TaxTMI 
TaxTMI 
2019 (5) TMI 542
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....on Works are associate concerns and the assessee has substantial transactions with both the concerns for supply of goods and reimbursement of expenses in subsequent assessment proceedings. The assessee is engaged in similar line of business of iron and steel and it has the current account maintained with both the concerns above for supply of goods and services. The assessee filed supporting evidences like sub-accounts to show that they have supplied material in the assessment year and subsequent year. It is observed that the contention of the assessee before the AO was that the alleged interest free fund was trade advance for commercial expediency. However, the AO considering the loan availed by the assessee from bank and interest paid thereon to the bank as well as other parties on unsecured loans calculated the interest @ 9% on the alleged interest free loan to the above said two parties of Rs. 71,70,707/- was added to the total income of the assessee. 4. Before the CIT(A), it was reiterated the same submissions as made before the AO. The CIT(A) examined the record and found satisfied with the arguments of the assessee. Further, he found that the immediate preceding assessment....
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.... - Assessing Officer on finding that assessee had made above advance from its funds borrowed from bank, disallowed Interest paid by assessee on its borrowings in proportion to total advance given to its subsidiary and group companies - However It was found that profit before depreciation earned by assessee was for more than total advance - Whether in view of above facts it would not be said that entire interest free advances were given out of interest bearing funds available to assessee and no part of borrowed funds would be said to have been diverted as non-interest bearing advances to subsidiary companies - Held, yes - Whether therefore, there was no room for any disallowance of interest paid on borrowings, on account of grant of interest free advances to subsidiary companies - Held, yes [In favour of assessee] 8. The appellant's reliance on the decision of the Hon'ble Supreme Court in the case of Munjal Sales Corporation Vs CIT reported in [2008] 168 taxman 43(SC) and Hero Cycles (P.) Ltd. vs. Commissioner of Income-tax (Central)[2015] 379 ITR 347(SC)are also, I find quite pertinent and cover its case. In the case of before the Hon'ble apex court in Hero Cyc....
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....e cannot be sustained. The ground is therefore allowed in favour of the appellantassessee." 5. In view of the reasons stated by the CIT(A) and discussion made by us in the afore-mentioned paragraphs, we find no infirmity in the order of CIT(A) and it is justified. Thus, Ground No.1 raised by the Revenue is dismissed. 6. Ground No.2 raised by the Revenue challenging the action of CIT(A) in deleting the addition made on account of payment of commission in the facts and circumstances of the case. 7. Heard both parties and perused the materials available on record. During the course of assessment proceedings, the AO found that the assessee claimed commission expenses to an extent of Rs. 41,28,331/-. To verify the said expenditure, the AO issued notices u/s 136 of the Act to M/s. Singhi Pvt.ltd. & M/s. United Sales Pvt.Ltd., and M/s. Gaurika India Ltd. the A.O doubted and held the AR himself the said reply and brought on record the reply by the Ld.AR himself in the name of M/s. Guarika India Ltd. In respect of other two concerns, the assessee filed written submissions by stating that the assessee has transactions with the said two concerns through banking channels and they were....
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....cation to disallow the same, particularly when the assessee gave full details including address of the buyers and the agents, details of payments etc. I also find that the judgment of the Hon'ble Jurisdictional High Court of Calcutta, in the case of C.I.T. Vs Alfa Hydronics Pvt Ltd, ITA No 549/2004 decided on 10th November, 2014, wherein it has been held that when there was nothing to show that the transaction of the payments of commission was not genuine or the commission was excessive or unreasonable, no disallowance can be made. The relevant portion of the judgment is reproduced as below: "The Court: This appeal under section 260A of the Income Tax Act has been preferred by the appellant/revenue against the order dated 29th September, 2003 passed by the Income Tax Appellate Tribunal, "E" Bench, Kolkata in ITA 1203 (Cal) of 1999 in respect of Assessment Year 1994-1995 on the following questions: (a) "Whether on the facts and in the circumstances of the case, the Ld. Tribunal was right in holding that the assessing Officer was not justified in disallowing the claim for payment of commission made to the two parties on the basis of misconception of law....
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....39;ble Kolkata High Court I find that the Ld. AO was not justified in making the impugned disallowance of Rs. 41,28,331/-, and therefore the same is ordered to be deleted." 9. In view of the decision of Hon'ble High Court of Calcutta and discussion made by us in the afore-mentioned paragraphs, we find no infirmity in the order of CIT(A) and it is justified. Thus, Ground No.2 raised by the Revenue is dismissed. 10. Ground No.3 is relating to deletion of addition of Rs. 7,01,459/- under the head "cutting charges" in the facts and circumstances of the case. 11. Heard both parties and perused the materials available on record. The AO found that the assessee claimed job expenses in the trading account towards cutting charges amounting to Rs. 7,01,459/- and for not giving any details, the AO added same to the total income of the assessee. The CIT(A) found that the assessee submitted all the details in respect of cutting charges as asked by the AO vide its written submissions dated 21.12.2016. The CIT(A) examined the entire record and found the addition made by the AO is not sustainable for the reasons stated as under:- 12. DECISION: 1. "I have examined the acti....
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....otal income of the assessee. The CIT(A) deleted the said addition by observing that the AO failed to specifically pinpoint as to which the voucher for personal use and not for business use, deleted the addition made under the head disallowance by holding not maintainable. We find admittedly that there was no evidence before the AO and the CIT(A) explaining the said expenditure under the head telephone and fax charges were incurred wholly for the business purposes and the disallowance made by the AO in our opinion is reasonable not excessive. Therefore, the order of CIT(A) is set aside and it is not justified. The order of A.O is restored. Thus, Ground No.4 is allowed. 15. Ground No.5 is relating to deletion of addition made on account of motor car fuel expense and depreciation for personal use. 16. Heard both parties and perused the materials available on record. During the course of assessment proceedings, the AO found that the assessee used the car other than business purposes but did not show any personal use. Further, he found that the payments were made only by cash. For not having giving suitable explanation, the AO added 10% of Rs. 5,28,528/- to the total income ....