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2015 (5) TMI 146
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....IT(A) erred in confirming the addition of Rs. 7,20,452/- on account of disallowance of interest u/s 36(1)(iii) on the ground that the assessee had utilized interest bearing funds for making interest free advances to sister concerns and therefore, the interest attributable to such advances was to be disallowed while computing the business income of the assessee for this year. 2] The learned CIT(A) erred in holding that once it is borne out that the assessee had borrowed certain funds and made certain interest free advances without any business purpose, the interest attributable to such advances was to be disallowed u/s 36(1)(iii) irrespective of the fact as to whether there were sufficient own funds with the assessee or not and therefore, the disallowance made in the case of the assessee was justified. 3] The learned CIT(A) erred in not appreciating that the A.O. had not proved any nexus between the funds borrowed by the assessee and making of interest free advances to sister concerns and hence, there was no reason to make any disallowance in respect of the interest attributable to such advances on presumptive basis. 4] Without prejudice to the above ground, the assessee su....
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....e disallowance made in respect of DC fees to Rs. 4,50,000/- on the ground that the said expenditure was capital in nature and hence, the same could not be allowed as a business deduction u/s 37(1) of the Act. 11.2] Without prejudice to the above ground, the assessee submits that the expenditure incurred towards payment of ROC fees was allowable as a deduction u/s 35D of the Act and hence, the learned CIT(A) was not justified in enhancing the addition by disallowing the entire amount of ROC fees in this year. 12] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 4. The issue in grounds of appeal No.1 to 4 is against the disallowance under section 36(1)(iii) of the Act at Rs. 7,20,452/-. 5. The issue in grounds of appeal No.5 to 10 is against the adhoc disallowance out of various heads of expenditure. 6. The grounds of appeal No.11 to 11.2 are not pressed and hence, the same are dismissed as not pressed. 7. The brief facts relating to the issue of disallowance under section 36(1)(iii) of the Act are that the Assessing Officer from the perusal of details submitted in Form No.3CD noted that sum of Rs. 48,00,000/- was shown a....
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.... agency relationship with the said party was rejected in the absence of any evidence filed by the assessee and consequently, the disallowance of interest expenditure of Rs. 4,98,764/- was upheld by the CIT(A). 11. The assessee is in appeal against the partial confirmation of disallowance under section 36(1)(iii) of the Act. 12. The learned Authorized Representative for the assessee pointed out that the advances had been made to the sister concern were out of own funds, which were interest free. Our attention was drawn to the copy of Balance Sheet placed at page 10 of the Paper Book, which reflected the surplus interest free funds available with the assessee. Further, reliance was placed by the learned Authorized Representative for the assessee on the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom) and the Pune Bench of the Tribunal in Trinity India Limited Vs. DCIT in ITA No.666/PN/2012 relating to assessment year 2008-09 vide order dated 28.08.2013. 13. The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A). 14. We have heard the rival contentions and perused ....
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....nd partially upheld by the CIT(A) while working out day-to-day basis, the advances made. 15. The CIT(A) vide para 6.3.2 had not found it fit to apply the said proposition laid down by the Hon'ble Bombay High Court in CIT Vs. Reliance Utilities and Power Ltd. (supra) to the facts of the present case. As per the CIT(A), the said proposition laid down by the Hon'ble Bombay High Court is applicable where the investments are made with a view to build long term business prospects and where the advances were made for investment in the related energy sector and were not made to sister concern. In such scenario, the finding of CIT(A) was that the Hon'ble Bombay High Court held that there were interest free funds available with the said assessee to meet its investments and at the same time where the assessee has raised loan, it could be presumed that the investments were made from interest free funds available. The CIT(A) distinguished the facts of the present case and observed that the amounts were advanced to two sister concerns for non-business purposes and there was no benefit to the assessee from such advances either directly or indirectly and therefore, the case stood on different f....
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.... extent of Rs. 5,14,84002/-, which alone is enough to cover the impugned interest-free advances. In our considered opinion, the parity of reasoning laid down by the Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd. (supra) is clearly applicable in the present case inasmuch as there are funds available with the assessee both interest-free and interest bearing, and the Interest-free funds available with the assessee are sufficient to cover the impugned interest-free advances made to the sister concerns, then the presumption is that the impugned interest-free advances made to the sister concerns are out of interest-free funds. In such a situation, following the judgement of the Hon'ble Bombay High Court the disallowance of interest expenditure made by the Assessing Officer becomes untenable. 7. In-fact, the factual aspects of the said proposition have not been faulted by the CIT(A), though he has not found it fit to apply the said proposition to the assessee's case. As per the discussion made by the CIT(A) in para 5.3.2 it emerges that according to the CIT(A) the aforesaid proposition laid down by the Hon'ble Bombay High Court is applicable only in a situatio....
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.... issue against the disallowance made out of following expenses:- i) Sales promotion expenses : Rs.3,14,540/- ii) Legal and professional fees : Rs.4,23,768/- iii) Travelling and conveyance expenses : Rs.8,26,814/- iv) Communication Expenses : Rs.3,19,810/- v) ROC Fees : Rs.3,74,920/- vi) Other administrative expenses : Rs.5,00,508/- 19. The Assessing Officer had made the said disallowances being excessive and also in some cases, expenditure having not been incurred exclusively for the purpose of business. In respect of the disallowance out of communication expenses, the said disallowance was made for personal use by the assessee. The Assessing Officer disallowed 5% of the expenses in respect of item Nos. (i) to (iv) and 80% in respect of ROC Fess and 10% out of other administrative expenses. The CIT(A) confirmed the disallowances made in respect of the said items. 20. The assessee is not in appeal in respect of ROC Fees expenses and is in appeal against the balance expenditure. 21. The first item of expenditure to be considered is sales promotion expenses and it was pointed out by the learned Authorized Representative for the assessee tha....
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....ssed by the Assessing Officer under section 143(3) r.w.s. 263 of the Act, does not survive and the same is hereby cancelled. The appeal of the assessee is thus, allowed. ITA No.975/PN/2013 :: Assessment Year 2009-10 24. In ITA No.975/PN/2013, the assessee has raised the following grounds of appeal:- 1] The learned CIT(A) erred in confirming the addition of Rs. 56,16,000/-made by the learned A.O. on account of unexplained investment in land purchased from Shri Raju Tungatkar without appreciating that the total consideration actually paid by the appellant was recorded in the books and no such addition was justified. 2] The learned CIT(A) erred in holding that the total consideration paid by the appellant to Shri Raju Tungatkar against purchase of land was Rs. 2,80,80,000/- as per the MOU and the seized paper found during the survey as against the actual consideration paid of Rs. 2,24,64,000/- as per the registered sale deed. 3] The learned CIT(A) failed to appreciate that - a. The appellant had not paid any consideration over and above the amount of Rs. 2,24,64,000/- which was recorded in the registered sale deed and hence, the addition made was not justified. b.....
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....he ratio of 80:20 had been mentioned. In reply, he agreed that the transaction for Shivare land was for Rs. 2.80 crores, as per MoU. However, since part of the said land was for private forestation, it was decided that balance amount would be paid only after the possession of clear land would be given. He promised to produce Shri R.N. Tungatkar before the Assessing Officer within 7 days, but he failed to produce the said person. In view thereof, the Assessing Officer treated sum of Rs. 56,16,000/- as unexplained investment under section 69 of the Act. 27. The CIT(A) upheld the order of Assessing Officer, in view of the evidence found during the course of survey and also in view of the fact that the notification for private forestation was issued much earlier i.e. before entering into MoU and the assessee was aware of such restriction on a portion of land and then only he agreed to pay the consideration of Rs. 52,00,000/- per acre. The CIT(A) also noted that only the cash component of 20% in the sale consideration was claimed to have been withheld and rejecting the explanation of the assessee, the CIT(A) upheld the order of Assessing Officer. 28. The assessee is in appeal agai....
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....endly relations with each other. The second party was in search of the landed property and met first party. As the first party is need of money for satisfying his legal meets, due negotiations took place between the parties of sale of the said property and rate of Rs. 52,00,000/- ( Rupees fifty two lacs only) per acre is agreed between the parties. Thus the total consideration agreed between the parties is of Rs. 2,80,80,000/- (Rupees two crores, eighty lacs eighty thousand only) and as per this MOU the terms and conditions agreed between the parties are as under- A) "The first party has agreed to sell and transfer the said property to the second part for the total consideration agreed between the parties is of Rs. 2,80,80,000/- (Rupees two crores, eighty lacs eighty thousand only) B) The second party has paid an amount of Rs. 70,00,000/- (Rupees seventy lacs) to the first party on the execution of this MOU vide two cheques No.276435 of Rs. 50,00,000/- and No. 276435 of Rs. 20,00,000/- dated 11106/2008 drawn on SBI. C) It is agreed between the parties that the second party shall pay an amount of Rs. 50,00,000/- (Rupees fifty lacs) to the first party at the time of the Sale....
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....a letter dated 25/10/2011 from the vendor, namely, Mr. Raju Tungatkar. In the letter, it was stated that there were few disputes regarding the measurement of land and classification of a part the area as private forestation land and therefore, they agreed to hold 20% of the contract value i.e. Rs,56,16,000/- till the time the land is deforested and all the disputes are resolved. The claim of the appellant is not well founded. It may be noticed from the above recitals in the MOU, after due negotiations that had taken place between the parties of the Sale, the rate of Rs. 52,00,000/- 'per acre and the total consideration of Rs. 2,80,80,000/- for the entire land was agreed upon between the parties. The MOU also provides the payment schedule for the total consideration of Rs. 2,80,00,000/- vide clauses A to E of paragraph 2 of the MOU. As per clause E, the appellant shall pay the final installment to the vendor at the time of execution of sale deed. It is also stated in paragraph 4 of the MOU that it was agreed between the parties that after the execution of the MOU, the first party would show the boundaries of the said property as per the said MOU. It was further agreed between th....
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....rsal Box File found during the survey clearly show that the consideration agreed upon was Rs. 2,80,80,000/- by cheque and cash In the of 80:20 respectively and the amount was to be paid on or before the execution of the sale deed. In the absence of any corroborative evidences to the contrary, the self serving letter now filed by the appellant in support of its claim that the part of the consideration agreed upon as per the MOU was not actually paid is only an afterthought and cannot be accepted. It is also common knowledge that no person would execute the sale deed without receiving the full sale consideration agreed upon as per the agreement or MOU. Moreover, from the details placed on record, it is also observed that the notification for private forestation was issued much earlier i.e. before entering into the MOU and the appellant was aware of such restrictions on a portion of the land and then only appellant agreed for the consideration of Rs. 52,00,000/- per acre. It is also interesting to note that it is only the cash component of 20% in the safe consideration that was claimed to have been withheld till the time the land is deforested and all the disputes are resolved. 33.....