TaxTMI 
TaxTMI 
2016 (12) TMI 748
X X X X Extracts X X X X
X X X X Extracts X X X X
....,70,40,858/-. Case was selected for scrutiny assessment. Notice u/s. 143(2) of the Act was issued and duly served. Necessary questionnaire and query raised by Assessing Officer were duly replied by assessee from time to time. Income was assessed at Rs. 2,29,34,267/- after making addition of Rs. 58,93,409/-. 3. Appeal was partly allowed by the first appellate authority. 4. Now both the assessee and Revenue are in cross appeals before the Tribunal. 5. First we take up assessee's appeal wherein modified grounds of appeal were filed on 28.7.16 which read as follows:- 1.1 The order passed u/s. 250 for A.Y. 2009-10 on 22-1-2013 by the CIT( A)-VIII, Ahmedabad to the extent confirming the disallowances/additions is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in not considering fully sand properly the submissions dt. 21-2-2013 furnished by the appellant. 2.1 The Ld. CIT(A) has grievously erred in law and on facts in upholding that the provisions of Sec 14A r.w.r. 8D were attracted to the facts of the present case. 2.2 That in the facts and circumstances of the case the Ld. CI....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce was called for under rule 8D(iii) of the Rules. 9. On the other hand, ld. DR could not controvert the submissions made by ld. AR towards the disallowance of interest under rule 8D(ii) but strongly objected the contentions of ld. AR that no disallowance is called for under rule 8D(iii) of the Rules by submitting that since w.e.f. Asst. Year 2008-09 Rule 8D has been amended with the insertion of the new method and the same needs to have been applied. Ld. DR further submitted that assessee in appeal before ld. CIT(A) has itself requested to give direction to disallow maximum of Rs. 3,53,002/- which itself means that to the extent of Rs. 3,53,002/- assessee is agreed for the disallowance. 10. We have heard the rival contentions and perused the material on record. The issue raised in this modified ground is relating to disallowance upheld by ld. CIT(A) at Rs. 3,53,002/-. We find that assessee has earned tax free interest income of Rs. 55,02,903/- and dividend income at Rs. 3,86,077/-. Average investment fetching tax free interest/dividend stood at Rs. 6,56,70,485/-. We further find that ld. CIT(A) deleted disallowance of Rs. 2,67,878/- provided under rule 8D(ii) of the Rules t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces. Further looking to the provisions of rule 8D(iii) r.w.s. 14A of the Act we believe that it is not easy for the Assessing Officer to go into the intricacies of the books of accounts in order to extract particular details in order to calculate the cost incurred towards managing investment. In order to cure this situation amended Rule 8D comes into fore play. We find that as per rule 8D (iii) amount of Rs. 3,53,002/- has been calculated and looking to the size and variety of investments, we find that the disallowance has been reasonably sustained by ld. CIT(A). We uphold the same. Accordingly, this ground of assessee is dismissed. 12. As regards ground No. 4, assessee is aggrieved with the order of ld. CIT(A) upholding the addition made u/s. 41(1) of the Act at Rs. 10,33,414/-. Brief facts relating to this ground are that during the course of assessment proceedings ld. Assessing Officer observed that outstanding amount payable to seven parties totaling to Rs. 20,44,109/- are being brought forward from last many years and no payments were made to these parties after creating of trading liability. Further no transactions were entered into with these seven parties. Ld. Assessing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich comes to Rs. 10,33,414. In view of the above, the AO is directed to delete the remaining amount of Rs. 12,10,695 (Rs. 22,44,109/- Rs. 10,33,414). This ground of appeal is partly allowed. 14. Aggrieved, assessee is now in appeal before the Tribunal. 15. Ld. AR reiterated the submissions about these two parties-Pal Peogeot Limited Rs. 5,49,929/- and Oriental Transport Co. Rs. 4,93,486/- that there were disputes with these parties and would be resolved in the near future but could not place any other material evidence to support his contentions. 16. On the other hand, ld. DR supported the order of Assessing Officer to the effect that Revenue has raised similar type of ground in their appeal against the order of ld. CIT(A) deleting the part disallowance u/s. 41(1) of the act. 17. We have heard the rival contentions and perused the record. The issue through this ground No. 4 relates to addition sustained at Rs. 10,33,414/- by ld. CIT(A) u/s. 41(1) of the Act. As referred above that the disallowance of Rs. 22,44,109/- was made u/s. 41(1) of the Act by Assessing Officer. When the issue came up before ld. CIT(A) assessee submitted details showing the status of the impugned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gar Works (P) Ltd. in Civil appeal No. 2344 of 1992 wherein it was observed that whether the liability is actually barred by limitation is not a matter which can be decided by considering the assessee's case alone but has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable. In the light of above observation of Hon. Supreme Court we believe that in the given facts and circumstances of the case before us assessee could not prove at any point of time that there existed a liability to be paid to Pal Peogeot Limited at Rs. 5,49,929/- and Oriental Transport Co. at Rs. 4,93,486/-. We find that since the assessment proceedings till the hearing before the Tribunal which has stretched for almost 5 years there has been no change in the status quo proved by assessee before various authorities. The assessee is submitting that there is a dispute and liability may arise in future. But in support thereof there is not a single evidence. During the course of hearing before us, ld. AR requested to provide one more opportunity to prove ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eject the books result of the assessee and estimating net profit at 13.84% as against 12.15% shown by assessee and making addition of Rs. 21,30,870/-. 24. When the issue came up before ld. CIT(A) total addition was deleted, as the assessee was having impugned GP in percentage for last three years average GP and further the unreconciled balances were reconciled which occurred due to some arithmetical error and there was no other mistakes pointed out by the Assessing Officer in the books of account of assessee. 25. Aggrieved, Revenue is now in appeal before the Tribunal. 26. Ld. DR supported the order of Assessing Officer whereas the ld. AR relied on the order of ld. CIT(A). 27. We have heard the rival contentions and perused the material on record. Revenue is aggrieved with the order of CIT(A) allowing assessee's appeal in deleting the addition of Rs. 21,30,870/- made by Assessing Officer by rejecting the books of account and adopting net profit rate of 13.84% as against 12.15% shown by assessee. We observe that ld. Assessing Officer took basis of last two years average whereas in normal course of assessment proceedings three years average is taken as a bench mark to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts of the party with 'he appellant and vice versa-which tallies. In-view of the above, neither the sales are understated nor are the expenses inflated in the books of account of the appellant. Therefore, when there is no defect found in books of account, AO is not justified in rejecting the same. Appellant also relies on the decision of Gujarat High Court in case of CIT vs. Vikram Plastics 239 ITR 161. Respectfully following the same I hold that the provisions of section 145(2) ought not to have been invoked and rejection of books of account by the AO is proper. As far as addition of NP is concerned, the AO has compared the NP with immediately previous year. While before me the appellant has submitted the average of last three years i.e. 9.55% (average of 5.93%, 8.87% and 13.84%) as against which NP for the year under consideration shown by appellant is 12.15%. For making the comparison, basis of one year is not justified. Therefore, comparison made by the AO is not correct. Further the AO has made the comparison of value of sales with item of raw material which may produce absurd result. In view of the above, I hold that AO is not justified in making the addition of NP on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... gone through the contention of the AO and submission made by the appellant. Issue before me is only that Rs. 2 lakhs paid to advocate for defending the case of lease-hold land is to be considered as revenue expenditure or capital expenditure. The main contention of the AO is that because it is incurred in respect of fixed asset which is giving enduring benefit to the company, therefore, it should be capitalized against which the appellant submitted that it is not incurred for the purpose of purchasing the fixed assets but for defending or maintaining the asset which is used for the purpose of the business of the appellant. Appellant also submitted the judgment of Hon'ble Bangalore Tribunal in case of Deputy Commissioner of Income-tax v. ITC Hotels Ltd. 1 SOT 703 wherein on identical facts the Tribunal has held the same as revenue expenditure being expenses incurred in order to safeguard its right to carry on the business." I am inclined to accept the argument of the appellant that professional fees paid to advocate for safeguarding the asset and not for purchasing the assets should be allowed as revenue expenditure. The court case has nothing to do with purchase of the asset. ....