2016 (7) TMI 833

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....im of expenses to the extent of Rs. 11,49,335/- on estimate basis and not as per Rule 8D r.w.s. 14A was made by the AO? 2. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) is justified in allowing claim of Rs. 4,21,087/- provision for supplying free goods? 3. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) is justified in allowing claim of Rs. 70,000/- as provisional commission expense? 4. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) is justified in allowing claim of Rs. 3,07,88,306/- as bad debt under the head rebate and discounts? 5. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) is justified in allowing claim of Rs. 19,01,217/- as bad debt in absence of supporting documents? 3. The Objector, by filing the present cross objection, sought to set aside the impugned order dated 30.09.2013 passed by the Commissioner of Income-tax (Appeals)-VIII, New Delhi qua the assessment year 2009-10 on the ground that :- "That, on the facts and in circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in sustaining the disallowance u/s 14A....

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.... and disallowed the same as unascertained liability and thereby made an addition of Rs. 70,000/-. 7. As per Annexure 6 of Form 3CD, the assessee shown the amounts of profit chargeable to tax u/s 41 of the Act at Rs. 14,49,165/- as on 31.03.2004 on account of sundry balance written back and Rs. 3,07,88,306/- as on 31.03.2004 on account of provision for discount and rebate written back and out of the said amount, the assessee has declared Rs. 14,49,165/- being sundry balances written back as its income under other income but not shown the provisions for discount and rebate written back as its income for the year under consideration. Finding the explanation furnished by the assessee not tenable, the AO came to the conclusion that assessee company had recovered Rs. 5,00,00,000/- in FY 2007-08 relevant to AY 2008-09 from promoters against disputable claims by debtors for discount and rebate and thus Rs. 5,00,00,000/- were kept by the assessee for provision in its books of account for discount and rebate and has not claimed any expenses, discount and rebate during FY 2007-08 relevant to AY 2008-09 except expenses incurred after takeover. So, the provision for discount and rebate writt....

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....elation to exempt income; that he must record his dissatisfaction with correctness of claim of expenditure made by the assessee or with correctness of the claim made by the assessee that no expenditure has been incurred and that determination of amount of expenditure in relation to exempt income under Rule 8D only come into play when AO rejects claim of assessee in this regard." 13. Undisputedly, assessee company earned dividend income to the tune of Rs. 4,31,81,095/- and claimed the same as exempt income u/s 10(35) of the Act and suo motu disallowed the amount of Rs. 2,60,564/- u/s 14A being the expenses incurred for earning exempt dividend income. 12. Before invoking provisions contained under Rule 8D(2)(iii), the AO has not recorded his dis-satisfaction of the correctness of the claim of expenditure made by the assessee nor AO came to the conclusions that, "the claim of the assessee that no expenditure has been incurred" is incorrect. Assessee has come up with a categoric plea that except for incurring expenditure of Rs. 2,60,564/- on account of salary paid to Executive (Finance), no other expenditure has been incurred for earning of the said dividend income. AO has not di....

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....le at page 104 of the paper book, it is apparently clear that the amount of Rs. 4,21,087/- treated as unascertained liability by the AO includes an amount of Rs. 3,64,453/- on account of expenses actually incurred in respect of cost of raw material, packing material, electricity, power & fuel, wages, repair and maintenance expenses and amount transferred from general expense ledger to specific ledger for FOC and complimentary and as such, an amount of Rs. 4,21,087/- is actually incurred as expenses on account of FOC and complimentary bottles given in the market as samples all over India. Ld. CIT (A), after noticing the factual mistake committed by the AO in treating the amount of Rs. 4,21,087/- as unascertained liability, has rightly deleted the same. So, finding no illegality or perversity in the order passed by the ld. CIT (A), we hereby decide ground no.2 against the revenue. GROUND NO.3 OF ITA No.6536/DEL./2013 17. The CIT (A) deleted the addition of Rs. 70,000/- made by the AO on the ground that the assessee has paid the commission to M/s. Paras Commercial Corporation, Cuttack, a consignment agent on 02.09.2008 on a monthly commission of Rs. 10,000/- per month and the as....