TaxTMI 
TaxTMI 
2016 (4) TMI 385
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.... of Rs. 25,00,000/- made by AO on account of disallowance of manufacturing expenses under the head "Manufacturing material and chemicals". 2. Whether in the facts and circumstances of the case the ld. CIT(A) has erred in law in facts in deleting the addition of Rs. 6,30,57,609/- made by the AO on account of disallowance of accrued interest not paid by it in respect of secured / unsecured loans taken from various institutions of UP Government. The assessee has violated Section 43B(d) of the I.T. Act, 1961 by not paying the accrued interest before the due date of filing of return. 3. That the appellant craves leave to add, modify and / or delete any ground(s) of appeal. 4. In the facts and circumstances of the case, the order of the CIT....
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....e society has claimed Rs. 1,01,78,326/- - under the head "Manufacturing Material and Chemicals" whereas in the immediately preceding year i.e. F.Y. 2006-07 expenses under the above head were claimed/shown Rs. 50,27,813/- thus the expense claimed under the above head were more than double the expenses of the last year. According to A.O. the AR of the assessee failed to explain the reasons for such a huge increase of expenses under the said head, and for want of proper explanation the A.O. made ad-hoc disallowance of Rs. 25 Lacs or estimate basis out of total claim under the said head. As against the above addition the assessee has furnished the details of "Manufacturing Material and Chemicals" expenses as per Schedule-'N' of profit ....
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....egard the AO in his Remand Report dated 22/2/2013 has reiterated his stand on this issue and has justified the disallowance. In response to AO's justification for the said addition the Assessee in his Rejoinder dated 21/3/2013 has placed his reliance on the comparative figures of various items of expenses falling under the head "Manufacturing Material and Chemical Expenses" as per Schedule-N of Profit and Loss Accounts for the F.Y. 2006-07 along with quantitative details of cane crushed sugar produced, and consumption of Sulphur. We find that Ld. CIT(A) have gone through the details as given by the assessee in this regard and find that during the financial year under consideration the quantum of cane crushed and sugar produced have gone....
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....ving at a figure of Rs. 25 lacs for ad-hoc disallowance under this head. Thus, the AO has also failed to specify any specific items of expenditure comprising total ad-hoc disallowance of Rs. 25 Lacs as above. It was also found that that as per record that the AO did not issue any show cause notice in this regard while making this addition and to that extent agree that it amounts to breach of principles of natural justice. In view of above discussions, we find that there was no no justification for adhoc disallowance of Rs. 25 lacs under the head "Manufacturing Material and Chemical Expenses", hence, the same was rightly deleted by the Ld. CIT(A). Keeping in view of the facts and circumstances of the case, we do find any infirmity in the ord....
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....ure related to mistake committed by AO while working out quantum of interest accrued but not paid during the year under consideration. With the help of Annexures to the Balance Sheet of the assessee filed during the appellate proceedings it was pointed out that instead of Rs. 6,30,57,609/- (figure of interest accrued but not paid as adopted by the AO for disallowance i.e. interest against secured loan of Rs. 96,10,292 + Interest against unsecured loan of Rs. 5,34,47,317/-) the correct figure of disallowance under above head should have been 5,61,06,320/- only which represent interest due but not paid in respect of unsecured loan appearing in the Balance Sheet. We find that Ld. CIT(A) has observed that the mistakes as pointed out by the coun....
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....CIT(A) that the definition of Public Financial Institutions/State Financial Corporation/State Industrial investment Corporation as given under the provision of Section 4A(2) of the Companies Act 1956 do not cover U.P. State Government; U.P. Sahakari Chinni Mills Sangh Limited and Sakkar Vikash Nikdhi from where the assessee has taken Loan and therefore, no disallowance on this account should be made and that the addition made by the A.O. deserves to be deleted. The assessee has further submitted that the provisions of 43B(d) of the Income Tax Act gives exhaustive definition of all Public Financial Institutions/State Financial Corporation/State Industrial Investment Corporation which has been prescribed u/s. 4A(2) of the Companies Act and on....