TaxTMI 
TaxTMI 
2017 (1) TMI 1141
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....istered A/D No. 1878 dated 7.4.2016 by the Tribunal was unserved with the remark 'LEFT'. Therefore, in the absence of any plausible reason we decided to dispose of the appeal on merit after hearing Shri Rajat Kumar Kureel, Ld. Departmental Representative appeared on behalf of Revenue. 3. Both the appeals are heard together and are being disposed of by way consolidated order for the sake of convenience. 4. Briefly, the facts are that assessee is a Private Limited Company and engaged in manufacturing of allopathic medicines. The assessee for the year under consideration has filed its return of income declaring total income of Rs. 34,15,360/-. Subsequently, the case was selected under scrutiny and accordingly notice u/s. 143(2)/142(1) of the Act was issued upon assessee. The assessment was framed u/s 143(3) of the Act vide order dated 10.12.2007 at a total income of Rs. 1,20,28,390/- after making certain additions / disallowance to the total income of the assessee. 5. First we take up assessee's appeal in ITA No.136/Kol/2010. First issue is general in nature and does not require any adjudication. 6. Second issue raised by assessee in this appeal is that Ld. CIT(A) erred in....
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....at collecting the external documentary evidence for each and every travelling cost is not realistic. It is because the nature of such expenses cannot be organized or systematically incurred for the purposes of the business. In such a situation, the reliance is placed to see the purpose for which it was incurred. If the purpose of travelling is found having nexus with the business and amount of such expenditure is reasonable then the issue of disallowance is not warranted. There is no specific section for allowing deduction for expenses relating to business tours. The claim has to be preferred in terms of section 37(1) of the Act under which the following conditions are required to be satisfied for claiming deduction namely- * Expenditure has to be in the nature of revenue expenditure-not in the nature of capital expenditure; * It must be laid out or expended wholly and exclusively for the purpose of business or profession; * It must not be of the nature described in sections 30 to 36; and * The expenditure should not be personal expenditure of the assessee. In the context of travel/tour expenses, Specially in the cases of non-corporate assesse....
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.... Ld. DR and perused the materials available on record before us. The main issue before us is that the assessee claimed the general expenses for Rs. 22,06,322/-. But out of said expenditure some expenses were claimed on the basis of self made vouchers. Therefore the AO on ad-hoc basis disallowed a sum of Rs. 50,000/- which was subsequently reduced to Rs. 20,000/- by the ld. CIT(A). Now we have to see whether the Ld. CIT(A) was justified in his action. After considering the relevant records, we are inclined to disagree with the view taken by the lower authorities for the reasons set out in para No. 10 in ground no. 2 in this appeal. We, therefore, reverse the action of the ld. CIT(A) and allow the ground of appeal of the assessee. 16. Next common issue raised by assessee in this appeal in ground no 3, 4 & 5 is regarding the disallowance of proportionate interest expenditure for the loan given to the directors. 17. Assessee in its balance-sheet has shown advances to the directors and others for Rs. 15,06,514/- and Rs. 41,42,250/- respectively. On question by AO about the nature of the advances, assessee submitted that it is not for the purpose of business. Accordingly, AO disall....
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....n funds then the interest should not be disallowed. The facts of this case are different from the present case. As such the disallowance of interest made proportionate to loans given to directors is upheld. In the result the appellant gets a partial relief." 19. Being aggrieved by this, both assessee and Revenue have come up in appeal before us. The Revenue has raised the issue in ground no. 3 in its appeal ITA 200/Kol/2010 as follows. 3. That the facts and in the circumstances of the case, Ld. CIT(A) has failed to appreciate that advance of Rs. 41,42,250/- given to others was not for business purpose and no benefit was derived out of such advance." 20. Before us Ld. DR vehemently relied on the order of lower authorities in the appeal filed by the assessee. However in the appeal filed by the Revenue the Ld. DR has supported the stand of the AO by reiterating the arguments contained in the respective orders, which we have already adverted to in the Para-15 above and are not being repeated for the sake of brevity. 21. We have heard the Ld. DR perused the materials available before us especially the impugned order. It was observed that the assessee has given advance ....
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....er the Hon'ble Court in that case i.e. Gopikrishna Murlidhar, (Supra) has taken a contrary view. The relevant finding of the Court is reproduced below:- "We do not think that we can give effect to this argument. Indisputably, these amounts were borrowed only for the purpose of business of the family. The assessee drew out from time to time various sums of money aggregating to Rs. 1,77,984/- from the business. It is not a case where any particular sum purporting to be borrowed on behalf of the business was spent for household expenses. This is a case where the loans were taken for carrying on the business but the family used to withdraw some amounts from the business whenever occasions arose. The family was surely entitled to withdraw from the capital supplied by it with the result of the capital being depleted. There is, therefore, no substance in the submission that the fact that part of the amount borrowed was later on used for personal expenses, would deprive the assessee of the benefits." With the help of this ratio of the judgment such problem can be resolved by examination and analyses of financial statements prepared on the basis of books of account maintained by....
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....portion has been fortified by the following decisions : 1) Hon'ble ITAT in the case of Torrent Financers V. ACIT, 73 TTJ 624 (Ahd.), 2) Hon'ble Allahabad High Court in the case of CIT V. Prem Heavy Engineering Works P. Ltd., 285 ITR 554 (All.), 3) Hon'ble Supreme Court in the case of Munjal Sales Corporation V. CIT, 298 ITR 298 (SC). If we apply the formula laid down in the case of ACIT vs Gopikrishna Murlidhar, (Supra) we find that the assessee has submitted that it has its own funds of Rs. 5,22,90,200.00 as on 31.3.2005. Therefore it is clearly established that the assessee was having its own capital greater than the loans and advances given to the directors. We are, therefore, of the considered view that no addition is warranted. Therefore, the addition of Rs. 6,77,000/- is deleted. Now coming to the Revenue's appeal we find on perusal of the details of the advances placed on pages 91 to 92 of the paper book that the assessee has advanced money in the course and for the purpose of the business. It is normal practice in any business organization to advance the money to the employees, suppliers, projects, taxes etc. The ld. DR has not bro....
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....rpose behind the grant of assistance is to tide over the financial crisis and promotion of industries and that both these activities are related to capital field and cannot be linked up with day to day operations of the appellant in any manner. Respectfully following the jurisdictional Kolkata ITAT and High Court decisions discussed earlier, I treat WBIPA as a capital receipt and direct the AO to delete the addition of Rs. 29,53,161/-" Being aggrieved by this, Revenue has come up in appeal before us. 25. Before us Ld. DR vehemently relied on the order of AO. 26. We have heard the Ld. DR and perused the records available. The assessee has received grant from the West Bengal Government amounting to Rs. 29,53,161/- under the Industrial Promotion Scheme of W.B. The AO has treated the same as revenue in nature and accordingly added the same to the total income of the assessee. However the Ld. CIT(A) has allowed the same based on the facts which is already discussed above. Now the main crux of the controversy is as to whether the grant received by the West Bengal Government is Capital or Revenue in nature. At the outset we find that the issue is already covered in favour of asse....
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....ue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition of Rs. 48,28,867/- on account of excise duty pertaining to finished goods. 28. During the course of assessment proceedings, AO observed that assessee has not included excise duty payable on the closing stock of finished goods lying in factory. The AO called upon the assessee for explanation in compliance thereto. Assessee submitted that the liability for making payment of excise duty arise at the time of removal of goods. Therefore the same was not included in the closing stock. However, AO disregarded the claim of assessee in view of provisions of Sec. 145A of the Act. Thus the excise duty for Rs. 48,28,867/- was added to the total income of assessee. 29. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that it has been valuing its closing stock of finished goods without inclusion of excise duty consistently. Considering the same, Ld. CIT(A) deleted the addition made by AO by observing as under:- "The other argument of the appellant is that it neither paid nor incurred nor debited such excise duty. According to appellant, payment of excise duty a....