TaxTMI 
TaxTMI 
2015 (6) TMI 393
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....(A), Revenue as well as Assessee preferred appeal before Hon'ble Tribunal. Hon'ble Tribunal vide order in ITA No. 721/A/2009 and C.O No. 81/A/2009 dated 06.08.2013 partly allowed the appeal of Revenue and C.O of the Assessee. Thereafter an M.A. No. 177/A/2013 was filed by the Assessee interalia for the reason that there were apparent mistakes in deciding ground no. 1,2 & 3 of Revenue's appeal. Thereafter vide order dated 29.11.2013 the appeal in ITA No. 721/A/2013 was recalled to decide the aforesaid 3 grounds. Thus before us, the 3 grounds of Revenue which were to be adjudicated reads as under:- 1. The CIT(A) has erred in law and on facts in deleting the addition made on account of excess payment of interest to the sister concern. 2. The CIT(A) has erred in law and on facts in deleting the addition made by the Assessing Officer u/s.40A(2)(b) of the I.T. Act on account of excess discount allowed to the sister concern. 3. The C1T(A) has erred in law and on facts in deleting the addition made u/s.40A(2)(b) of the I.T. Act on account of suppression of charges received on account of job work charges for dyeing and printing from the sister concern. 1st ground is with respect to....
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....nor could point out as to whether the decision of Hon'ble Tribunal in earlier year in Assessee's own case has been reversed by Hon'ble High Court. On the contrary we find that the Co-ordinate Bench of Tribunal in Assessee's own case for A.Y. 2002-03 in ITA No. 509/A/2011 order dated 30.04.2014 and on similar facts by following the decision of Hon'ble Gujarat High Court in Assessee's own case (in Tax Appeal No. 1126 of 2007 with Tax Appeal No. 814 of 2009) has deleted the addition. We therefore find no reason to interfere with the order of ld. CIT(A) and thus this ground of Revenue is dismissed. 2nd ground is with respect to deletion of disallowance u/s. 40A(2)(b) of the Act. 8. During the course of assessment proceedings, AO noticed that Assessee has claimed rate difference provided to Kamala Associates, a sister concern of the Assessee. He also noticed that Assessee had not provided rate difference to other outside parties. The submission of the Assessee was not found acceptable to the A.O. He was of the view that the Assessee has suppressed receipt by way of charging at lesser price from group concerns. He therefore by invoking provisions of Section 40A(2)(a) worked the disall....
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....the Hon'ble Court said that the difference in sale price and actual price at least the goods are sold does not amount to expenditure which can be disallowed u/s.40A(2)(a). In view of this, the discount given cannot be treated as unreasonable and it is proper as per general business practices. 8.2.6.3 Even otherwise, with respect to the comparative rates to see the comparison of rates it is seen that no single dyeing or printing job work carried out by it for outsider has been carried out for M/s. Kamla Associates and M/s. Garden Silk Mills. The assessee submitted the details before the A.O. to show that there was no quality in common processed by the assessee company for Kamla Associates vis-a-vis outside parties and hence no comparison can be made. Further the question comparison of job work rates charged to outside parties with M/s Kamla Associates either on gross rate basis or net rate basis does not arises because no single dyeing or printing job work carried out by it for outsider were carried out for M/s Kamla Associates or for that matter Garden Silk Mills Ltd. Accordingly the scope of work, designs etc were completely different for M/s kamla associates vis-a-vis outs....
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....of the decision of the jurisdiction ITAT Ahmedabad in the case of Binit Corporation T24 TT3 5711 wherein the ITAT has, after considering various judicial pronouncement, stated that first of all the AO 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 AO 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 AO 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 depending upon the facts of each case. Even the benefit accruing to the assessee shall have to be evaluated. This again may not be confined to the period....
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....ardstick in charging the job charges for sister concern. He thereafter on the basis of the average rate of printing charges charged to Garden Silk Mills, worked out the average job charges that Assessee should have charged to the Kamala Associates and accordingly estimated the suppression of receipts on account of dyeing charges at Rs. 11,45,024/- and on account of printing charges at Rs. 80,30,582/- and thus made an aggregate addition of Rs. 91,75,606/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who after the considering the submissions of the Assessee deleted the addition made by A.O by holding as under:- 9.3 I have considered the submission made by the appellant and the observation of the A.O. The main argument of the appellant are that the assessee has charged average Rs. 10.55 per meter from outside parties for dyeing activity whereas it has charged Rs. 6.70 per meter on an average from Kamla Associates and Rs. 7.36 per meter from Garden Silk Mills Ltd. for the dyeing activity. In respect of printing charges, the assessee has charged Rs. 15.07 per meter on an average but it has charged Rs. 14.63 per meter from Garden Silk Mils Ltd. and Rs....