TaxTMI 
TaxTMI 
2022 (5) TMI 105
X X X X Extracts X X X X
X X X X Extracts X X X X
....2. That the Ld. CIT (A) has erred in law in sustaining an addition of Rs.21,630/- under section 14A read with Rule 8D of the Act, to the extent of total dividend income earned by the appellant company amounting to Rs. 21,63 0/- from the mutual fund investment. 2.1 That the Ld. CIT (A) has erred in law in not considering the fact that the Ld. AO has neither recorded his satisfaction nor given any reason while disregarding the suo motu disallowance of Rs. 10,500/- made by the assessee on this count. 3. That the Ld. CIT (A) has erred in law in sustaining the disallowance of Rs. 1,05,69,307/- being interest expenses in proportionate to the funds outstanding with subsidiary company. 3.1 That the Id. CIT(A) has wrongly sustained the aforesaid disallowance by not appreciating the fact that the interest free advance was given by the assessee company to M/s Genesis Luxury Fashion Pvt. Ltd. (a wholly owned subsidiary) out of company's own interest free funds , the balance of which far exceeds the amount of advance outstanding . 3.2 That the Id. CIT(A) has erred in sustaining the aforesaid disallowance despite the fact the interest free advance was given by the parent assessee company....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ficer treating the same as capital expenditure, the other additions in respect of Rs.11,34,464/- made on account of disallowance of advertisement expenses, Rs. 62,03,141/- made on account of non deduction of tax u/s 40(a)(ia) of the Act and also deleted the addition of Rs. 50,000/- made regarding disallowance of donation made u/s 80G of the Act. However, the Ld. CIT(A) in respect of the disallowance of interest of Rs.1,05,69,307/- affirmed the view of the Assessing Officer and also sustained the addition of the sum of Rs. 30,37,439/- in respect of the disallowance regarding advance rent that was forfeited by the owners of the premises. 6. Aggrieved against this, the assessee is in appeal before this Tribunal. 7. Ground No. 2 is against sustaining the addition of Rs.21,630/- u/s 14A of the Act read with Rule 8D of the Rules sustained to the extent of total dividend income earned by the assessee company during the year under appeal. Ground No. 2.1 is in support of the Ground No. 2. 8. Ld. Counsel for the assessee submitted that the Assessing Officer had made disallowance by invoking the provisions of Section 14A of the Act of Rs. 86,37,390/-. However, on appeal to the Ld.CIT(A), t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this ground of the assessee's appeal is dismissed. 13. Ground No. 3 is against the disallowance of Rs. 1,05,69,307/- being interest expenses in proportionate to the funds outstanding with the subsidiary company. 14. Ground No. 3.1 to 3.2 are in support of the Ground No. 3. 15. Ld. Counsel for the assessee reiterated the submissions and the material placed before the Ld.CIT(A). It was contended that in respect of rectification entries of Rs. 5 crore and Rs. 1 crore passed by Journal Voucher JVHO/0910/3979 & JVHO/0910/3991 respectively. These entries were passed to rectify the earlier entries passed on the date of 30/3/2010, where the amount received of Rs. 5 crore and Rs. 1 crore from M/s Genesis Luxury Fashion Pvt. Ltd. were inadvertently booked under wrong head against M/s Genesis Luxury Fashion Pvt. Ltd. whereas these entries should have been recorded against advances given to M/s Genesis Luxury Fashion Pvt. Ltd. Considering the above facts, it became clear that the actual amount outstanding from M/s Genesis Luxury Fashion Pvt. Ltd. as on 31/3/2010 was Rs. 5 core and not Rs. 11 crore as considered by the Assessing Officer. 15.1. Further, interest free advance as given by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rores were returned by the subsidiary company to the appellant company. Therefore the total amount advance to M/s Genesis Luxury Fashion Pvt. Ltd, was in fact 1 Crore out of which Rs.6 Crore was received on 30/03/2010. Therefore the assessing officer is directed to determine the actual amount of loan advanced by the appellant company to the subsidiary company. The other aspect of the loan is, that it was interest free. The appellant has argued that it had enough interest free funds of its own. Therefore it was in a position to extend interest free loan to its subsidiary company M/s Genesis Luxury Fashion Pvt. Ltd. This argument of the appellant is needed to be examined carefully. Whether, the appellant, meant that the share capital as well as the reserve, was available to it, in the liquid form so as to extend a substantial sum of loan to its subsidiary? The appellant has not submitted the cash flow statement with respect to the liquidity available with it at the time of extending the loan! The share capital and the reserve in the balance sheet, usually, remain invested in the assets form. The mere availability of share capital and reserve in itself does not enable the appellan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he owners of the shop/showroom was also filed before the Assessing Officer. Even communication accessed through e-mail was also filed before the Assessing Officer. He submitted that the authorities below therefore, are not justified for making the disallowance and same deserves to be deleted. He submitted that expenditure was incurred during the course of business and solely for business expediency. Hence, it is allowable expenditure. 21. Ld. Sr. DR opposed the submissions and supported the orders of the authorities below. He submitted that the assessee has not placed on record any agreements between the parties. Further, no effort was made to recover the advances so paid. He submitted that merely making an averment and without substantiating the same with evidence would not be sufficient to allow the claim of the assessee. 22. In rejoinder, Ld. Counsel for the assessee submitted that the entire payment was made through banking channel. The authorities below have not doubted about the genuineness of transactions. He submitted that even such advances were in earlier years as well. He submitted that the AO has not brought any adverse material regarding these advances. Therefore, in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of sales and in support of its claim, related vouchers and credit card statements were filed by the assessee company. 2.3 T hat the CIT(A) wrongly confirmed the aforesaid disallowance without considering the fact that there is no applicability of TDS provisions on hotel and travelling expenses incurred for business purpose and thus these expenses are allowable in nature under section 37 of the I. T. Act, 1961. 3. That the Ld. CIT (A) has erred in law in sustaining the disallowance on account of advances written off amounting to Rs. 50,8 4,244/- made by the Ld. Assessing Officer. 3.1 That the Ld. CIT (A) has erred in law in sustaining the addition despite the fact that the said advances were paid by the appellant company for opening of show rooms which was forfeited by the party, as the appellant company could not get necessary license for opening the show rooms at different place. 4. That the Ld. CIT(A) has erred in law in sustaining the ad-hoc disallowance of Rs. 15,72,656/ - being 20% of 78,63,281/- on account of expenses incurred through credit card holding that these expenses are not wholly and exclusively for the purpose of business of the appellant company. 4.1 Tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tation at page No.2 of Paper Book and Annexure V of Tax Audit Report at page No.17 of PB) was not found to be correct as no such evidence on the referred page was found. Therefore, the contention of the Ld.AR, bereft of any evidence is rejected and I do not find any infirmity in the order of the Assessing Officer." 31. In respect of sales promotion expenses of Rs.4,19,522/- and Rs.18,919/-, it is recorded that the assessee has not given any detail regarding the activity undertook by the Directors Mr.Sanjay Kapoor and Mr. Jyoti Mohan Narula. The contention of the assessee is that the visit was with regard to business. The assessee had provided relevant evidences. He submitted that the auditor has duly verified the expenditure therefore, the Ld. CIT(A) was not justified in sustaining this addition. 32. There is no dispute with regard to the fact that the expenditure was incurred in travelling and stay of the Directors of the company. The AO had disallowed this expenditure on the basis that the assessee failed to deduct tax. Hence, there is contradictory stand of the authorities below for making and sustaining the disallowance. Therefore, the AO is directed to delete the disallowanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fied for making disallowance on estimate basis. 39. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that the Ld.CIT(A) has decided the issue by observing as under:- "During the assessment proceedings, the appellant was asked by the AO to submit the details of claim of Rs.78,63,281/- under the head credit card expenses. On perusal of the same the AO found that part of expenses on credit card are personal in nature. The AO asked the appellant to submit the full details to which the appellant submitted as under.- "Please further note in the desired format your honors has sought the details of members, the addresses, names, the person transacted through them, name of hotel and restaurant and person to whom the gifts were given and whether they were for business purpose etc. Sir, there may be 100 of such persons incurred. If each voucher is picked up it contains the amount, weight, month, information etc." The appellant, therefore, did not quite comply with the requirement of the Assessing Officer. Further, mere incurring of expenditure in whatever head is not material. It is the nature....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... provision of section 40A(3) of the IT Act. 1961. 3. Whether on the facts and circumstances of the case in law Ld. CIT(A) has erred in deleting the addition of Rs. 19,03,536/- made by the AO ignoring the finding of AO that the same is being capital in nature. 4. Whether on the facts and circumstances of the case in law Ld. CIT .(A) has erred in deleting the addition of Rs.3,71,112/- made by the AO towards foreign exchange notional loss after considering the instruction no. 3 of 2010 dated 23.03.2010 issued by the CBDT. 5. Whether on the facts and circumstances of the case in law Ld. CIT(A) has erred in deleting the addition of Rs. 14,76,782/- made by the AO u/s 40(a)(i) for non deduction of TDS in respect of payment made to foreign parties reflecting in AIR Information. 6. Whether on the facts and circumstances of the case in law Ld. CIT (A) has erred in deleting the addition of Rs. 1,54,332/- being 20% of Rs. 8,57,402/- made by the AO in respect of expenditure incurred on tours & travelling Ignoring the finding that the said expenses have not been incurred wholly and exclusively for business purposes. 7. The appellant craves leave, to add, alter or amend any ground of ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed that there was no occasion of invoking of section 40A(3) of the Act which has been rightly deleted by Ld.CIT(A). 50. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that Ld. CIT(A) has given finding on fact that there is no violation of provision of section 40A(3) of the Act. Ld. Sr. DR could not point out any violation by the assessee. Therefore, the decision of Ld.CIT(A) is affirmed. 51. Ground No.3 is against the deleting the addition of Rs.19,03,536/- made by the AO on the basis that the expenditure was capital in nature. 52. Ld. Sr. DR supported the assessment order. 53. On the contrary, Ld. Counsel for the assessee submitted that there was no capital expenditure. The AO has made disallowance purely on adhoc basis without pointing out at what expenditure was capital in nature. 54. We have heard the rival contentions and perused the material available on record and gone through the orders of the authorities below. We find that Ld.CIT(A) has given finding on fact by observing as under:- "The addition was made by the Assessing Officer on the basis that certain items of expense....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to normal business transactions for which the payment was received from the parties or payment made to parties. The appellant further stated that it has been following the same method with respect to notional foreign exchange loss in the earlier years too which has not been disputed by the Assessing Officer. It was further argued that the foreign exchange loss has been computed as per AS-II notified by the Companies (Accounting Standard) Rules, 2006. I find merit in the contention of the Ld AR. The appellant has not dealt in any foreign exchange derivatives. The notional loss has occurred during the course of normal business transaction. And lastly, the department has not objected to such method been followed by the appellant in the earlier years. Therefore, the addition made by the AO of Rs.3,71,112/- on a/c of marked to market losses, is deleted." The above finding of fact is not rebutted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere in the finding of Ld.CIT(A), the same is hereby affirmed. 60. Ground No.5 is against deleting the addition of Rs.14,76,782/- made by the Assessing Officer u/s 40(a)(i) of the Act for non....