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2014 (8) TMI 1159 - ITAT AHMEDABADDisallowance of deduction in respect of writing off of the irrecoverable advances and other debit balances - Held that:- We are of the view that the amounts towards EMDs, was having nexus with the business of the assessee, and therefore, the same needs to be allowed. With respect to the “Employees’ Welfare Trust”, amounting to ₹ 7,31,425/-, in the absence of any details, we are of the view that the same has rightly been disallowed by the AO. With respect to the balance written amount of ₹ 30,48,835/-, from the list placed it is seen that it contained various amounts which are shown to be not recoverable from the parties. However, it also includes certain amounts like provision for gratuity, salary payable, PF payable, staff loan etc. from which the full details thereof not placed before us Considering totality of the facts, we are of the view that disallowance in the present be restricted to ₹ 1,00,000/- (Rupees One Lakh) to cover such amounts. We direct accordingly, and the ground no.2 of the appeal are partly allowed. Disallowance of deduction as business expenditure - amount given as donation to the Red Cross society - Held that:- From the details of the donation given at page no.14 of the paper book, it is seen that the major amount of ₹ 42,320/- is donation to the Red Cross society, and therefore, claimed as business expenditure. The aforesaid submission of the assessee has not been controverted by the Revenue by bringing any material on record. We, therefore, are of the view that same needs to be allowed. With respect to other donations, considering meagerness/smallness of the amounts, aggregating to ₹ 3900/-, and considering the peculiar facts of the case we consider that the same be allowed. Thus, we allow this ground of the appeal of the assessee. Adjustment in respect of international transaction of royalty payment - Held that:- As only stated rate is not decisive and effective rate has to be considered, and when the amount of royalty paid by the assessee is considered with ex-factory sale value, without deducting various expenses, such as dealer commission, special commission, warranty etc., as has been noted by the learned CIT(A) at page no.4 of his order, then the effective rate worked out is only 2.3% on sale, as against 3% paid by other group entities. This finding of the fact given by learned CIT(A) could not be controverted by the learned DR of the Revenue, and hence, on this aspect, we hold that no interference is called for in the order of the learned CIT(A), and accordingly, the ground no.5 of the Revenue is rejected. Disallowance on account of provision of obsolescence of inventory - Held that:- CIT(A) has directed the AO to allow the claim of the assessee subject to the assessee furnishing the complete particulars in this regard, if necessary, with adequate proof. Hence, in our considered opinion, no interference is called for in the order of the CIT(A) on this issue, because he has taken proper care to ensure that all the details and evidences are obtained and are examined by the AO and only thereafter, deduction is to be allowed, if the assessee is able to establish before the AO that such write off in respect of provision for obsolescence of inventory claimed by the assessee is in line with the accepted method of valuation of stock, i.e. at cost or market price, whichever is lower. Disallowance on account of warranty expenses - Held that:- Since it is admitted by both the parties that the facts of the case in the year under appeal are identical to that of earlier years, we respectfully following the decision for A.Y.2004-5 and with similar directions restore the issue of warranty expenses for A.Y.2005-06 to the file of the CIT(A) for decision afresh. Needless to state that CIT(A) shall grant adequate opportunity of hearing to both the parties. Thus, this ground of Revenue is allowed for statistical purposes. Claim for deduction for the debit balances written off for the sums which were due from different parties for and on connection with the assessee’s business in spite of the fact that the claim was allowable u/s.28 or 37 - Held that:- There is no dispute to the fact that the loss of ₹ 1,58,529/- incurred during the course of business and that the assessee has written off the said amount from its accounts, as the same became irrecoverable. The Hon’ble Apex Court in the case of T.R.F. Ltd. Vs. CIT [2010 (2) TMI 211 - SUPREME COURT] held that in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable; it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. This being so in the case of assessee, we are not inclined to take a different view on this issue, and accordingly, this ground of the CO of the assessee is allowed. Addition u/s 40(a)(ia) - Pursuance of the provisio to section 40(a)(ia) as amended retrospective with effect from 1.4.2005 by the Finance Act, 2008 - Held that:- We find that this claim of the assessee for further deduction was not before the CIT(A) or the AO, before passing their respective orders. Therefore, we deem it fit to send this issue to the file of the AO for considering admissibility or otherwise of the claim of the assessee as per the law. The assessee shall furnish all the details, as required by the AO for determination of the claim of the assessee, and accordingly, this ground of the CO of the assessee is allowed for statistical purpose.
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