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2017 (4) TMI 709 - ITAT MUMBAIDisallowance of Transportation Charges - Held that:- The Hon’ble Apex Court in S.A. Builders (2006 (12) TMI 82 - SUPREME COURT ) while dealing with the “Commercial Expediency” relating to section 37 held that decision relating to section 37 will also be applicable to section 36(1)(iii) because in section 37 the expression used is “for the purpose of business”. It was further held that consistently it has been held in decision relating to section 37 that expression “for the purpose of business” includes expenditure voluntarily incurred for Commercial Expediency, and it is immaterial, if a 3rd party also benefits thereby. The expression “Commercial Expediency” is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may have been incurred under any legal obligation, but yet it is allowable as business expenditure, if it was incurred under Commercial Expediency. In our opinion the transport expenses were incurred by the assessee under business expediency. Thus, in view of the above discussion the disallowance of Transportation Charges of ₹ 14,76,363/- claimed as expenses on account of Transport Outward Claim were allowable expenses, which we delete. - Decided in favour of assessee Disallowance on account of rejection of material - Held that:- The rejected material is destroyed by the MNC to avoid the misuse. Thereafter the customer sends their debit notes for rejected material. The contention of the assessee was not accepted by the AO holding that the assessee failed to file sufficient evidence in support of their claim that the goods were manufactured, delivered to the buyers and were destroyed after rejection. The ld CIT(A) also concluded that the assessee failed to substantiate as to how the quality and printing issue lead to rejection of the goods. The assessee has not filed any confirmation from such client to support their contention and confirmed the disallowance. We have noticed that the lower authorities have not rejected the books of accounts. No findings were given on the debit notes filed by the assessee before the authorities below. Considering the submission of the ld AR for the assessee that similar disallowance was claimed in the preceding years and was allowed to the assessee, we deem it appropriate to restore this ground of appeal to the file of AO to consider it afresh and pass order in accordance with law. The AO is directed to examine the delivery challans of goods supplied and the debit note issued thereafter for rejected goods. Needless to say the AO will provide opportunity of hearing to the assessee. Thus, this ground of appeal is allowed for statistical purpose.
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