TaxTMI 
TaxTMI 
2021 (6) TMI 1193
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....lar No. 5 of 2014? II Whether on the facts and circumstances of the case and in law, the CIT (A) was right in deleting the disallowance of Rs. 8,15,40,683/- made on account of excessive commission expenses while ignoring the fact that a clear relation existed between the assessee company and the firm, as a director of the assessee company was also a partner in the firm concerned? III Whether on the fact and circumstances of the case and in law, the CIT (A) was right in deleting the disallowance u/s 36(1)(iii) of the Act on account of advances made to /debit balances of M/s Hero exports and M/s Hero Motors Ltd. on the ground of sufficient own funds while ignoring that the assessee has huge borrowings on which interest expenses were claimed? IV Whether on the fact and circumstances of the case and in law, the CIT (A) was right in deleting the disallowance of interest u/s 36(1)(iii) of the Act on account of Capital Work in Progress on the ground of sufficient own funds while ignoring that the assessee has huge borrowings on which interest expenses were claimed? V Whether on the fact and circumstances of the case and in law, the CIT (A) was right in ....
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.... 5. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and furnished the written submission which have been reproduced by the Ld. CIT(A) at page no. 7 to 56 of the impugned order. The said submissions of the assessee were forwarded to the A.O. for his comments. The A.O. furnished the report dt. 06/02/2015 which had been reproduced by the Ld. CIT(A) in para 5.2 at page no. 57 to 64 of the impugned order the said report of the A.O. was forwarded to the assessee who furnished the counter comments which had been reproduced by the Ld. CIT(A) in para 5.3 of the impugned order, for the cost of repetition the aforesaid submissions and comments are not reproduced herein. The Ld. CIT(A) after considering the submissions of the assessee and remand report of the A.O. deleted the disallowance made by the A.O. by observing in para 5.4 of the impugned order as under: 5.4 I have considered the observations of the Assessing Officer as made by him in para 3 of the assessment order while making the impugned addition. I have also considered written submissions filed by the assessee company through its learned AR vide letters dated 25.07.2014, 18.08.2014, 21.10.2014, 16.01.201....
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....In the result, the grounds No. 1, 2 and 2(b) to 2(1) taken by the assessee company are allowed. 6. Now the Department is in appeal. 7. The Ld. CIT DR reiterated the observations made by the A.O. and supported the assessment order. 8. In his rival submissions the Ld. Counsel for the Assessee at the very outset stated that this issue is covered in favour of the assessee vide earlier order of the ITAT in assessee's own case for the Assessment Year 2008-09 to 2010-11 copy of which is placed at page no. 122 to 131, 3 to 22 and 23 to 60 respectively of the paper book. He accordingly submitted that the Ld. CIT(A) rightly deleted the disallowance made by the A.O. by following the earlier orders of the ITAT in assessee's own case, therefore there is no merit in the appeal of the Department. 9. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is noticed that an identical issue has been decided by the ITAT in assessee's favour in the earlier AYs 2008-09 to 2010-11. We deem it appropriate to reproduce the findings of the ITAT in ITA No. 192/Chd/2013 for the A.Y. 2008-09 wherein vide order dt. 29/10/2015 ....
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....the Assessing Officer has nowhere recorded a finding as to why the disallowance so made by the assessee is not correct. Reliance is placed on the judgment of the Hon'ble Jurisdictional Punjab & Haryana High Court in the case of CIT Vs. Deepak Mittal (2014) 361 ITR 131 to the effect that in the absence of any satisfaction recorded by the Assessing Officer as to why the calculation made by the assessee is not correct, the disallowance made by him on account of administrative expenses under Rule 8D of the Income Tax Rules is not as per law. In view of the above disallowance made by the Assessing Officer under section 14 of the Act read Rule 8D of the Income Tax Rules is deleted. The aforesaid order has been followed by the ITAT in the Assessment Year's i.e 2009-10 and 2010-11, we, therefore do not see any valid ground to interfere with the findings of the Ld. CIT(A) who rightly deleted the disallowance made by the A.O. by following the earlier orders of the ITAT in assessee's own case for the A.Y's 2008-09 to 2010-11. 10. Vide ground no. 2 the grievance of the Department relates to the deletion of disallowance of Rs. 81540683/- made by the A.O. on account of excessi....
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.... a sole selling agent for bi- cycles products of other companies i.e. M/s. Highway Cycle Industries Ltd, M/s. Rockman Cycle Industries Ltd and M/s. Majestic Auto Ltd. These companies had discontinued their cycle products; therefore no commission is being paid to M/s. Munjal Sales Corporation ........................... iii) A statement indicating the name & qualification of employees of M/s. Munjal Sales Corporation, as desired, is enclosed. All the employees of M/s. Munjal Sales Corporation are experienced employees having complete knowledge about marketing & dealers of cycle trade. We would like to point out that while most of the employees are well educated i.e. graduate/post graduate and MBAs, it is the not the education level of the executives but their relationship with the dealers which matters in the cycle trade and most of the employees of sole selling agents are with the firm since decades having goodwill with the dealers, which is apparent from the increase of total turnover of cycles and cycle parts of the company as compared to earlier years ......... iv) The remuneration paid to the directors of the company is in respect of many folds of wor....
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....o submit the reply to the following queries: a) From the Selling Expenses as per Annexure XVII of the Annual Report 2009-10, it is seen that HCL has paid Sales Promotion of Rs. 11,22,55,232/- and Advertisement & Publicity ofRs. 36,68,85,360/-. In view of the same please justify the payment of Commission to M/s. Munjal Sales Corporation, when Selling Expenses are being incurred by HCL. b) Commission paid by the assessee to M/s. Munjal Sales Corporation appear to be disproportionate to the expenses appearing in the P & L account of M/s. Munjal Sales Corporation. Hence, it appear that assessee is paying disproportionately huge Commission to MSC. Please justify. c) From the copy of Agreement as submitted on pages 413-414, it is seen that on 25.04.2007, agreement of 26.06.2002 was reviewed. Please provide the detailed working on the basis of which the agreement was reviewed? Further the agreement was to be reviewed in 2012, was it reviewed? The working details of same to be submitted. d) The payments of Commission by assesses to MSC appear to be diversion of profits to the family concerns. In view of the noting on previous Note Sheets please justify a....
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....e on just and fair basis. Query (d) -Payment of commission to M/s Munjal sales Corporation appears to be diversion of profits to the family concerns. It is wrong to allege that there is diversion of profit when there is no motive behind it. Generally these types of practices are resorted to when any of the concern generate profits at the loss of Revenue. In fact the assessee end up in paying higher taxes based on the following grounds: - Tax rate applicable to assessee is 30% - Tax rate applicable to MSC is 30% Service tax on commission is 10.30% There is no change in the rate of commission paid to M/s. Munjal Sales Corporation. The quantum of commission depends upon the volume of the turnover........" 11.5 The A.O. was also not satisfied from the aforesaid reply of the assessee, he again asked the assessee to furnish the justification of the commission expenses. The assessee vide reply dt. 23/01/2004 submitted as under: "With reference to your honour's letter dated 17.1.2014 regarding commission paid to M/s. Munjal Sales Corporation, it is submitted as under: - 1. The rate of commission of 1% on the specified....
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.... has also additionally paid service tax on the amount of commission @ 10.3% which comes to Rs. 10818958/-. Therefore otherwise also in no way the company or MSC or directors/partners have been benefitted by payment of low taxes due to their relation with the firm MSC. 6. As explained earlier and also observed by your honour in the letter, the assessee company had incurred the expenditure on advertisement, sales promotion etc, to built up its brand to make the people aware of various sale promotions schemes, to create a awareness about the various models launched by the company from time to time and its latest products range, to give a competition to other manufacturers & also to remain in the market. By building up the brand, the sale of products which is being dealt by the assessee company, by itself, will not take place unless there is proper contact with dealers and their problems are solved time to time and to push them to place orders of bicycles with the employees of sole selling agent. From facts already stated it is submitted that expenses on advertisement etc. are totally different in nature which serves the purposes at macro level to create awareness for....
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....es Corporation. There is no difference in tax rate. The provisions of income tax should not be applied in a manner which may cause hardship on bonafide cases. 11.7 The A.O. however was not satisfied from the submission of the assessee and made the addition of Rs. 8,15,40,683/- by observing as under: The query regarding the justification or working as to how the figure of 1% of Commission paid to MSC by the assessee as still not been answered. The assessee in it reply has nearly taken the plea that the rate of Commission of 1% is the same as of the earlier years. The assessee were asked to substantiate the services of the employees with details which was leading to the increase in Sales of the assessee Company. The assessee in its reply has only stated that the employees of the MSC keep on visiting the dealers to maintained their relation in connection with the business dealings. The assessee has not responded to the main query. Also regarding the rationale of Commission being paid to the MSC inspite of payment of heavy salaries to the Directors of the Company. The reply of the assessee is that it is not possible for directors to manage all the business....
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....al Administrative Expenses and Financial Expenses 21055319 By Commission 105038419 By Interest 16517005 By Dividend Income 65001575 By Rent Income 17500 By Profit on Sale of Inv. and fixed assets 1535054219 Net Profit 1702230476 By amount written back 1455446 Thus from the above it is seen that though the Commission Income being earned by MSC is Rs. 10,50,38,419/-(Net of Service Tax) from the assessee and MSC is also having other income, the total expenses of MSC stand at Rs. 2,10,55,319/-. From the above Profit and Loss statement it is to be noted that the assessee has incurred huge profits on sale of investments and fixed assets. The expenses incurred for the same are also included in the total expenses of MSC. Thus the issue being raised again and again regarding the justification of Commission expenses being paid by the assessee to MSC leads clearly to the conclusion that the Commission expenses are highly exorbitant and unjustifiable. Therefore, the claim of the assessee that the whole of said expenses are to be allowed is rejected. The assessee in the Annexure XIX' to the tax Audit Report states that ....
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....er confirmed by the Hon'ble Supreme Court in assessee's case reported in (2016) 236 Taxman 447 no businessman be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. It is further held that the revenue cannot be justifiably claim to put itself in arm chair of businessman or in a position of Board of Directors and assume role to decide how much is reasonable expenditure having regard to circumstances of case. 12.2 The Ld. CIT(A) after considering the submissions of the assessee, remand report of the A.O. and counter comments of the assessee deleted the addition by observing in para 6.4 of the impugned order as under: 6.4 I have considered the observations of the Assessing Officer as made by him in para 3 of the assessment order while making the impugned addition. I have also considered written submissions filed by the assessee company through its learned AR vide letters dated 25.07.2014, 18.08.2014, 21.10.2014, 16.01.2015, 19.05.2016 and 02.08....
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....rival submissions the Ld. Counsel for the Assessee reiterated the submissions made before the authorities below and strongly supported the impugned order passed by the Ld. CIT(A). It was further submitted that this issue is squarely covered by the earlier order of the ITAT for the preceding A.Y. 2010- 11 in ITA No. 720/Chd/2014 order dt. 03/04/2017. 16. We have considered the submissions of both the parties and perused the material available on the record. It is noticed that an identical issue having similar facts was involved for the A.Y. 2010-11 in ITA No. 720/Chd/2014 wherein vide order dt. 03/04/2017 the relevant findings have been given in para 34 and 35 which read as under: 34. We have heard both the parties. We have gone through the findings of the Ld. CIT (Appeals) and we find no infirmity in the same. The Ld. CIT (Appeals) has dealt with the issue in detail out lining the facts that the said agent had been acting as the sole selling of the assessee since 1962 and relevant application had been field to the Ministry of Corporate Affairs on its reappointment as sole selling agent on 29.3.2007 which the Ministry had approved on old commission rate of 1% of turnover....
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....nding in the Balance Sheet of the Assessee as on 31.3.2011 were called for. Copy of accounts of the main Debtors were also examined. Out of the said debit accounts it was seen that Debtor by the name of M/s Hero Exports was having a debit balance of Rs. 37,554,527/- as on 31.03.2011 and M/s. Hero Motors Ltd. was having a debit balance of 32,737,039/- as on 31.03.2011. Copy of Accounts of the same is placed on record. The detailed analysis of both the accounts, the show causes issued to the assessee on the issue, the replies of the assessee to the same and the findings and conclusions about both the debit accounts has been discussed in the following Paras:- (I) Debit Balance of M/s Hero Exports:- From the copy of the account of M/s Hero Exports in the Books of M/s Hero Cycle's Limited, it is seen that there is a net opening debit balance of Rs. 16,77,59,780/- as on 01.04.2010 and a net closing debit balance of Rs. 3,75,54,527/- as on 31.3.2011. It was observed that though there were regular transactions between the two entities but throughout the year, neither the balance has been squared off nor the debit balance has been turned into credit balance fo....
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.... buyers ranges from 90 to 180 days. As explained above, the assessee company is bulk supplier to M/s. Hero exports. This party is exporting all the products under brand name of Hero.... vii) The company has always been receiving the payments from M/s Hero exports in due course but on account of various reasons mainly such as worldwide slowdown of markets and losses due to volatile foreign exchange markets on account of falling dollar price in terms of rupee, the financial position of the party tightened. Such ups & downs are normal in commercial fields. The funds has made the payment to assessee company as and when funds available, keeping in view their priorities...." The above reply of the assessee has been considered. The assessee has stated that it has made sales to M/s Hero Exports. This is a fact but the main question as how substantial Debit Balance is allowed not to be paid remains unanswered. In view of the above findings and the submissions of the assessee we have to also take into consideration the following points as to why the said Debit Balance of M/s. Hero Exports is to be treated as Interest Free Advance. M/s Hero Exports and M/s ....
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....from M/ s. Hero Motors, it is submitted that the balance due from this party is on account of supply of C.R. Strips. Consolidated statement of account of this party as per books of C.R. Division has been filed vide letter dated 21.11.2013 at paper book pages 391 to 397. ii) Accounts of this party with C.R. Division are running accounts with regular supplies and receipt of payments in the normal course. There is not even a single transaction involving any amount advanced by the assessee company to M/s. Hero Motors in this year i.e. all the transactions are on account of supplies made to this firm. None of the entry in the party's account represents loans or advance in the shape of money for which the balance is outstanding from it. iii) Thus there is only a net balance of Rs. 3.27 crore due from the party as on 31.3.2011, which keeping in view the nature of trade with party as a bulk purchaser is normal in commercial terms. In continuous supply/sales, customers' accounts never get reduced to zero or negative Thus, the assessee has once again not been able to justify as to why not the debit balances of M/s. Hero Motors Ltd. in the books of the asses....
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....,54,078/-) is disallowed and added back to the taxable income of the assessee. Penalty proceeding u/s 271(l)(c) is initiated separately for furnishing inaccurate particulars of income as discussed above. B) Disallowance of Interest u/s 36(l)(iii) on account of Advance to Hero Motor: - During the course of assessment proceedings assessee vide order sheet entry dated 4.12.2013 asked as to why loan of Rs. 60 Crores (Opening Balance) was granted to M/s. Hero Motors Ltd. on different dates @6% whereas to all other parties it has been granted @12% to 15% and why not the differential rate of interest be added to the taxable income. Assessee vide its reply dated 29.01.2014 has stated that:- "As per our submissions vide letter dated 16.12.2013 the company has charged interest on this account @ 6%. This a/c has been squared up on 30.6.2010. For this purpose, the assessee company has not made any borrowing. This loan has been given out of own funds arising from internal accruals. Regarding your honour's query that interest charged from the other parties is 12% to 15%, it is submitted that it is the discretion of the assessee company to decide the rate o....
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.... initiated separately for furnishing inaccurate particulars of income as discussed above. C) Disallowance of Interest u/s 36(l)(iii) on WIP:- The details regarding the Total Capital Work In Process for the F.Y. 2010-11 were called from the assessee vide note sheet entry dated 09.01.2014. No reply to the same was submitted. The assessee was issued show cause vide Note Sheet Entry dated 23.01.2014 requesting to explain as to why not interest be capitalized on capital WIP. The assessee vide its reply dated 29.01.2014 has submitted as under:- "The detail of capital work in progress is enclosed. This expenditure is mainly relating to the Main Unit and C.R. Division of the company. It may be here mentioned that assessee company has already capitalized interest on CWIP at Rs. 633211/-. No funds have been borrowed for these purposes nor has any borrowed amount been utilised to acquire the CWIP ................... Regarding the total expenditure on capital work in progress, it is submitted that this expenditure is only of routine type, towards modifications/replacements in the existing machinery installed worth crores of rupees with a motive for ....
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....85000000 435000000 150000000 CLOSING BALANCE 150,000,000 The share application money thus advance by the assessee appeared to be in the nature of interest free advances. Therefore, the assessee was asked vide note sheet entry dated 21.01.2014 that as per the details submitted by the assessee on 15.01.2014 (page-1120) share application money as on 31.03.2010 is shown at Rs. 43.50 Crores and as on 31.03.2011 the same was at Rs. 15 Crores. The assessee was requested to submit the ledger account of the same and also to justify as to why not interest u/s 36(l)(iii) be disallowed on the same as the said share application money amount was in the nature of advance for non business purposes. The reply to the above was to be submitted on 23.01.2014. On 23.01.2014 no reply on the issue was submitted by the assessee. Again vide note sheet entry dated 23.01.2014 the assessee was given a show cause as to why not interest u/s 36(1)(iii) be disallowed on the amount of share application money has advance by the assessee which was standing in its balance sheet during the F.Y. 2010-11, as the same was ....
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....st bearing funds for advancing money for the share application, as discussed above. Accordingly, the interest u/s 36(l)(iii) of the Income Tax Act, 1961 is disallowed and added back to the total income of the assessee. The computation of the interest u/s 36(l)(iii) is as under:- Date Particulars Debit Credit Balance No. of Days Intt. @7.5% 01.04.2010 Opening Balance 435000000 435000000 91 8133904 30.06.2010 App. Money reed. Back from Ritamay Builders 335000000 100000000 30.06.2010 Adjusted towards Share allotment 100000000 0 142 0 19.11.2010 RTGS to M/s. Hero Motors 50000000 50000000 75 770548 02.02.2011 Cheque No. 070573 issued to M/s. Hero Motors 100000000 150000000 57 1756849 TOTAL 585000000 435000000 150000000 365 10661301 Amount of interest to be disallowed u/s. 36(l)(iii) of the Income Tax Act, 1961 regarding share application money = Rs. 1,06,61,301/-. 19. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and furnished the written submissions which....
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....ideration is concerned are identical to the facts of the case of the assessee company for the A.Y. 2010-11 and there is no material difference in the facts, the ratio of the decisions of the learned CIT(A)-2, Ludhiana and Honorable ITAT, Chandigarh for the A.Y. 2010-11 is squarely applicable to the case of the assessee company for the year under consideration. So respectfully following the orders of the learned CIT(A)-2, Ludhiana and Honourable ITAT, Chandigarh in the case of the assessee company itself for the A.Y. 2010-11 supra), the addition of Rs. 1,69,52,715/- in this case on account of disallowance of interest by invoking provisions of section 36(l)(iii) of the Act on the ground that the assessee company has given interest free loans/advances to related parties allegedly out of borrowed funds and that too for non business purposes is directed to be deleted on the basis of same reasoning and logic as adopted by the learned CIT(A)-2, Ludhiana and Honourable ITAT, Chandigarh in the case of the assessee company itself for the A.Y. 2010-11 while deleting the identical addition in A.Y. 2010-11. In the result, the ground No. 4 taken by the assessee company is allowed. ....
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....fficer as made by him in para 3 of the assessment order while making the impugned addition. I have also considered written submissions filed by the assessee company through its learned AR vide letters dated 25.07.2014, 18.08.2014, 21.10.2014, 16.01.2015, 19.05.2016 and 02.08.2017 on the issue under reference. I have further considered various judicial pronouncements relied upon by the learned AR of the assessee company including the order of the Honourable Apex Court in the case of the assessee company itself reported at (2016) 236 Taxman 447 (SC) as well as other material placed by him on record. On careful consideration of the rival contentions, it has been noticed that the issue under consideration is squarely covered in favor of the assessee company by the order of Honourable Apex Court in the case of the assessee company itself and also by the order of the Honourable Punjab and Haryana High Court in the case of M/s Bright Enterprises (P) Limited Vs. CIT reported at (2016) 381 ITR 107 (P&H) vide which similar additions were deleted. Moreover, the assessee company has sufficient interest free funds to pay share application money under consideration. As the facts of the case of t....
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....in favor of the assessee company by the orders of the Honourable ITAT, Chandigarh in ITA No. 314/Chd./2013 for the A.Y. 2009-10 dated 16.02.2016 and ITA Nos. 720/Chd./2014 for the A.Y. 2010-11 dated 03.04.2017 in the case of the assessee company itself as the identical addition made by the Assessing Officer in A.Ys. 2009-10 & 2010-11 was deleted by the Honorable jurisdictional ITAT. As the facts of the case of the assessee company for the year under consideration as far as the addition under consideration is concerned are identical to the facts of the case of the assessee company for the A.Ys. 2009-10 & 2010-11 and there is no material difference in the facts, the ratio of the decisions of Honorable ITAT, Chandigarh for the A.Ys. 2009-10 & 2010-11 is squarely applicable to the case of the assessee company for the year under consideration. So respectfully following the orders of the Honourable ITAT, Chandigarh in the case of the assessee company itself for the A.Ys 2009-10 and 2010-11 (supra), the addition of Rs. 2,02,663/- in this case on account of capitalization of interest by invoking provisions of section 36 (i)(iii) of the Act as the assessee company has shown huge assets unde....
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.... Cement Ltd. (2002) 254 ITR 377. The I.T.A.T. also observed that the Hon'ble Supreme Court in assessee's own case had held that no notional addition on account of lesser rate of interest charged could be made. The relevant findings of the I.T.A.T. at para 16 of the order are as follow: "16. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The undisputed facts of the case are that the assessee has given loan of Rs. 10 crores to M/s Hero Motors Ltd. @ 6%. It has amply been demonstrated before us that the company is a cash rich company and has huge own funds which goes to the tune of around 652 crores, while the total loans and advances given by it are at around 116 crores. In this scenario, it can safely be presumed that the assessee had given loans out of its own funds. However, in the said case, the assessee had not given interest free loans, rather the case of the Assessing Officer is that the interest charged is at a lesser rate. It has been held in the case of CIT Vs. Dalmia Cement Ltd. (2002) 254 ITR 377 (Del) that the Revenue cannot justifiably claim to put....
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....that the assessee had enough own funds for the purpose of investing in the capital work-in- progress. The I.T.A.T. following the decision of the I.T.A.T., Chandigarh Bench in the case of DCIT Vs. Samrat Forgings Ltd. in ITA No.975/Chd/2011 dated 24.5.2012 had deleted the disallowance made. The relevant findings of the I.T.A.T. at para 22-23 of the order are as under: "22. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. On perusal of the order of the I.T.A.T., Chandigarh Bench in the case of Samart Forgings Ltd. (supra), we see that similar issue has been decided by the I.T.A.T. at page 9 of the said or, which reads as under : "9. The provisions of main section and the proviso are in relation to the amount of interest payable on capital borrowed. The first juncture thus to be seen is whether the asses see had borrowed any capital for the purposes of investment in capital as set for extension of existing business or profession. In the fact s of the present case, there is no finding by the Assessing Officer in respect of the borrowals made by the asses see fo....
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.... of these concerns cannot be presumed to be in the nature of loans and advances and, therefore, deleted the disallowance made u/s 36(1)(iii) of the Act. The relevant findings of the I.T.A.T. are as follows: "35. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. On perusal of the order of the learned CIT (Appeals), we see that he has given his finding at page 19 of his order, which reads as under : "The issue which needs consideration is that given the aforesaid facts and circumstances of the case whether any interest needs to be disallowed out of the interest expenditure on the ground that the funds were diverted for non-business purposes. It has been decided by the Hon'ble Punjab and Haryana High Court in the case of M/s Abhishek Industries Ltd. that where the funds of the appellant had been diverted for non-business purposes then the proportionate interest needs to be disallowed. However the case of M/s Abhishek Industries Ltd. is applicable only where any amount was advanced as loan. In this regard reference may be made to the case of M/s Power Drugs ....
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....constant sale and purchases from these two concerns and amounts of money coming and going were on account of regular business of the assessee. During the course of business if some amount remains at the debit of the other company, the Assessing Officer cannot just presume it to be in the nature of loans and advances. Here also, the observations of the Delhi High Court in the case of Dalmia Cement Ltd. (supra) is pertinent, whereby it was held that it is not the prerogative of the Department to dictate the terms of the business and Revenue cannot impose its view on the businessman when to give any money and when to receive it back. The transactions are going on with the sister concerns on regular business. Steps are being made and even if some amount remains at the debit, the Assessing Officer cannot consider the same as loan and cannot make addition under section 36(1)(iii) of the Act on the same." 43. Since the facts of the present case are identical to that in assessment year 2009-10 and no distinguishing facts were brought to out notice, the decision of the I.T.A.T. in assessment year 2009-10 squarely applies to the present case also following which we confirm the order....
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.... the quantification of the amount paid to M/s. Hero Corporate Services Ltd. By your Company for the F.Y. 2010-11". The assessee has submitted its reply vide letter dated 27.01.2014 as follows:- "With reference to your honour's queries raised vide letter dated 09.01.2014 regarding professional fee paid at Rs. 34,74,448/-, it is submitted as under:- The assessee Company has already filed photocopy of letter dated 02.04.2010 from M/s. Hero Corporate Service Limited (HSCL) giving details of services being provided by the party alongwith photocopy of one of the invoice for the quarter ended September, 2010 at pages 1073 to 1075. Statement of party's account has also been filed at page-380. M/s. HCSL was incorporated with an objective to provide, management advisory services to various group entities instead of, engaging professionals at individual company/undertaking level on the corporate basis in the filed of finance, treasury, HR, product effectiveness, expansion of clients and new markets, cost reduction programs, increase in productivity programs etc ....... * In evidence of the services taken by CR Division from HCSL we are encl....
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..... The assessee has also not replied to the query as to whether any consultancy was specifically sought by M/s. Hero Cycles Ltd. From M/s. Hero Corporate Services Ltd. The assessee has also not replied to as to which areas the consultancy was required for. Also no correspondence regarding the same has been submitted by the assessee. The assessee has also not submitted the quantification and the methodology as to how the amount of consultancy amount paid of Rs. 34,74,448/- was arrived at. In view of the above discussion and that the assessee has not proved with evidence the justification about the consultancy services availed and that the said payment was wholly and exclusively for business purposes, the said amount of consultancy expenses of Rs. 34,74,448/- is disallowed and added back to the total income of the assessee. 25. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and furnished the written submission which had been incorporated in para 11.1 of the impugned order, for the cost of repetition the same is not reproduced herein. 25.1 The Ld. CIT(A) forwarded the written submissions furnished by the assessee to the A.O. for his comments in response the A.O....
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....11.4 of the impugned order as under: 11.4 I have considered the observations of the Assessing Officer as made by him in para 3 of the assessment order while making the impugned addition. I have also considered written submissions filed by the assessee company through its learned AR vide letters dated 25.07.2014, 18.08.2014, 21.10.2014, 16.01.2015, 19.05.2016 and 02.08.2017 on the issue under reference. I have further considered various judicial pronouncements relied upon by the learned AR of the assessee company as well as other material placed by him on record. On careful consideration of the rival contentions, it has been noticed that the Assessing Officer has allowed identical expenses in A.Y. 2012-13 after considering the nature of expenses in detail. It has also been noticed that no such disallowance was ever made in earlier years. Moreover, the issue under consideration is squarely covered in favor of the assessee company by the order of the Honourable ITAT, Chandigarh in ITA No. 758/Chd./2014 for the A.Y. 2010-11 dated 03.04.2017 in the case of the assessee company itself as the identical addition made by the Assessing Officer in A.Y. 2010-11 was deleted by the Hono....
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.... Objection reads as under: " That the learned CIT(A)-2, has erred in confirming disallowance of Rs. 6,03,45,313/- u/s 14 r.w.r 8D which is against the law and facts of the case." 32. From the aforesaid ground it would be clear that the grievance of the assessee relates to the confirmation of disallowance made by the A.O. under section 14 of the Act r.w.r 8D of the Income Tax Rule 1962. As regards to this issue the Ld. Counsel for the Assessee furnished the written submissions and calculations which read as under: " Initially the revenue had raised only two grounds of appeal. Thereafter six grounds of appeal were filed by the revenue. All the grounds raised by the revenue are duly covered by the order of the Hon'ble Tribunal in the earlier years to which reference has been made by the Ld. CIT(A) in his order and I have filed copies of the orders on which reliance had been placed by the Ld. CIT(A) while allowing relief to the assessee. I had also filed short notes on 05.02.2018 and again on 12.04.2019 on this issue. The only controversial issue is regarding disallowance made by the AO and deleted by the CIT(A) u/s 14A / Rule 8D, because the appellant has alre....
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.... Rs. 86,35,49,132/- Annexure -2 Total investments as per Balance Sheet as on 31.03.2011 Rs. 870,73,62,564/- Investments yielded exempt income and outstanding as on 31.03.2011 Rs. 201,65,21,670/- Average of investments (86,35,49,132 + 201,65,21,670) Rs. 144,00,35,401/- Disallowance @ 0.5% = Rs. 72,00,177/- as against Rs. 2,45,56,827/- suo-moto disallowed by assessee. CO No. 4/2018 The assessee has filed CO against suo-moto disallowance made at Rs. 603,45,313/- (Annexure-3) The details are given as per Annexure 3. The assessee is entitled to file cross objections against the suo-moto disallowance if the same has not been correctly made as per law. Reliance is placed on various judgments filed before your Honour. 1. As regards the disallowance made by the assessee suo-moto under rule 8D(2)(ii) of Rs. 3,57,88,486/-, the same is not sustainable as the assessee's own funds are much more than the investments. 2. As regards the disallowance made by- the assessee suo-moto under rule 8D(2)(iii), the same is to be restricted to Rs. 72,00,177/- as against Rs. 2,45,56,827/- and the assessee is entitled to a relief of Rs....