 0.86% 16.687 0.09% 1424.28 7.94% 2010-11 21853.31 252.28 1.15% 13.99 0.06% 1719.57 7.87% During assessment year 2008-09 no disallowance under any above head of expenditure was made. Though every assessment year is separate but th....
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....M/s. Mahadev Suppliers of Rs. 1,47,075/- and Rs. 1,39,425/-. As regards to the sales of Rs. 1,34,400/- and Rs. 1,37,200/- made to M/s. Mahadev Suppliers on 03/01/2009, the Ld. CIT(A) noted that the assessee had allowed discount of Rs. 9,700/- as per the credit note. The Ld. CIT(A) pointed out that the trading discount /rebate was being allowed by the assessee in the earlier years to various purchasers and this consistent practice being followed. The Ld. CIT(A) categorically stated that it had not been shown that the said discount was non-genuine, excessive or unreasonable. He was of the view that the said discount was to the customers of the assessee for the commercial expediency to increase the sales. He therefore, deleted the addition made by the Assessing Officer on estimate basis. Now the Department is in appeal. 13. We have considered the submissions of both the parties and carefully gone through the material available on record. In the instant case, it is an admitted fact that the similar type of trading discount was allowed in the earlier years and there is no deviation in the facts of the years under consideration vis-à-vis facts involved in the earlier years. It is....
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....wance made by the Assessing Officer. Now the Department is in appeal. 18. Learned D.R. although supported the order of the Assessing Officer, but could not controvert the observations made by the Ld. CIT(A). 19. In his rival submissions, learned counsel for the assessee strongly supported the impugned order passed by the Ld. CIT(A). 20. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is noticed that turnover of the assessee increased in comparison to the earlier year, but there was decrease in the sales promotion expenses. It is noticed that a similar disallowance was deleted by the ITAT vide order dated 06/04/2010 in I.T.A.No.226/JU/2009 in assessee's own case for the A.Y. 2005-06 and the said order was followed by the Ld. CIT(A). We, therefore, do not see any infirmity in the order of the Ld. CIT(A) on this issue. 21. Last issue vide Ground No.4 relates to the deletion of addition of Rs. 5 Lac made by the Assessing Officer on account of freight and forwarding expenses. 22. Facts relating to this issue, in brief, are that the Assessing Officer during the course of assessment procee....
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.... mentioned that in the transport bills complete details of goods, quantity and destination were mentioned. As regards to the freight payment of Rs. 94,045/-, the Ld. CIT(A) pointed out that this amount was paid on 01/10/2008 as per the bill of M/s. Gill Roadways and the details of the goods transported were duly mentioned in bills & G.R. maintained by the assessee which were part of books of accounts produced before the Assessing Officer. The Ld. CIT(A) held that the freight and forwarding expenses had been incurred by the assessee for the transportation of the goods sold on F.O.R. basis. He also pointed out that the said expenses had not been proved to be non-genuine or bogus or unreasonable. Accordingly, the addition made by the Assessing Officer was deleted. Now the Department is in appeal. 25. We have given careful and thoughtful consideration to the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that the adhoc addition made by the Assessing Officer was without any basis. He did not point out any specific instance where the expenses incurred on account of transportation and forwarding were not related to the....