TaxTMI 
TaxTMI 
2018 (3) TMI 1341
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....cumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) {Ld. C.l.T.(A)} erred in confirming the disallowance of interest expense of Rs. 11,27,850/- under Section 36(1)(iii) of the Act. Consequently, the Ld. C.l.T.(A) ought to have held that interest expenses of Rs. 1127850/- is not disallowable under Section 36(1 )(iii) of the Act." 3. Brief facts are that the AO noticed during the course of assessment proceedings that the assessee has debited bank interest of Rs. 52.82 lacs to its profit and loss account. The AO further observed that the assessee has advanced interest free loans. Accordingly, he required the assessee as to why the proportionate interest be not disallowed and accordingly, he disallowed a sum of Rs. 11,27,850/-. Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed the action of the AO by observing in Para 2.2. as under: - "2.2 I have carefully considered facts stated by the AO. and also the arguments of Ld. A.R. in oral as well as written submissions, It is undisputed that assessee had paid huge interest on borrowings made by it and also advanced interest free loans/advances to different persons /concerns....
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....e to establish the nexus he has to follow the decision of Hon'ble High Court in the case of Reliance Utilities and Power Limited (supra). In term of the above, we remand the matter back to the file of AO for fresh adjudication. 5. The second issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of commission for short deduction of TDS under section 194H of the Act, thereby invoking the provisions of section 40(a)(ia) of the Act. For this assessee has raised following ground No. 2:- Disallowance of commission under Section 40(a)(ia) of the Act Rs. 17,13,478/-: "2. The facts and circumstances of the case and in law, the Ld. C.l.T(A) erred in holding that the provisions of Section 40(a)(ia) of the Act apply to short deduction at source. Consequently, the Ld. C.l.T(A) ought to have not confirmed the disallowance of commission of Rs. 17,13,478/-, on which the appellant had deducted tax at source under Section 40(a)(ia) of the Act. 6. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee has filed the details of TDS deducted and only from one party i.e. Sohum Sh....
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....Rs. 4000000/- out of the total payment of Rs. 4,07,67,591/- made to Say India Jewellers Pvt. Ltd., being a party covered under Section 40A(2)(b ) of the Act. Consequently, the Ld. C IT (A) ought to have not disallowed Rs. 40,00,000/- under Section 40A(2)(a) of the Act. 11. Briefly stated facts are that the assessee has made payment on account of purchase of jewellery from Say India Jewellers Pvt. Ltd, a company covered under the provisions of section 40A(2b) of the Act. Further, the assessee also acquired/ purchased jewellery from Nascent Jewellery Private Limited, which is also covered under the provisions of section 40(a)(2b) of the Act. The AO noted that the assessee has made entire purchase of Rs. 4,07,67,591/- from group of companies and booked net loss of Rs. 2,54,59,777/-. According to AO, the businessman has take into consideration various variable or fixed expenses required for retail sales while purchasing goods in bulk. According to AO, the assessee has disclosed margin of profit i.e. GP at 43.68% and out of the sum around 29% to sale consideration was paid to various parties. According to AO, the effective GP rate comes around 14.63%. Therefore, according to AO, the ....
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.... On the facts and circumstances of the case and in law, the Ld. C.l.T.(A) erred in confirming the disallowance of service charges of Rs. 3800000/- on an ad-hoc basis out of the total services charges of Rs. 1,5209,793/-Consequently, the Ld. CI.T.(A) ought to have not disallowed services charges of Rs. 38,00,000/-." 15. Brief facts are that the assessee has debited service charges of Rs. 1,52,09,793/- to P & L account on account of payment made to parties namely Ashapura Enterprises and corporate care. The first of all the AO required the assessee to explain as to why the claim of the assessee be not disallowed. The assessee furnished form No. 16A, copies of IT Return, computation of balance sheets of these parties, ledger account confirmations, copies of bills and list of persons to whom supplies/ work done in response to query by the AO. It was also asked whether any service tax was charged by the party or not. The assessee submitted the details in the form of 16A issued to these parties and sample copy of invoices. The AO noted that from the sample bill of Ashapura Enterprises that the service charges in the month of August 2010 at Rs. 9,66,857/- on which service tax was deduc....
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....are purely factual in nature. The CIT (A) has examined the record and the accounts produced by the assessee and after scrutiny of the same returned findings of fact that the expenditure was justified. No rationale has been given by the AO for disallowing 50% of the expenses incurred. Neither is there a finding that the expenditure is not genuine nor have the books of account been rejected by the AO. There is no perversity in the findings of fact returned by the CIT (A) and affirmed by the Tribunal." 17. On the facts of the case, we are of the view that the AO is unable to prove the non-genuineness of the expenditure despite the fact that the assessee has deducted TDS on this expenditure and also paid service charges. Further, entire details were available with the AO and he has not carried out any examination of any of the parties and without that adhoc disallowance at the rate of 25% of the expenditure was made. It means, that the AO has accepted the genuineness of the expenditure and once genuineness of the expenditure is accepted, the AO cannot disallow the same on adhoc basis. We delete the disallowance and allow this issue of assessee's appeal. 18. In the Result, the app....