TaxTMI 
TaxTMI 
2012 (1) TMI 222
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....city. In the oil division, it declared gross profit of Rs. 32,27,07,546/- on turnover of Rs. 3,25,37,85,015/- giving G.P. rate of 9.92% during the year as against gross profit of Rs. 26,29,38,228/- on turnover of Rs. 2,70,38,05,605/- giving a GP rate of 9.72% in the immediately preceding year. 5. During the course of assessment proceedings, AO raised various queries in respect of the trading results declared which were replied by the assessee. The queries raised & the reply furnished is reproduced in Para 4 (Page 2-6) of the assessment order. AO, however, as per Page 7-8 of the order pointed out the following discrepancies/irregularities/inconsistencies:- (i) The yield of mustard oil & mustard oil cake varies from 31.17% to 33.78% & 65.23% to 67.71% respectively even when the purchase of mustard seeds which is crushed to obtain the oil is centralized. Further, the yield of mustard oil & mustard oil cake shown by the sister concern, M/s Vijay Industries, is from 33.26% to 34.69% & 63.94% to 65.86% respectively from which it appears that there is a difference of nearly 2% which is not explainable by the assessee. (ii) No records are maintained for dif....
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....g material fact that it was the assessee who could not substantiate the declared trading results before the AO. The required details were never filed. Non furnishing of required details is itself a defect and can attract the provisions of section 145(3) of the Act. It has been further stated that every year is an independent year and principle of res judicata is not applicable in case of Income-tax proceedings. Reliance is also placed on the decision of Kotak Mahindra Finance Ltd., 265 ITR 114 and in case of New Jahangir Vakil Mills Co. ltd. vs. CIT, 49 ITR 137 (SC) and in case of CIT vs. Foss Electronics, 263 ITR 125 (Raj.) wherein it is held that every year is an independent year. Reliance is also placed on the decisions reported in 38 ITR 579, 210 ITR 406 and 59 ITR 733. 8. On the other hand, the ld. Counsel of the assessee firstly placed reliance on the order of ld. CIT (A). Further attention of the Bench was drawn on the copy of written submissions placed on record. The various observations made by the Assessing Officer for invoking provisions of sec. 145(3) are incorrect. The same is explained as under:- (i) The mustard seeds which are crushed to obtain the mustard oil ....
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....y of Kattha was also different. Thus, merely on the basis of the number of logs purchased by the assessee, & on the basis of past records or any other extraneous material, yield of Kattha could not be calculated to determine the undisclosed sales. The method adopted by the assessing authority in deriving the yield of Kattha from the Kher wood was not a sound method. Therefore, the addition made capriciously was not justified. (iii) So far as consumable store expenses are concerned, assessee submitted complete details before the lower authorities. They are fully vouched and it is not the case of the AO that expenses are bogus or have not been incurred. (iv) The quantitative/qualitative details of opening & closing stock of finished goods, raw material & WIP is at PB 10-12. The valuation of the same along with the basis of valuation was submitted during the course of assessment proceedings vide letter dt. 21.12.2008. Further, the observation of the AO regarding undervaluation of finished goods is without any basis. (v) The observation of the AO regarding purchases from sister concerns at prevailing market rate or not is devoid of any merit. He has not pointed out any ....
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....& 915/JP/2010 vide order dated 25.2.2011. It is further seen that for assessment year 2003-04 also the trading addition of Rs. 50 lacs was made by the AO which was restricted by ld. CIT (A) at Rs. 20 lacs. However, the Tribunal deleted the entire addition while deciding the appeal in ITA No. 728/JP/2007 dated 31.12.2008, copy of order of Tribunal is placed on record. It is further seen that on similar basis in case of sister concern of assessee M/s. Deepak Vegpro Pvt. Ltd. similar trading additions were made. However, the Tribunal has deleted the entire addition made in that case also. Copy of order of Tribunal is placed on record. Facts and circumstances, in our considered view, are similar as were involved in earlier year. Therefore, in view of consistency, we hold that ld. CIT (A) was justified in deleting the trading addition of Rs. 75 lacs following the order of Tribunal for earlier year. Accordingly, we confirm the order of ld. CIT (A) on this issue. 12. Second ground in the appeal of the department is against deleting the addition of Rs. 10,20,73,725/- made on account of deemed dividend under section 2(22)(e) of the I.T. Act. 13. Brief facts of the case are that assess....
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....the account have alternated between debit and credit. This fact have also been accepted by the Assessing Officer in his assessment order on page number 14 in para number (v) that at some point of time, the balance was debit and at some point of time the balance was credit. A list of instance wherein such balances are in debit have also been given by the appellant and mentioned in the order (supra). Under this scenario, it is imperative to determine the nature of such entries whether; these are the loan or advances or business transaction. The provision of section 2(22)(e) of the Income-Tax Act' 1961 are attracted only under the circumstances, when the transactions are in the nature of loans or advances and not otherwise. It is also seen that the nature of the business of the assessee company and Deepak Vegpro (P.) Ltd. & Saurabh Agrotech (P) Ltd are the same. All these three companies are engaged in the crushing of mustard seed, purchase and sale oil and oil cake. All these three companies are having the business transaction inter-se, which fact has remained undisputed and have also been accepted by the Assessing officer in his assessment order. It is found on verification of t....
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....its regular business through a mutual, open and current account to a related party do not come under purview of section 2(22)(e) of the Act." I also had an occasion to lay my hands on the recent decision of Hon'ble Delhi High Court in the case of DCIT Vs. Gaharda Chemicals Limited 2011 TIOL 127 ITAT Mum. decided on 07.01.2011, wherein while following the decision of CIT Vs. Raj Kumar (2009) TIOL 247 (Del.)& CIT Vs. Ambassador Travels (P) Limited (2008) 173 Taxman 407 (Del.) have concluded that the commercial transaction between two companies could not be brought within the purview of the provision of the s. 2(22)(e) of the Income Tax Act, 1961. Therefore by following the above decision, I have no hesitation to come to the conclusion that the transaction entered into between the assessee company and the Deepak Vegpro (P) Ltd. and the Saurabh Agrotech (P) Ltd , which have been considered by the Assessing Officer are in the nature of business and trade transaction entered into the regular and normal course of business and are not in the nature of loans or advances, therefore the provision of section 2(22)(e) of the Income-Tax Act' 1961 are not applicable upon such transaction and ....
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....ssessee was factually incorrect in as much as on a number of occasions the assessee company was having credit balance i.e. liability towards the group companies and has also received cheques. The AO has analyzed copy of account of the assessee with M/s. Deepak Vegpro Pvt. Ltd. wherein daily balance of outstanding due towards M/s. Deepak Vegpro Pvt. Ltd. was calculated and on the basis of which it was found that till 14.06.2005 the assessee was having debit balance and thereafter the position changed and at some point of time the balance was in debit and at some point of time the balance was in credit. The maximum credit balance was Rs. 6,77,22,753/- on 16.3.2006. The same was treated as deemed dividend as M/s. Deepak Vegpro Pvt. Ltd. was having accumulated profit as on 31.3.2005 and 31.3.2006 at Rs. 8,89,81,472/- and Rs. 11,15,40,081/- respectively. It was further explained that AO has also observed that the balance was not due to trading transaction as assessee company has received back more than Rs. 100 crores from M/s. Deepak Vegpro Pvt. Ltd. whereas the purchases made from M/s. Deepak Vegpro Pvt. Ltd. to the tune of Rs. 30 crores or odd and similarly sale to M/s. Deepak Vegpro ....
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....ny of any sum by way of loans or advances to a beneficial shareholder holding not less than 10% of the voting powers. This is a deeming fiction whereby payment of any sum by way of loan or advance is deemed as dividend. Therefore, this provision needs to be construed strictly. For applicability of this section, following conditions should be satisfied:- (i) There should be a payment (ii) Payment should be of a sum (iii) Such payment should be by way of loan or advance Unless & Until all the above conditions are satisfied, deeming fiction would not be attracted. In the present case, the nature of business of M/s Deepak Vegpro (P.) Ltd. & M/s Saurabh Agrotech (P.) Ltd. is also similar to that of the assessee's company business i.e. trading & manufacturing of mustard oil and oil cake. In the course of such business, these companies have entered into a series of trade transactions of purchase, sale, making payment & receiving payment. The respective entries are made in their respective books of accounts in single & consolidated account. (i) The brief of the transactions in the books of assessee company with M/s Deepak Vegpro (P.) Ltd. of purchase, sale, payment made &....
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.... & 2600 entries respectively. The account is continuously moving & even on one single day there are as many as 20-25 transactions. On some day the balance is in credit & on some other day the balance is in debit as is evident from the daily balancing statement placed at PB 45-48 & 148-151 respectively. These transactions are in respect of purchase or sale or composite payment received from the parties against sale or composite payment made to the parties against purchase or transfer of amount where there is availability of limit etc. Such mutual, open, current, running & trade account transactions made in normal course of business can by no stretch of imagination partake the character of a payment by way of loans or advances. The deeming provisions of law contained in section 2(22)(e) being very much confined & limited to the particular purpose for which it has been enacted cannot assume any role beyond the said restricted & confined limit & it can never interfere in the normal business of the companies carried out in the ordinary course because if so it will create an anarchic situation whereby no concern can enter into normal business transactions. In order to cover any....
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....dem." The expression "advance" means something which is due to a person, but which is paid to him ahead of time when it is due to be paid. In the Dictionary of Accounts by Eric L. Kohler (5th Edn.), the expression "advance" was defined as payment of cash or the transfer of goods for which accounting must be rendered by the recipient at some later date. Loan and advances could only be considered "deemed dividend" for the purpose of section 2(22)(e). It is, therefore, sine qua non, to ascertain the correct nature of the payments. In the present case the assessee company received application money for the allotment of shares. There is nothing on record to indicate that application money was received or allotment of shares was made contrary to the provisions of Companies Act, 1956. The amount was reflected as such in the Balance Sheet. Accounts were prepared perfectly in accordance with the norms set out under the Companies Act, 1956. These were filed with the Registrar of Companies. The chief ingredient of s. 2(22)(e) is that one should be shareholder on the date the loan was advanced to him. Where such ingredient is not established, the advance could not be taken as deemed dividend u....
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....e find that Ld. CIT (A) has examined the issue extensively and then found that the transaction does not relate to either loan or advances. Therefore, provisions of section 2(22)(e) are not attracted. While holding so the Ld. CIT (A) has taken into consideration various case laws relied upon before him which are also relied on here before the Tribunal and then only concluded that the addition made by AO was not justified. The Ld. CIT D/R except placing reliance on the order of AO and placing reliance on the decision of Hon'ble Madras High Court could not controvert the finding of Ld. CIT (A). The Ld. CIT D/R could not bring any material that how the transaction entered into between the assessee and the other companies are akin to loan and advances. The nature of transaction clearly established that they related to purchase and sale entered into between the parties or on account of running account. After going through the chart of transaction, we find that this transaction cannot be treated as payment or any sum paid or payable and this payment are not by way of loan or advances and until these conditions are satisfied, provisions of section 2(22)(e) cannot be attracted. The n....
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....CIT(A) in this respect." In various cases, the nature of such mutual, open, current, running & trade account has been analyzed & it is held that credit balance in such account are not payment by way of loans or advances & therefore section 2(22)(e) is not attracted. The gist of these decisions is as under:- NH Securities Ltd. Vs. DCIT 11 SOT 302 (Trib.) (Mum.) (2007) As per the Schedule to the Limitation Act, 1963 and as per Articles 1 & 19 thereto, the limitation period prescribed in the case of mutual, open and current account is three years from the close of the year in which the last item is admitted or proved as entered in the account. On the other hand, in case of a loan, the limitation period is three years from the date on which the loan is made. This throws light on the characteristic feature of a running account and a loan account in a subtle manner. The Limitation Act, 1963 recognizes the running character of a mutual, open and current account by taking the last acknowledged transaction as the starting point of limitation. But in case of the loan, once for all and single transaction, that single transaction itself is the starting point of the limitation. ....
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....d not be treated as deemed dividend for the purpose of section 2(22)(e). The law does not prohibit business transactions between related concerns & therefore payment made in the ordinary course of business can not be treated as loans or advances. Therefore, payments made by a company in the course of carrying on of its regular business through a mutual, open & current account to a related party does not come under the purview of section 2(22)(e). CIT Vs. Ambassador Travels (P.) Ltd. 318 ITR 376 (Del.) (HC) Assessee engaged in the business of travel agency entered into certain business transactions with M/s Holiday Resort (P) Ltd. & M/s Ambassador Tours (India) (P.) Ltd. As a result of these business transactions, there were some financial transactions but the AO came to the conclusion that because of the shareholding pattern, these financial transactions would fall in the category of deemed dividend u/s 2(22)(e) of the I.T. Act. This view was upheld by CIT(A). Tribunal was of the view that there is nothing on record to show that the amount considered by the AO were in any manner advances or loans in the account of the assessee. Being a travel agency, it had regular busines....
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....285 ITR 221 (Mad.) (HC) This case though related to section 269SS but the facts of this case was that assessee company was having running current account with its Director, the Director use to pay the money as well as withdraw from that account, no interest is charged & in these facts it was held that the deposits & withdrawal of money from the current account could not be considered as loan or advance. Muthoot M. George Brothers Vs. ACIT 47 TTJ 434 (Cochin) (Trib.) In this case it was held that bonafide transactions between sister concerns with centralized accounts & management do not attract provisions of section 269SS & section 269T. The transactions between the sister concern & the assessee are to be examined. There are transfer of funds from and to the sister concerns. There is no evidence to show that the money was loaned or kept deposited for a fixed period or repayable on demand. Further, the sister concerns and the assessee are owned by the same family group with a common managing partner with centralized accounts under the same roof. Transfer of funds has taken place in a whimsical manner. Therefore, it is rather difficult to say that the transactions are in the nat....
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....nce to the partners of the assessee not for the purpose of the business, but for their individual benefit. No specific defect has been pointed out in the conclusion of the CIT(A) the same is upheld. Sri Satchindananad S. Pandit Vs. ITO 19 SOT 213 (Trib.) (Mum.) It was held that where the amount outstanding from assessee director to the company is on account of transaction entered into during the regular course of business between them, it can no be treated as deemed dividend u/s 2(22)(e). There is no prohibition against any business transaction between a shareholder & his company. Section 2(22)(e) is a deeming provision on the basis of a legal fiction. In constructing a legal fiction, it will be proper & necessary to assume all those facts on which alone the fiction can operate & as held by Apex Court in case of Mancheri Puthusseri Ahmed Vs. Kuthiravattam Estate Receiver AIR 1997 SC 208, in so constructing the fiction, it is not to be extended beyond the purpose for which it is created or beyond the language of the section by which it is created. By enacting section 2(22)(e), the legislature has created a fiction & has made the payments referred to therein "dividend" for the ....
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....d that on identical facts in the case of sister concern of assessee, the Tribunal has deleted the addition. Attention of the Bench was drawn on copy of order of Tribunal placed at paper book page 389 to 415. 20. After considering the submissions and perusing the material on record, we find that on identical facts similar addition was made in case of M/s. Deepak Vegpro Pvt. Ltd., a sister concern of the assessee. In this case, an addition of Rs. 1,84,15,499/- was made on account of deemed dividend in terms of section 2(22)(e) of the Act. The ld. CIT (A) deleted the addition and on second appeal the Tribunal after considering the issue in detail found that the addition deleted by ld. CIT (A) was in order. For the sake of clarification, we would like to reproduce the findings of the Tribunal recorded in para 33 to 35.2 at pages 12 to 26 as under :- "33. We have heard rival submissions and considered them carefully. After considering the submissions and perusing other material on record, we find that there is no infirmity in the finding of ld. CIT (A). Detailed written submissions which are similar to the written submissions filed before ld. CIT (A) are as under :- " (1) Secti....
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.... it is to be noted that the nature of transactions between them are business transactions inter se. It is a mutual, open, current, running & trade account running into 16 pages containing around 800 entries. The account is continuously moving & even on one single day there are as many as 20 transactions. On some day the balance is in credit & on some other day the balance is in debit as is evident from the daily balancing statement placed at PB 29-32. These transactions are in respect of purchase or sale or composite payment received from the parties against sale or composite payment made to the parties against purchase or transfer of amount where there is availability of limit etc. Such mutual, open, current, running & trade account transactions made in normal course of business can by no stretch of imagination partake the character of a payment by way of loans or advances. The deeming provisions of law contained in section 2(22)(e) being very much confined & limited to the particular purpose for which it has been enacted cannot assume any role beyond the said restricted & confined limit & it can never interfere in the normal business of the companies carried out in the ordinar....
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.... debt, but there may be a debt without contracting a loan. In a loan the mind and intention of the two parties, the lender and the borrower must be ad idem." The expression "advance" means something which is due to a person, but which is paid to him ahead of time when it is due to be paid. In the Dictionary of Accounts by Eric L. Kohler (5th Edn.), the expression "advance" was defined as payment of cash or the transfer of goods for which accounting must be rendered by the recipient at some later date. Loan and advances could only be considered "deemed dividend" for the purpose of section 2(22)(e). It is, therefore, sine qua non, to ascertain the correct nature of the payments. In the present case the assessee company received application money for the allotment of shares. There is nothing on record to indicate that application money was received or allotment of shares was made contrary to the provisions of Companies Act, 1956. The amount was reflected as such in the Balance Sheet. Accounts were prepared perfectly in accordance with the norms set out under the Companies Act, 1956. These were filed with the Registrar of Companies. The chief ingredient of s. 2(22)(e) is that one sh....
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....1963 and as per Articles 1 & 19 thereto, the limitation period prescribed in the case of mutual, open and current account is three years from the close of the year in which the last item is admitted or proved as entered in the account. On the other hand, in case of a loan, the limitation period is three years from the date on which the loan is made. This throws light on the characteristic feature of a running account and a loan account in a subtle manner. The Limitation Act, 1963 recognizes the running character of a mutual, open and current account by taking the last acknowledged transaction as the starting point of limitation. But in case of the loan, once for all and single transaction, that single transaction itself is the starting point of the limitation. This statutory distraction reflected in the Limitation Act, 1963 is a pointer towards the basic difference between a running account and a loan account. Whenever payments made by a Ltd. Co. to its shareholder is proved by the characteristic as other than loan/advance; in other words, the payment is for the purpose of repayment of loan or such other existing liability, the question of s. 2(22)(e) applying, does not arise. T....
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....section 2(22)(e). CIT Vs. Ambassador Travels (P.) Ltd. 318 ITR 376 (Del.) (HC) Assessee engaged in the business of travel agency entered into certain business transactions with M/s Holiday Resort (P) Ltd. & M/s Ambassador Tours (India) (P.) Ltd. As a result of these business transactions, there were some financial transactions but the AO came to the conclusion that because of the shareholding pattern, these financial transactions would fall in the category of deemed dividend u/s 2(22)(e) of the I.T. Act. This view was upheld by CIT(A). Tribunal was of the view that there is nothing on record to show that the amount considered by the AO were in any manner advances or loans in the account of the assessee. Being a travel agency, it had regular business dealings with the above two concerns dealing with holiday resorts & tourism industry. Therefore, since the transactions were normal business transactions, they can not be described as loans or advances which form a distinct category of financial transactions. Therefore, provisions of section 2(22)(e) are not at all applicable. High Court held that it is clear, that the assessee was a travel agency & the above two concerns that it ....
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.... held that the transactions inter se between the sister concerns and the assessee cannot partake of the nature either "deposit" or "loan", though interest might have been paid on the same. Expecting for the transfer of funds being witnesses in the books of account of the concerned firms, no material is on record to show issue of receipt or pronote in evidence of accepting a deposit or accepting a loan. Therefore, the transactions as are found in the books of accounts of the assessee cannot be termed as deposits or loans as understood in common parlance. It only represents diversion of funds from one concern to another depending upon the exigencies of the business. These findings has been approved by Rajasthan High Court in case of CIT Vs. Maheshwari Nirman Udhoyg 302 ITR 201. DCIT Vs. Lakra Brothers 106 TTJ 250 (Chand.) (Trib.) The important words in section are loan or advance & for the individual benefit of such shareholders. Loan is something different from debt. For a loan there must be a lender, borrower as well as a contract/agreement between the parties for the return of the loan amount. Every sale of goods on credit does not amount to a transaction of loan. In t....
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....-company. The assessee-company being unable to invest such a large amount, P agreed to invest 50% of the project cost, the rest of the 50% to be arranged by the shareholders/directors of the company. The funds advanced were to be adjusted against the dues payable by P to the assessee-company in subsequent years for the job work of printing and dyeing to be done by the assessee for P. The Assessing Officer held that the amount paid to the assessee-company was a deemed dividend under section 2(22)(e) of the Income-tax Act, 1961. The Tribunal held that it was an advance for a commercial purpose to the assessee-company by its sister concern P and not a deemed dividend under section 2(22)(e) of the Act. On appeal, it was held that the amounts advanced for business transaction between the assessee-company and P did not fall within the definition of deemed dividend under section 2(22)(e). The transaction of cheque received & cheque paid in present case, in the normal course of business are neither transaction of loan nor a transaction of advance. These transactions are not attached with any obligation. In the mutual interest amounts are transferred between the two concerns consideri....
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....inter-se, which fact has remained undisputed. It is found on verification of the account and on fact that the account of the assessee with the Saurabh Agrotech (P) Ltd is a running, current, open and trade account. The business transactions entered into between the assessee company and Saurabh Agrotech (P) Ltd has been routed through the said account. The assessee company does not have any other account except the account considered by the Assessing Officer. This is single and consolidated account, wherein the trade transaction has been passed through, therefore it is a business and trade account. Now the question arises, whether, the provision section 2(22)(e) of the Income-Tax. Act' 1961 are attracted upon the business of trade transaction. In this regard learned counsel has rightly placed the reliance upon the decision of Hon'ble Delhi High Court in the case of CIT V/s Raj Kumar (2009) TIOL 247 (Del.) "Trade advance which are in the nature of money transacted to give effect to a commercial transactions would not fall within the ambit of the provisions of Section 2(22)(e) of the Act - Revenue's appeal dismissed. While delivering the judgment, Hon'ble Delhi High Court has ....
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....have been paid on the same and the same view have been upheld by Income Tax Appellate Tribunal, Bench-Jaipur, Jaipur in the case of Income Tax Officer v/s Mahavir Stores, Alwar ITA No. 1834 & 1835/JP/981 dated 23.11.1993. Therefore considering all the above fact and latest case laws on the subject it is categorically held that the transaction of assessee company with the Saurabh Agrotech (P) Ltd, is the business and trade transaction entered into the normal course of business and the provision of section 2(22)(e) are not applicable thereupon and the addition of Rs. 1,84,15,499/- u/s 2(22)(e) of the Income-Tax Act' 1961 is deleted. Since I have deleted the addition of Rs. 1,84,15,499/-, therefore my finding upon the issue of deduction of tax liability, the depreciation as per the income tax and possess accumulated profit have remained merely of academic interest therefore, no finding thereupon have been given." 35. After considering the above findings of ld. CIT (A) and the written submissions of the assessee which are also reproduced somewhere above in this order, we find that ld. CIT (A) has examined the issue extensively and then found that the transaction does not relate ....
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.... word "loan" could only be such advance which carries with it an obligation of repayment. Thus, trade advances which is in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of section 2(22)(e). 35.1. Similar facts are involved in this case also as the transactions are of business nature. Therefore, they do not fall within the ambit of section 2(22)(e) of the Act. We have also gone through the various case laws, some of them have already been considered by ld. CIT (A) and found that they are in support of the case of the assessee. 35.2. The decisions relied upon by ld. CIT D/R are not applicable on the facts of the present case as these transactions of the assessee are of business in nature and, therefore, they do not fall within the ambit of section 2(22)(e). In view of these facts and circumstances and in view of the detailed reasoning given by ld. CIT (A) which is reproduced somewhere above in this order, we hold that ld. CIT (A) was justified in deleting this addition. Accordingly we confirm the order of ld. CIT (A) in this respect." After going through the order of the Tribunal and submissions of both the parties,....
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....t there is no infirmity in the finding of ld. CIT (A) as the payment to the transporter on each occasion does not exceed Rs. 20,000/-. Therefore, in our considered view, addition under section 40A(3) could not have been made. Accordingly, we confirm the findings of ld. CIT (A) on this issue also. 27. Ground No. 4 is against deleting the disallowance of Rs. 4,67,830/- out of telephone expenses. 28. The brief facts of the case are that Assessee company claimed telephone expense of Rs. 23,39,150/-. AO disallowed 20% out of the same i.e. Rs. 4,67,830/- by holding that the use of telephone & internet lines for non business purposes can not be ruled out. CIT (A) deleted the disallowance. 29. After considering the orders of the AO and ld. CIT (A), we again find no infirmity in the finding of ld. CIT (A). We noted that expenditure incurred under this head is exclusively for the purpose of business. The AO has not pointed out any particular expenses which are not for purposes of business. Looking to the turnover of the assessee and other details kept by assessee, we hold that ld. CIT (A) was justified in deleting the addition. Accordingly we confirm his order on this issue also. ....
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....all the facts and, therefore, order of AO is liable to be restored on this issue. 36. On the other hand, the ld. Counsel of the assessee firstly placed reliance on the order of the CIT (A) and written submissions placed on record. It was further submitted that in similar circumstances the addition was made in case of M/s. Deepak Vegpro Pvt. Ltd. also and the Tribunal has restored the issue to the file of AO with certain directions. Therefore, similar direction may be given in this case also. 37. After considering the orders of the AO and ld. CIT (A) and order of the Tribunal in case of M/s. Deepak Vegpro Pvt. Ltd. (supra), we find that similar addition was made in case of M/s. Deepak Vegpro Pvt. Ltd. also and after considering the arguments and the orders of the authorities below, the Tribunal has given following finding:- "13. After considering the submissions and perusing the material on record, we find that rule 8D is not applicable for the year under consideration as Rule 8D has been held applicable prospectively i.e. from assessment year 2008-09 in the case of Godrej & Boyce Mfg. Co. Ltd., 328 ITR 81 (Bombay). 13.1. First submission of the assessee....
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.... issue afresh in light of observations given by the Tribunal as above. We order accordingly. This ground of the department as well as the ground of the assessee are allowed for statistical purposes. 39. Ground No. 7 in appeal of the department is against restricting the disallowance at Rs. 1,72,791/- out of total disallowance at Rs. 3,45,582/- made by AO on account of vehicle running and maintenance expenses. 40. Assessee has also challenged through Ground No. 9 the addition sustained by ld. CIT (A). 41. The brief facts of the case are that Assessee company claimed vehicle running & maintenance expense of Rs. 17,27,911/-. Division wise bifurcation of the same is as under:- Division Amount Oil Division 12,71,864/- Jaipur Glass & Potteries 4,39,844/- Goenka Products 16,203/- Total 17,27,911/- AO disallowed 20% out of the same i.e. Rs. 3,45,582/- by holding that the expenditure is not fully vouched & is claimed on self made vouchers. Therefore, in the absence of proper bills & vouchers these expenses are not subject to verification. CIT(A) restricted the disallowance to 10% i.e. Rs. 1,72,791/- in order to plug the possible leakage of revenue & to meet....
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....at Rs. 18,57,263/-, the AO made adhoc disallowance of Rs. 2,00,000/-. The ld. CIT (A) restricted the adhoc disallowance at Rs. 1,00,000/-. 52. After perusing the orders of the AO and ld. CIT (A) we find that ld. CIT (A) was justified in restricting the disallowance at Rs. 1,00,000/- as certain vouchers were not verifiable and just to plug the possible leakage, the ld. CIT (A) has restricted the disallowance at Rs. 1,00,000/-. Accordingly, this ground of the department as well as of the assessee fails. 53. Ground No. 11 in the appeal of the department is against restricting the disallowance at Rs. 50,000/- out of Rs. 5,00,000/- made by the AO on account of legal and professional expenses. 54. The assessee has challenged the sustenance of addition by ground no. 8. 55. AO made an addition of Rs. 5,00,000/- against claim of assessee at Rs. 12,04,143/- by holding that assessee has no base for claiming the expenditure/no third party verification of substantial amount is possible. The ld. CIT (A) restricted this disallowance to Rs. 50,000/- just to plug the possible leakage of revenue. 56. After considering the submissions, we find that assessee deserves to succeed in this ....
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....rally written back by the assessee. In the present case, there is no such remission or cessation nor there any unilateral write back of such liability. The lower authorities have also not brought any evidence that the other party has written off these amounts in their books of accounts during the year. Only because the assessee could not file the confirmation or the amount is not paid or the person has not claimed the payment, it can't be presumed that the liability has ceased to exist during the year. The amount is otherwise coming from earlier years and therefore addition can't be made during the year under consideration. It is to be noted that in subsequent years, the liability in respect of following creditors has been paid. The details of the same is as under:- S.No. Name of the Party Opening Balance Date of Payment 1. Shivam Securities- Cr. For exp (PB 212) 19,489/- 19.03.2009 2. Manohar Lal Kejriwal- Broker (PB 213) 2,094/- Running account 3. Jiwa Ram -Broker (PB 214) 1,803/- Running account 4. Elkay Company- Broker (PB 215) 4,745/- Running account TOTAL 28,131/- In respect of remaining creditors, the amount is payable. There is no material with the lower authoritie....
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....in respect of such expenditure or any benefit within the meaning of section 41(1). The Assessing Officer treated the amount as the assessee's income under section 41(1). This was upheld by the Commissioner (Appeals) and the Tribunal. On appeal to the High Court held that it had not been established that due to non-encashment of the cheques in question, the money involved had become the money of the assessee because of limitation or by any other statutory or contractual right. The amount was not assessable under section 41(1). CIT Vs. Tamilnadu Warehousing Corporation 292 ITR 310 (Madras) It was held that the assessee had continued to show the admitted amount of Rs. 8,22,925 as liability in the balance-sheet. The undisputed fact was that it was a liability reflected in the balance-sheet. Once it was shown as liability by the assessee, the Commissioner was wrong in holding that it was assessable under section 41(1) of the Act. Unless and until there is a cessation of liability, section 41(1) is not applicable. Uttam Air Products (P) Ltd Vs DCIT 99 TTJ 718 (Del) It was held that, the balance of the creditor was outstanding in the books of the assessee for a considerable peri....