TaxTMI 
TaxTMI 
2014 (5) TMI 1075
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....r on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Nashik is justified in deleting the addition made on account of undervaluation of stock of gold at Rs. 2,65,200/-. 2. Whether on the facts2 and in the circumstances of the case, the Ld. CIT(A)-I, Nashik is justified in deleting the addition made on account of investment not recorded in the books at Rs. 2,75,000/-. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Nashik is justified in deleting the addition made u/s 40A(2)(b) of the I.T. Act, 1961 at Rs. 7,09,881/-." 4. In brief, the relevant facts are that the respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of re-selling and manufacturing of Gold, Silver, Stone & Diamond ornaments. During the previous year relevant to the assessment year under consideration, there was a survey action u/s 133A of the Act conducted in the business premises of the assessee on 01.11.2007. In the course of survey, assessee disclosed an income of Rs. 50,32,006/- as additional income for the assessment year under consideration. Subsequently, assessee filed a ret....
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....d that the Assessing Officer was justified in making the impugned addition on account of undervaluation of the cost of such excess Gold declared at the time of survey. 7. On the other hand, learned Representative for the respondentassessee submitted that the CIT(A) has appreciated that the purity of the Gold used in the ornaments was a relevant factor for the purposes of valuation and in the present case the rate adopted by the Assessing Officer was Rs. 1040 per gram which was the rate of pure Gold on the date of survey. The CIT(A) has rightly allowed the deduction on account of the purity content, impurities, etc. which is a normal trade practice. 8. We have carefully considered the rival submissions. In our considered opinion, no interference is required in the order of the CIT(A) because he has allowed relief considering the trade pra4c tices, whereby the value of Gold in the ornaments manufactured, has been adjusted on account of impurities, alloy mixing, soldering joints, etc., whereas the Assessing Officer had adopted the rate of pure Gold. Nothing has been brought on record by the Revenue to establish any error in the approach of the CIT(A) in reducing the valuation on acc....
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....ess of what was paid to the independent lenders, namely, banks; and, accordingly he disallowed interest paid to M/s Gajara Finance in excess of 13%. Accordingly, an addition of Rs. 7,09,881/- was made. 14. The CIT(A) has deleted the addition by making the following discussion :- "8.3 I have carefully considered the facts of the case, the assessment order and the submissions of the appellant. On perusal it is seen that the appellant has borrowed unsecured loans of Rs. 3,43,58,170/- from Gajara Finance which is covered u/s 40A(2)(b) and has paid interest @ 15%. The appellant has claimed deduction of Rs. 53,24,110/- on account of interest paid to M/s Gajara Finance @ 15%. An amount of Rs. 46,14,229/- was allowed by the AO as deduction @ 13% and Rs. 7,09,881/- was disallowed being unreasonable. The AO's action is primarily based on the fact that the said person is covered u/s 40A(2)(b). He has not considered the relevant facts that this was an unsecured loan and obtained by the assessee to meet its business needs. Section 40A(2) has empowered the AO to examine the payments invoking relatives, Director, partner or any other person having substantial interest in the business of th....
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....to M/s Gajara Finance @ 15% was excessive or unreasonable having regard to the market rate of interest, which was a condition precedent for making a disallowance in terms of section 40A(2)(a) of the Act. In this case, assessee pointed out before the CIT(A) that the loans raised from M/s Thane Janta Sahakari Bank Ltd. and ICICI Bank were on account of a cash credit facility and fo7r acquisition of car respectively. Both the loans were secured against assets and on the contrary, borrowing from M/s Gajara Finance was unsecured and this aspect clearly showed that the terms and conditions of the two borrowings were not similar. In-fact, this aspect also justifies the interest paid to M/s Gajara Finance at a rate higher than that paid to the banks. This aspect of the matter has not been controverted by the learned Departmental Representative before us, and continues to hold the field. Therefore, considering the aforesaid aspects and in view of the discussion of the CIT(A) which we have extracted above, Revenue has to fail on this Ground. We hold so. 18. In the result, the appeal of the Revenue for assessment year 2008-09 is dismissed. 19. In appeal for assessment year 2009-10, the firs....
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....nd abroad. The assessee has paid an amount of Rs. 4,00,000/- in the expectation that the same would directly or indirectly benefit its business and facilitate its development. The assessee is in the business of manufacturing and trading in gold ornaments and semi-precious stones which has a clientele in India and abroad. It is a settled position of law that the businessmen's business may be benefited in a number of ways. One of them may be the promoting of good business relations with whom he has to deal with in the course of his business. The test, therefore, is whether the assessee has reasonably in the interest of business incurred the expenditure in question. Therefore, this payment has to be viewed in the larger context of business interest or expediency. It is also a relevant factor to note that the Board of Directors of the assessee company is managed by persons from the jain sect. Therefore, the assessee's membership of the JITO, therefore, has provided it with a platform to interact with entrepreneurs and to further its business interest. Payment of entry fee for becoming a member of a sports club was held to be a business expenditure and allowed in the case of Gujarat Sta....