2014 (1) TMI 1772

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....law and on the facts in confirming action of AO in adhoc disallowance @ 50% of the financial charges of Rs. 10,35,000/- invoking provisions of section 40A(2)(b) of the Act. Ld.CIT(A) erred in not appreciating the fact that due to volatility of the stock market appellant paid the financial charges against services availed to fulfill obligations for contracts undertaken. Ld.CIT(A) ought to have deleted such adhoc disallowance when financial exigency of the business warranted guarantee of these parties round the year. 2. Ld.CIT(A) further erred not to appreciate documentary evidence, explanation and submission of the appellant that fixed monthly charges guaranteed the availability of assets as and when the need arose. Both the lower a....

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....ition is made in respect of the related parties. The ld.CIT(A) has not considered the facts of the case in right perspective. She submitted that the confirmation letters from the concerned parties were duly submitted before the authorities below. She drew our attention towards page No.12 of the paper-book regarding the letter of the bank addressed to Shri Yatish H. Shah. She submitted that the authorities below have not taken the assets placed by related parties to the banker. She placed reliance on the decision of Hon'ble ITAT "C" Bench Ahmedabad rendered in the case of Dy.CIT vs. Ravi Ceramics in ITA No.2959/Ahd/2009 for AY 2006-07, dated 11/05/2012. She also placed reliance on the decision of the Hon'ble ITAT "L" Bench Mumbai rendered in....

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....regard to the legitimate needs of the assesseecompany's business vis-à-vis the benefits derived by or accruing to the assessee-company as a result of such payments of financial charges because the basis of quantification of such payments are not clear and instances of utilization of such services do not fully justify the payment. This finding of the AO was confirmed by the ld.CIT(A) on the basis that the total bank guarantee for the period 1.4.2007 to 31.3.2008 was Rs. 56,500,000/- 1% of such amount comes to Rs. 5,65,000/-. Thus, this a reasonable amount to be paid as guarantee commission to the related parties, on the basis of such payments made by the appellant itself in the earlier year. Balance amount allowed by the A.O. amoun....