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2015 (5) TMI 724
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.... of income 19,53,953/- Add: i) On account of ROC fees (as discussed vide para 3 and 3.1) (1,50,500 + 47,500) 1,98,000/- ii) On account of accrued on NCs (as discussed vide para 4) 63,605/- iii) On account of custom duty (as discussed vide para 5) 84,729/- iv) On account of custom duty (as discussed vide para 5.1) 7,04,233/- v) On account of professional fees (as discussed vide para 6) 7,500/- vi) On account of legal fee (prior period) (as discussed vide para 6.1) 9,450/- vii) On account of professional fees paid for conversions of Agriculture land (as discussed vide para 6.2) 22,066/- viii) On account of medi-claim of the director (as discussed vide para 7) 13,142/- ix) On account of interest of work-inprogress (as discussed vide para 8) 1,24,148/- x) On account of plant expenses (as discussed vide para 4) 93,973/- xi) On account of notional interest on advances (as discussed vide para 9) 2,84,405/- xii) On account of telephone & vehic....
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.... by disallowing the Mediclaim policy paid for Director of the company under the head insurance expenses vide para 7 of assessment order dated 24/12/2008 stating that no reply / explanation furnished, however the reply had been submitted vide para 9 of letter date 18/12/2008. 5. Ld. Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming addition of Rs. 1,24,148/- being interest not charged on capital expenditure of Rs. 46,73,942/- booked as work in progress on behalf of plant owner M/s Futuristic Offshore Services & Chemicals Ltd. vide para 8 of assessment order dated 24/12/2008. 6. Ld. Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming addition of Rs. 93,973/- by Assessing officer by disallowing the plant expenses of Rs. 93,973/- vide para 8.1 of assessment order dated 24/12/2008. 7. Ld. Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming addition of Rs. 2,84,405/- being interest not charged on business advances of Rs. 18,96,035/- given in earlier years vide para 9 of the assessment order dated 24/12/2008. 8. Ld. Commissioner of Income Tax (Appeals) has erred both on fact....
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....CIT (A) inter alia observing that Custom Department levied penalty for retaining material beyond the specified period. 6. Ld. Counsel for the assessee submitted that since the demand for both the amounts was raised during the year, therefore, liability accrued during the year itself and this was not a prior period expenditure. He submitted that the very nature of payment being interest clearly suggests that it is compensatory in nature and not penal in nature. Ld. DR submitted that there is nothing on record to suggest that the demand was raised during the year. He, therefore, submitted that the matter be restored to Assessing Officer to verify when the demand was raised. 7. We have considered the submissions of both the parties. The facts are not disputed. Ld. Counsel refers to page 20A wherein Cochin Customs receipt for miscellaneous charges is contained which is dated 30.01.2006 acknowledging the payment of Rs. 84,728/-. In this receipt, the bill of entry number is mentioned as 170028 dated 30.11.2005 from 16.11.2005 to 31.01.2006. This suggests that the demand note was received during the year under consideration and, therefore, this cannot be treated as prior period expe....
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....e denied particularly when the bill has been received in the current assessment year and the payment has also been made in the current assessment year. We order accordingly allowing this ground. 10. Brief facts, apropos ground no.4, are that assessee company had paid a sum of Rs. 13,142/- on medi-claim policy of the Director of the company. The Assessing Officer disallowed the same on the ground that the same are personal in nature. Ld. CIT (A) confirmed the Assessing Officer's action. 11. Ld. Counsel submitted that there cannot be any disallowance on the ground of personal expenditure of director in the hands of the assessee company because the amount has been incurred for the purpose of business. He relied on the decision of Hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co. vs. CIT reported in 253 ITR 749. 12. Having heard both the parties, we do not find any reason to interfere with the order of lower revenue authorities because admittedly the mediclaim policy was for the benefit of director only and no benefit was derived by the assessee company from the said insurance policy in the name of director. This claim in no way was for the benefit of bus....
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.... the assessee had paid interest on the borrowed funds even for a single day which was stated to have been utilized upgrading of plants. He computed the disallowance at Rs. 1,24,148/- by applying the interest @ 15% per annum. Ld. CIT (A) confirmed the Assessing Officer's action. 14. Ld. Counsel referred to page 25 onwards wherein the agreement of business arrangement between assessee and FOSCL dated 08.09.2004 is contained and pointed out that it was clearly agreed that the assessee would advance interest free funds to FOSCL as the profits derived from the business will be shared between both the parties on equal basis. He submitted that this arrangement was made on account of commercial business expediency and, therefore, no disallowance could be made. 15. We have considered submissions of both the parties. In the agreement, the following recitals are made :- "WHEREAS "SIPL" is carrying on the business as importer and exporter of petroleum products and has considerable technical knowledge regarding the product and information about export marketing possibilities of the same. WHERE....
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....ncurred to SIPL with regard to settlement of outstanding dues of FOSCL towards Financial Institutions, Banks, Excise, Sales Tax, MSEB & MIDC will be paid by FOSCL at the Interest Rate of 12% per annum." A bare perusal of the above arrangement clearly shows that the whole arrangement has been made on account of commercial expediency because both the parties were benefited by the technical knowledge and know-how of each other. FOSCL was also the holder of intellectual property rights concerning the products and any other future added products and was entitled to these rights, therefore, it was in the interest of assessee to get benefit out of the same. We, therefore, considering the commercial expediency involved and terms of the agreement between the parties, did not find any reason to confirm the disallowance made by the lower revenue authorities on account of interest element on the amounts advanced to FOSCL being reflected as work-in-progress in the fixed assets. This ground is allowed. 16. Brief facts, apropos ground no.6, are that under the head Plant expenses, the assessee company claimed expenses of Rs. 93,973/- which was incurred on behalf of FOSCL. The Assessing Offic....
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....ord of the case. It is well settled law that no addition can be made on account of notional interest to be earned by assessee. This is against the very concept of real income theory. Be that as it may, the assessee had sufficiently owned funds to advance a sum of Rs. 18,96,035/-. We, therefore, do not find any basis for confirming the additions made by lower revenue authorities. Accordingly, this ground is allowed. 22. Brief facts, apropos ground no.8, are that from the tax audit report, the Assessing Officer noticed that auditors had observed that assessee might have booked some personal expenses under the head telephone expenses and vehicle running maintenance. He accordingly made a disallowance of Rs. 50,000/- on estimate basis which was confirmed by ld. CIT (A). 23. Ld. Counsel for the assessee submitted that fringe benefit tax has been paid on telephone and vehicle running expenses, therefore, further disallowance is not called for. He relied on the decision of ITAT in the case of Assistant CIT vs. M/s. Micro Turners in ITA No.4569/Del/2011 order dated 15.02.2013 contained at pages 51 to 57 of the paper book. 24. Having heard both the parties, we find that the ITAT in....
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.... part of the ground no.1 relatable to addition of Rs. 7,32,148/- is misconceived because assessee did not assail the findings of Assessing Officer before ld. CIT (A) in regard to take that charges of Rs. 7,32,148/- being pertaining to previous year. Therefore, the only issue is to be considered apropos ground no.1 is in regard to addition of Rs. 8,08,857/- made on account of under valuation of closing stock. 28. Brief facts, apropos this issue, are that the assessee company had imported material, namely, Benzene from M/s. PEC Limited and claimed to have paid a sum of Rs. 31,16,607/- on account of service charges to M/s. PEC Limited. In its reply, the assessee, inter alia, pointed out that out of the LC charges of Rs. 13,55,446/- debited to the service charges, Rs. 7,32,148/- pertaining to previous year, therefore, this amount was disallowed by Assessing Officer being pertaining to prior period expenses as assessee's admission. As regards balance amount of Rs. 6,23,298/- (Rs.13,55,446/- minus Rs. 7,32,148/-), the Assessing Officer noted that assessee had not furnished any documentary evidences and working of valuation of closing stock and supporting evidences thereof. He, accordi....
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....hat if the closing stock of the current year is to be increased then simultaneously opening stock of subsequent year has also to be increased. We direct accordingly. This ground is allowed in terms of aforementioned observations. 32. Brief facts, apropos ground no.2, are that the assessee company had made a payment of Rs. 11,40,652/- to M/s. PEC Limited on account of overdue interest charges. The assessee was required to explain as to why this amount should not be disallowed being prior period expenses and penal in nature. The assessee submitted as under :- "The interest of Rs. 11,40,652/- paid to PEC Ltd. in respect of delay in payment to them. The payment have been delayed due to fall in market price of the product deal by the assessee company. Interest on delayed payment is not the penalty charged by PEC Ltd., therefore it is allowed as revenue expenditure." The Assessing Officer did not dispute the assessee's claim that it was not penal in nature, however, observed as under : "However, regarding the perio....