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2017 (11) TMI 1601 - AT - Income TaxIngenuity of loss - reimbursement of the cost of short supply replenished to the buyer as deduction under the head ‘Profits and Gains of the business' - Held that:- On appreciation of the evidences submitted by the assessee, such as the settlement deed, the high seas sale details, the income tax return of the buyer and debit notes, it is apparent that the adequate evidences to justify the loss incurred by the buyer, which was partly compensated by the assessee and claimed as a business loss cannot be disallowed. Furthermore, AO also verified that the buyer has accounted for this loss may be towards the reduction in the cost of the purchase of the fixed assets by the buyer, but that does not make any difference regarding the claim of the assessee. As the above loss has been incurred by the assessee during the course of the business and incurred during the year, hence, the assessee is entitled to get the deduction of the same. Regarding the genuineness of the claim, it is supported by the settlement deed and confirmation of the buyer who received the above sum by issuing the debit note. The ld CIT (A) has considered all the reasons given by the ld Assessing Officer for disallowance and after that has allowed the claim of the assessee. The ld Departmental Representative also could not point out any error in the order of the ld CIT (A). In view of this we confirm the finding of the ld CIT(A) in deleting the disallowance of ₹ 4.85 crores on account of reimbursement of the cost of short supply replenished to the buyer as deduction under the head ‘Profits and Gains‖ of the business. In the result, the solitary ground of appeal of the revenue is dismissed. Disallowance u/s 14A - Held that:- Admittedly, the assessee has earned exempt income of ₹ 55204/- as per page No. 7 of the assessment order. The above issue is squarely covered in favour of the assessee in case of Joint Investments Pvt. Ltd vs. CIT [2015 (3) TMI 155 - DELHI HIGH COURT] wherein, in para No. 9 Hon'ble High Court has held that disallowance cannot swallow the entire exempt income. Therefore, the disallowance u/s 14A confirmed by the ld CIT (A) of ₹ 1545259/- is restricted up to ₹ 55204/-.
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