TaxTMI 
TaxTMI 
2017 (1) TMI 568
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....nditure. 2. As per registry noting, it is observed that the appeal has been filed with a delay of 662 days. The Ld. Counsel stated that the issue in dispute originally arose in the case of concern M/s Bon Limited who got merged with M/s Hindustan Unilever Limited w.e.f. 01/04/2009 vide Bombay High Court order dated 16/04/2010 . As per said order, Hindustan Unilever Ltd. was to step into the shoes of Bon Limited in all its pending proceedings. The original appeal was filed within time on 09/04/2009 by M/s Bon Limited as ITA No. 2271/M/09 but the same was dismissed by ITAT vide its order dated 19/01/2011, being not maintainable as assessee was not in existence at the time of hearing. Therefore, a new appeal was filed in the name of M/s Hin....
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....an entity covered u/s 40A(2)(b). Upon perusal of the details, AO concluded that 20% of these expenses being excessive and unreasonable are disallowable as per Section 40A(2). Similar adhoc disallowance of 20% was made under the heads 'Trade & Primary Expenses, 'Other Misc. Expenses' & 'Cartage & Freight' as assessee failed to submit the requisite vouchers for verification on test check basis. Thus, disallowances which are subject matter of this appeal were made in the following manner:- No. Nature of Expenditure Total Amount (Rs.) Disallowance made (%) Amt. of disallowance 1. Payment made to entities covered u/s 40A(2)(b) 2,05,61,370/- 20% 41,12,274/- 2. 'Trading & Primary Expenses' and 'Other Misc. Expen....
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....us. A paper-book containing inter-alia various submissions made before AO along-with final accounts and Tax Audit Report of the assessee has been placed before us. Qua 40A(2) disallowance, the Ld. Counsel for assessee has contended that the impugned payments were reasonable and fair keeping in view the prevailing market conditions. AO could not point out any basis on which adhoc disallowance has been made. Further, the payment has been made from one subsidiary to holding company and both being company assessee, falls under the same tax bracket and hence tax neutral. The CBDT vide circular number 6-P dated 06/07/1968 has stated that no disallowance is called for u/s 40A(2) in respect of payments made to relatives/sister concerns where there ....
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....bursed 27,31,452/- 5. Payment for raw material / packing material / chemicals 81,68,950/- TOTAL 2,05,61,370/- Admittedly, the assessee do not have any manufacturing facility as no investment in fixed assets have been made by it rather it availed manufacturing facility of its holding company and paid related costs. The complete details of cost incurred item-wise were given in various submissions to AO during assessment proceedings. But AO failed to point out any discrepancies in the same and made adhoc disallowance of 20% without any sound basis. It appears that the same has been made on mere suspicion that excessive payment have been made so as to compensate for the royalties. The CIT(A) has already ....
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....ned disallowance of 20% made u/s 40A(2). Hence, Ground Nos. 1 to 4 of the assessee succeeds. 7. The second issue is related with adhoc 20% disallowance of certain expenditures for want of verification of vouchers on test check basis. The Ld. AR has drawn our attention to various pages of the Paper Book to show that complete details of expenses were made available to AO. But since one factory at Trichy was sold during the year and business was discontinued, there was delay in procuring the relevant vouchers and the same could not be produced in time before AO, which led to this disallowance. There is nothing adverse in that respect in Tax Audit Report. Considering the total turnover of Rs. 14 crores achieved by the assessee, these constit....