TaxTMI 
TaxTMI 
2021 (4) TMI 441
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.... out of total disallowance made by Ld. AO u/s. 14A read with rule 8D. It is submitted before lower authorities that no expenditure has been incurred in relation to exempt income by the appellant and further appellant company was having interest-free funds lying with it in form of share capital and reserve and surplus as well as interest free unsecured loans. Therefore the part addition confirmed by Ld. CIT(A) is totally incorrect and unjustifiable and the same be deleted in the interest of justice. 2. The Ld. CIT(A) has erred in confirming the disallowance of Rs. 51,711/- made by AO towards Late payment of PF and ESI. It is submitted that the Appellant company had applied for the registration of PF and ESI during the year consideration and thus for the initial 2-3 months the contribution deposited late due to non availability of registration number. It is therefore submitted that the delay in depositing the contribution is due to circumstances beyond the control of the assessee only. Under the circumstances, it is prayed before your honour that the impugned addition made of Rs. 51,711/- on account of late deposit of PF and ESI be deleted. 3. The Ld. CIT(A) has err....
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....of average investment taken by the AO for the purpose of calculating disallowances. The assessee claimed that the average value of investment is only of Rs. 25,00,000/- whereas the AO has taken the same as at Rs. 1,20,00,000/- only. 6. The learned CIT(A) after considering the facts in totality deleted the disallowances made for the interest expenses and confirmed the addition for administrative expenses by observing as under: However, since time and energy of the management and resources of the company are utilized for earning exempt income, a disallowance at 0.5% of average value of investment is justified and accordingly the same is confirmed subject to verification. However, the AO is directed to verify the figure of actual investment since she has mentioned average value of investment at Rs. 1,20,00,000/-. Thus appellant succeeds partly in respect of Ground No. 1. 7. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 8. The learned AR before us filed a paper book running from pages 1 to 67 and submitted that the assessee has not incurred any expense towards the administrative expenses. Accordingly the question of disallowi....
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.... were not allotted till the month of August. Therefore addition should not be made for failure which was beyond its control. 12.2. However the AO rejected the submission of the assessee and made the addition for Rs. 51,711/- being late payment of EPF and ESI in view the provision of the Act and the judgment of Hon'ble Gujarat High Court in case of CIT vs. Gujarat State Road Transport Corp. reported in 366 ITR 170 which subsequently came to be confirmed by the learned CIT(A) by order dated 16-01-2018. 13. Being aggrieved the assessee is in appeal before us. 14. The learned AR before us agreed for the disallowance made by the authorities below. On the other hand, the ld. DR vehemently supported the order of the authorities below. 15. At the outset, we note that the issue is covered against the assessee by the Hon'ble Gujarat High Court in the case of CIT vs. GSTRC reported in 41 taxmann.com 100 wherein it was held as under: In view of the above and considering section 36(1)(va), read with sub-clause (x) of clause (24) of section 2, it is to be held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-c....
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....n the advertisements. Furthermore, it has opened new branches viz-a-viz. has obtained new finances. Likewise, it has incurred expenses under the head selling expenses which includes the commission, discounts to the parties, free distribution of samples. Similarly, the employee cost and travelling cost was also enhanced in the year under consideration. 17.2. It was also contended by the assessee that major expenses were incurred through the banking channel which were supported based on vouchers, bills etc. Accordingly, the assessee claimed to have incurred all the expenses for the purpose of the business and eligible for deduction. 17.3. However, the AO disagreed with the contention of the assessee by observing that the assessee is engaged in the business of trading activity and there was no change in such activity even after introduction of new products. In other words, the assessee even after introduction of new products, was carrying out only trading activities. Accordingly, there was no change in the activity of the business of the assessee requiring to incur such huge cost. 17.4. The AO also found that most of the expenses were incurred through cash which was supported....
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.... CIT(A) the assessee is in appeal before us. 22. The learned AR before us contended that the books of accounts of the assessee were duly audited and no adverse remark was pointed out by the auditor therein. The learned AR further submitted that there was change in the activity of the assessee which resulted increase in the expenses. As such the assessee has introduced few more products in the line of its business. 23. On the other hand the learned DR vehemently supported the order of the authorities below. 24. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the indirect expenses incurred by the assessee in the year under consideration have increased manifolds in comparison to the earlier assessment year. Accordingly, the AO made the disallowance on ad-hoc basis. First of all, we note that there is no provision under the Act to make the disallowance on ad-hoc basis. The AO has to see whether the expenses claimed by the assessee were to be disallowed under the provisions of law. But the AO has not made reference to any specific provision which was violated by the assessee. 24.1. Admittedly, the expenses in....