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2013 (11) TMI 196 - ITAT AHMEDABADAssessee’s Appeal – Disallowance of Deduction u/s 80I and 80 HH - Held that:- AR of the assessee fairly conceded that regarding allowability of deduction under these two Sections in respect of the income on account of FD interest, the issue was covered against the assessee – as per the decision in respect of FD interest income, for this income on account of interest on loan also, the AO was directed to allow benefit of netting if the assessee can established the nexus between interest expenditure and interest income and in that situation, only net interest income should be excluded from business profit for the purpose of allowing deduction under these two Sections Relying upon Lalsons Enterprises v. DCIT [2004 (2) TMI 294 - ITAT DELHI-E ]. The two issues of discount and transport income were covered in favour of assessee – there was no reason to take a contrary view in the present year and therefore, for these two items, we decide the issue in favour of assessee by following the Tribunal’s orders in earlier years. For all the remaining items, the main aspect i.e. allowability of these deductions for these incomes is decided against the assessee but for these remaining items, the issue was restored to the file of AO for granting benefit of netting income to assessee in case the assessee was able to establish nexus between expenses incurred, if any, for earning these income. In that situation, only net income should be excluded from the business profit for the purpose of computing deduction allowable to assessee under these two Sections – Decided against Assessee. Disallowance of Interest Expense - Held that:- Disallowance of small amount of interest was not justified - All the business payments were also made from the same bank accounts and business receipts were credited in the same bank account, it cannot be said conclusively that overdraft in the bank account on the date of payment of advance tax was on account of payment of advance tax and not on account of other business payments made on the same date or preceding dates - Considering all these facts, we feel that in the fact of the present case, the disallowance was not justified and we, therefore, delete the same – Decided in favour of Assessee. Allowability of Deduction u/s. 80I on Gross Profit – Held that:- Following CIT v. Amod Stamping [2004 (1) TMI 15 - GUJARAT High Court] and Joint Commissioner of Income-tax Versus Mandideep Engineering And Packing India P. Limited [2006 (4) TMI 75 - SUPREME Court ]- while computing the profits for the purpose of availing of deduction under section 80-I, the profits and gains of the assessee's business were not required to be reduced by the deduction admissible under section 80HH – Decided against Revenue. Allowability of Deduction u/s 80-I / 90IA / 80HH – Allowability of Deduction u/s 80J / 80JA / 80HH/ 80I / 80HH / - held that:- Following DCIT v, Harjivandas Juthabhai Zaveri And Another [1999 (12) TMI 5 - GUJARAT High Court ] The same goes to reduce cost and as a result, the profit remained same and therefore, deduction allowable to the assessee u/s. 80I of the Act was not required to be reduced on account of this receipt – For the benefit the assessee had to establish nexus between truck hire charges received and truck hire charges paid by showing that for the same income, expenses was incurred by the assessee and in that situation, the AO should exclude only net income on account of truck hire charges from profit of Mandali Division for computing deduction allowable to the assessee u/s. 80I, 80A and 80HH of the Act - it was not required to be excluded from business profit but if the assessee was not able to establish that all these receipts were nothing but reimbursement of expenses, then also the Assessing Officer should examine the alternative claim of the assessee i.e. benefit of netting should be allowed to the assessee - Decided against Revenue. Disallowance of Entertainment Expenses - Held that:- The issue should also go back to the file of Assessing Officer for fresh decision and if assessee can establish the amount of expenditure incurred for tea and coffee for employees, then no disallowance was called for to that extent - He should pass necessary order as per law as per above discussion after providing reasonable opportunity of being heard to assessee – Decided in favour of Revenue. Disallowance of Claim of Deduction u/s. 35AB - Order of Ld. CIT(A) was set aside on this issue and the matter was restored back to the file of Assessing Officer for fresh decision after examining the factual aspect and if it is found that this claim of the assessee in the present year was fulfilling this requirement u/s. 35AB of the Act i.e., all the expenditure was incurred by the assessee for acquiring technical know-how on or after 01-04-1986 and if the claim of the assessee is within the period of six years from the year in which the expenditure was incurred and the amount is also equal to 1/6th of such expenditure then the claim of assessee should be allowed. The Assessing Officer should pass necessary order as per law after providing reasonable opportunity of being heard to assessee – Decided in favour of Revenue. Disallowance Made u/s 40A(2) - Merely because the price paid to related party is excessive by price of Rs.0.01 per kg. which is less than 2% paid to the outsider, there cannot be any conclusive finding that price paid by the assessee to the related party was excessive or unreasonable without going into this aspect as to whether some other benefit is also received by the assessee or not from the related party as discussed above. Because of smallness of amount, we feel that going into these aspects will be a futile exercise and hence, we decline decline to interfere in the order of Ld. CIT (A) on this issue – Decided against Revenue.
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