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2022 (5) TMI 622 - ITAT AHMEDABADDisallowance u/s 10A - re-allocation of salary & wages (Admn.), power consumption, stationary which are clearly incurred for both SEZ Unit and non-SEZ Unit - HELD THAT:- It is pertinent to note that the CIT(A) has given categorical finding that the assessee in the revised Form No.56A has taken the profit from SEZ Unit at Rs.1,33,37,787/- which was reduced by the expenditure related to Electricity, Sundry Balance and depreciation of patent. The assessee already admitted and the Assessing Officer in remand report also verified that as per the corrected Form No.56F the eligible profit of SEZ unit was of Rs.1,33,37,787/- excluding the amount of Rs.1,71,73,667/- where no bank realisation certificate is there on record on this profit the eligible claim under Section 10A of the Act at the rate of 50% as claimed was of Rs.66,68,894/-. But now the claim after re-working of eligible profit at Rs.73,43,346/- @ 50% comes to Rs.36,71,673/- for which the assessee is entitled for claim of deduction under Section 10A of the Act. There is no need to interfere with the findings of the CIT(A). Hence, ground no.1 of Revenue’s appeal is dismissed. Disallowance of interest under Section 36(1)(iii) - when the assessee failed to discharge its onus that the advances to its subsidiaries were made for the purpose of business - HELD THAT:- The said issue is covered in favour of the assessee by the Tribunal which is confirmed by the Hon’ble High Court of Gujarat for A.Y. 2007-08 [2018 (2) TMI 442 - GUJARAT HIGH COURT] - Decided against revenue. Addition on account of miscellaneous expenses - HELD THAT:- From the perusal of the assessment order, it can be seen that the basis of making this addition was not demonstrated by the Assessing Officer in the assessment order. In fact, books were also now rejected by the Assessing Officer. Thus, merely on conjectures and surmises the Assessing Officer cannot make adhoc disallowance. There is no need to interfere with the findings of the CIT(A). Hence, ground no.3 of Revenue’s appeal is dismissed. Addition on account of licence fees - D.R. submitted that the payments were made on monthly basis and the same is in the nature of revenue and, therefore, addition on account of licence fees is totally uncalled for by the Assessing Officer - HELD THAT:- AO has totally ignored the factual aspect of payment of Licence Fees which was for the purpose of business and, therefore, revenue in nature. The payments were made on monthly basis and these facts were not controverted by the revenue. The CIT(A) has rightly deleted this addition and there is no need to interfere with the observations of the CIT(A). Hence, ground no.4 of the Revenue’s appeal is dismissed. Addition on account of vehicle expenses and travelling expenses - HELD THAT:- It is pertinent to note that the vehicle expenses and travelling expenses were made during the business exigencies. The Assessing Officer has ignored this fact. The CIT(A) has rightly made 10% addition which was totally on adhoc basis and deleted the same by giving detailed findings to that extent. Hence, gourd no.5 of Revenue’s appeal is dismissed. Addition on account of bonus and leave encashment as well as provisions of Excise Duty - HELD THAT:- It is pertinent to note that it is admitted fact related to bonus/leave encashment which are of A.Y. 2008-09 and the same were not debited in current year. The CIT(A) has rightly deleted this addition and there is no need to interfere with the findings of the CIT(A). D.R.’s contention that Excise Duty was paid after filing of return of income was not correct. Hence, ground no.6 of Revenue’s appeal is dismissed. Disallowance on account of pre-paid insurance expenses - HELD THAT:- From the perusal of records, it can be seen that the assessee is claiming insurance on payment basis consistently and in previous years the Assessing Officer has not disallowed this claim. The CIT(A) has given detailed finding and there is no need to interfere with the same. Ground no.7 of the Revenue’s appeal is dismissed. Disallowance u/s 40A(2)(b) - D.R. submitted that the assessee has not given any evidence before the Assessing Officer and, therefore, the onus was not discharged by the assessee during the assessment proceedings - HELD THAT:- It is an admitted fact that this disallowance is purely on mechanical basis by the Assessing Officer and the assessee has given all the evidences before the CIT(A). The Assessing Officer has not pointed out any discrepancy; hence ground no.8 of the Revenue’s appeal is dismissed. Disallowance made under Section 14A - HELD THAT:- It is admitted fact that no exempt income was earned by the assessee during the year. All the investments in shares as notified in the Profit & Loss Account as well as in the books of the assessee Company. In fact, interest-free funds were in excess of investments in shares and, therefore, the CIT(A) has rightly deleted this disallowance. Hence, ground no.9 is dismissed. Disallowance on account of rent expenses - HELD THAT:- A.R. demonstrated before us as well as before the CIT(A) that the TDS was deducted from the rent and the income was shown in return of income of receiver i.e. Lavjibhai P. Patel. Thus, the CIT(A) has rightly deleted this disallowance. Ground no.10 is thus dismissed. Disallowance on account of Sundry Balance written off - CIT-A deleted the addition - D.R. submitted that the deletion is not just and proper on behalf of the CIT(A) as such amount did not satisfy the precondition laid down under Section 36(2) - HELD THAT:- It is pertinent to note that the advance to employees and credit note received for inferior quality of goods sold were neither received in current A.Y. nor in subsequent A.Y. and it was rightly written off by the assessee. The said Sundry Balance was allowable as business expenses and Excise Duty added in opening stock of next year was also on record before the CIT(A). The CIT(A) has rightly deleted this disallowance. Hence, ground no.11 of Revenue’s appeal is dismissed. Penalty u/s 271(1)(c) - deduction under Section 10A of the Act at 100% whereas the assessment year in question i.e. A.Y. 2009-10 which is the 6th year - HELD THAT:- It is pertinent to note that the assessee has pointed out that the claim of deduction under Section 10A of the Act was wrongly claimed 100% and subsequently the assessee has filed revised Form no.56F and, therefore, it cannot be stated as concealment of particulars of income or furnishing of inaccurate particulars. The mistake cannot be treated as deliberate mistake on the part of the assessee as held by Hon’ble Supreme Court in the case of Price water house coopers [2012 (9) TMI 775 - SUPREME COURT] Hence, penalty under Section 271(1)(c) imposed by the Assessing Officer is hereby deleted.
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