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2019 (10) TMI 1077 - ITAT KOLKATAWeighted deduction u/s. 35(1)(ii) - revenue withdrawing the recognition with retrospective effect - HELD THAT:- We find that there is no provision in section 35(1)(ii) of the Act to withdraw the recognition granted to the assessee therein. When there is no provision for withdrawal of recognition in the Act, the action of the revenue in withdrawing the recognition with retrospective effect from 1.4.2007 is unwarranted. In this regard, the recent decision in the case of Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd vs CIT Gwalior [2018 (2) TMI 1220 - SUPREME COURT] held that the power of cancellation of registration us 12A of the Act was conferred by the Act on the ld CIT w.e.f. 1.10.2004 and the Hon’ble Apex Court held that prior to that date , no cancellation of registration could happen. But in the instant case, there is absolutely no provision for withdrawal of recognition u/s 35(1)(ii) of the Act . Hence, we hold that the withdrawal of recognition u/s 35(1)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1)(ii) - CIT-A had wrongly confirmed the disallowance as made by the AO u/s 35(1)(ii) Addition of proportionate interest expenditure - assessee had given interest free advance - HELD THAT:- Since the assessee has own funds of ₹ 148.27 cr. plus ₹ 28 cr. this year in its possession and the interest free advance amount is only to the tune of ₹ 4.51 cr. which is less than 3% of its own funds means, the presumption that has to be drawn in such a scenario is that the interest free advance has been made by the assessee from its own fund and, therefore, no disallowance was warranted and, therefore, we direct deletion of the disallowance confirmed by the Ld. CIT(A) to the tune of ₹ 40,65,156/-. This ground of appeal of assessee is allowed. Ad-hoc disallowance on the expenditure claimed - HELD THAT:- AO is at liberty to disallow the expenditure if there is any deficiency in the vouchers or bills supporting the incurrence of an expenditure on the reason that expenditure are non-genuine and can be disallowed item wise. However, the action of the AO to disallow the expenditure on ad-hoc basis without rejecting the books of account cannot be accepted, since the action of AO smacks of arbitrariness and cannot be allowed to sustain, therefore, all the ad-hoc disallowances made by the AO and confirmed the Ld. CIT(A) are deleted.
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