TaxTMI 
TaxTMI 
2018 (6) TMI 1806
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....when the borrowing on the said specific head can be said to arise due to utilization of the available funds for the said investment. 3. The Id. CIT(A) has erred in deleting the addition of Rs. 1,21,628/- made by the AO on account of interest paid in excess of bank rate u/s 40A(2)(b) of the Act by unduly emphasizing on the imputed costs of bank loans and without appreciating the fact that the interest payment was made to related-parties. 4. The Id. CIT(A) has erred in deleting the addition of Rs. 19,84,563/- made by the AO on account of diversion of funds by the assessee to its sister concern which was not related to its business activities. 5. The Id. CIT (A) has erred in deleting the addition of Rs. 10 lacs made on account of abnormal increase of freight and advertisement expenses, by holding that the AO has not given a single instance of expenditure, which was not incurred for business purposes without appreciating the approach of the AO in detecting the unreasonable increase in expenditure, whereby the onus fell on the assessee to fully justify the expenditure incurred on these heads. 6. The Id. CIT(A) has erred in directing the AO not to make....
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.... 4. As per facts and circumstances of the case and provisions of law, the learned COMMISSIONER OF INCOME TAX-(APPEALS) has erred in upholding disallowance of Rs. 17,46,331 out of the staff welfare expenses being expenses incurred on school building on the contention that these expenses are not incurred for the purposes of the business of the assessee. The disallowance be deleted. 5. As per facts and circumstances of the case and provisions of law, the learned COMMISSIONER OF INCOME TAX (APPEALS) has erred in upholding disallowance of interest u/s 36(1)(iii) on advance of Haryana State Agriculture Marketing Board for purchase of shop. The disallowance be deleted. 4. Ground No.2 of the Revenue's Appeal and Ground No. 1 of Assessee's appeal relate to disallowance under section 14A: 4.1 Brief facts of the issue are that as per balance sheet as on 31.03.2010, the assessee was having investments in equity shares of various companies and concerns, from where it was to earn exempt income. The Assessing Officer asked the assessee regarding disallowance of proportionate interest and administrative expenses u/s 14A of the Act. 4.2 It was submitted that besides other in....
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....12%, but was not satisfied with the explanation of the assessee in this regard. The Assessing Officer has referred to the assessment order of the preceding year and observed that the maximum rate of interest on unsecured loans should not be more than 11% and so he restricted the claim of interest to 11%. Disallowance of Rs. 1,21,628/- was made on this account. 5.2 The Ld. CIT(A) having considered the facts of the issue and held that some of the persons, in respect of whom interest has been restricted, are not covered by section 40A(2)(b) and the rate at which interest was paid cannot be considered excessive if one takes into account the conditions of borrowing as the borrowings are obtained without any collateral securities unlike banks. 5.3 Before us, the Ld. AR relied on the order of the Ld. CIT(A) and the Ld. DR relied on the order of the Assessing Officer. 5.4 The disallowance of 1% on account of interest paid the outside parties which the assessee categorically explains to be not related as per the Section 40A(2)(b) is against the provisions of the Act. Even so keeping in view the market condition since the monies have to be raised at a faster pace, payment of 1% exce....
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....to Rs. 10 lacs is being made to cover the leakage of revenue loss." 7.2 The Ld. CIT(A) deleted the addition. 7.3 Before us Ld. DR relied on the assessment order. 7.4 Ld. DR argued that the ratio of freight outward to sales expenses has increased from 0.63% to 0.96% because of the increase in diesel rates and advertisement to sales ratio has decreased from 0.27% to 0.21%. According to the assessee, all the expenses were incurred for the purposes of business. The Assessing Officer has made the disallowance on the ground that expenses have increased despite decrease in its profit and certain vouchers were not for business purposes in entirety, but the Assessing Officer has not given a single instance of expenditure, which was not incurred for business purposes. 7.5 It was argued that lump sum disallowance without giving any cogent reason for making disallowance and without pointing out that any claim of expenditure out of these expenses was not genuine. 7.6 Having gone through the issue and the assessment order we find that the Assessing Officer has not brought any material on record primarily to disallow the expenditure. Keeping in view the assessee's argument that the....
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.... to Rs. 45,56,500/- received by the appellant is added to the returned income of the appellant." 8.3 The Ld. CIT(A) has deleted the addition on the grounds that the subsidy was received in F.Ys. 1987-88 to 2009-10 - the total amount being Rs. 1,06,81,500/-. Out of this subsidy, the Assessing Officer has made addition of subsidy of Rs. 45,56,500/- on the ground that the relevant documents were not produced to prove that the amount of subsidy had been adjusted against value of fixed assets. 8.4 The Ld. CIT(A) further held that the assessment of the company has generally been done under scrutiny in the earlier years and there is little chance that Assessing Officer failed to consider subsidy as per relevant provisions of law and since the Assessing Officer must have certainly satisfied himself in the respective assessment years that the subsidy was treated as per the law, prevalent in the respective year(s). For the same reason, there is no substance in the observation of the Assessing Officer that the depreciation claimed was more than the amount of subsidy. 8.5 The Assessing Officer made addition as documents has not been submitted regarding the receipt of the subsidy. 8....
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....is always credit balance in the operational account. (iv) The company had not borrowed any fund for the above advances. (vi) The interest has been calculated for the whole year whereas these remained with the parties only for the part period. However, while deleting the disallowance of expenses pertaining to Nikhil Gupta and Ganga Ram, the Ld. CIT(A) directed the AO to restrict the disallowance and to re-compute the same for the period for which it remained with Haryana State Agriculture Market Board. 9.4 We have gone through the facts on record, placing reliance in the case of Bright Enterprises Pvt. Ltd. Vs. CIT 381 ITR 107-wherin Hon'ble P&H High Court has observed that if the interest free funds are available a presumption would arise that investment would be out of interest free funds. The commercial expediency is not in doubt as the advance was given for purchase of Shop for the business of the company in the Mandi Area to be set up by the Board. 10. Ground No. 9 of the Revenue's Appeal relates to disallowance of interest of Rs. 51,000/- 10.1 Brief facts are that the assessee had shown an amount of Rs. 51,000/- as advance to Rotary Club, Chandiga....
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....ed parties. 11.3 Before us Ld. AR brought to our notice that the matter stands covered by the earlier orders of the ITAT, Chandigarh Bench in ITA No. 37/CHD/2014, in ITA No. 1144/CHD/2012 for A.Y. 2009-10 and in ITA No. 775/CHD/2012 for A.Y. 2008- 09 and also in ITA No. 1068/CHD/2013 for A.Y. 2011-12. 11.4 Ld. DR relied on the assessment order. 11.5 Having perused the matter on record and history of the case we are in total agreement with the observation of the Ld. CIT(A) that, the assessee has cited many cogent reasons like huge volume of sales to these concerns etc. to justify the sales to the sister concerns at lower rates. It may be clarified that while the addition for inflated purchases in respect of purchases made from sister concerns could be made u/s 40A(2)(a), but there is no corresponding provision in respect of sales made to sister concerns. The department cannot compel a person to make profit out of every transaction since the department does not have any authority to, ask a person to maximize its profits. If the assessee chooses to give discount to someone, he is free to do it. The only criteria/condition is that the transaction (sale) should not result in lo....
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....ered and the confirmations, the commission payment is not verifiable. 12.4 We find that the commission payments have been regularly debited by the assessee to the P&L Account from 2008-09 onwards. We therefore consider it fit in the interest of justice to restore the matter back to the file of the Assessing Officer with directions to the assessee to produce relevant documents and evidences before the Assessing Officer so as to make him eligible for allowance of this expenditure. 12.5 As a result, this ground of appeal of the Assessee is allowed for statistical purposes. 13. Ground No. 3 of the appeal of the Assessee relates to the disallowance of Travelling expenses: 13.1 Brief facts of the issue are that the assessee had claimed an expenditure of Rs. 2,49,613/- on account of foreign travelling. The Assessing Officer asked the assessee to provide details regarding foreign visits and the assessee had submitted that this expenditure was incurred for visit to USA towards stay and ticket to explore possibility of export of DOC and import of Soyabean oil and to explore the possibility of efficiencies of process and process improvements. The Assessing Officer was not satisfie....