TMI Blog2014 (1) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... is a business necessity - there is nothing more has been brought on record by the Revenue - Decided against Revenue. Deletion made on account of disallowance of bad debts expenses u/s 36(1)(vii) of the Act - Held that:- CIT(A) allowed the claim of the assessee on the ground that the AO has accepted the fact that the bad debts was on account of advance for supply of raw-materials, and the party to whom the payment was being weak, the said bad debts became bad in nature - the assessee has succeeded in proving that the advances for the purpose of business and that the debt has been written off in the books of accounts – The decision in T.R.F. Ltd. Vs. CIT [2010 (2) TMI 211 - SUPREME COURT] followed – Decided against Revenue. Deletion made on account of disallowance of interest expenses – Held that:- The rate of interest of 12% of borrowed funds should not have been considered as excessive - the assessee has satisfactorily explained the business exigencies for raising loan from other parties, and utilising the same wholly and exclusively for the purpose of business, and the rationale for keeping funds with the banks in the form of FDRs, which are valid points as a prudent busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t contractor directly and no TDS was deducted therefrom as per law. However, the finding of the CIT(A) that there is no contract between the assessee and the transporter, and the impugned payment is for purchases as well as services, which is not tenable, as the assessee has not furnished any documentary evidences that the transporter was appointed by the clearing and forwarding agent. The learned AR of the assessee, on the other hand, submitted that since there is no contract between the assessee and the transporter, and therefore, the assessee is not liable to deduct TDS on the payment paid for purchases of materials, and it is the clearing and forwarding agent who engaged the transporter, and the assessee to pay the charges on receipts of goods and services. This fact has been appreciated by the learned CIT(A), and therefore, his order on this issue may be confirmed and that of the Revenue be rejected. Reliance was placed on the decision of Hon ble Punjab Harryana High Court in the case of CIT Vs United Rice Land Ltd., 322 ITR 594 to the proposition that the assessee was not liable to deduct tax under section 194C from the payments made to the transporters, in the absence of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and bills, then the AO should have inquired and examined with the labourer. This has not been done by the AO. In a business, expenses of this type do happen in all regularity, which is a business necessity. Therefore, we are not convinced with the findings of the AO on this issue, as there is nothing more has been brought on record by the Revenue before us. Accordingly, we confirm the order of the CIT(A) on this issue, and dismiss the ground no.2 of the Revenue. 7. The ground no.3 of the Revenue reads as under: 3. On the facts and in the circumstances of the case and in law, the ld.CIT(A) has erred in deleting the addition of Rs.1,11,813/- made on account of disallowance of bad debts expenses. 8. We have heard both the parties on the issue, and perused the orders of the Revenue authorities. As the facts emerge from the record, the assessee claimed bad debts of Rs.1,11,813/- for the money advanced to Vector Divisas for import of goods and claimed as deduction. The AO denied the same on the ground that the same was not incurred in the previous year and was incurred fully and exclusively for the purpose of business. The learned CIT(A) allowed the claim of the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake timely payments which could not be generated in a single day or within a single week. FDRs. are kept in the bank as security for granting of LC for import of the goods and payment to the suppliers, and these FDRs. cannot be utilised for other routine and regular purposes of the business need. It is further submitted that the assessee firm had no cash credit account but had overdraft account against FDRs. Therefore, borrowing made by the assessee from other persons is wholly and exclusively for the purpose of its business only and therefore, the payment of interest on such loans allowable as deduction. We find that the CIT(A) while allowing the claim of the assessee has recorded that the AO was not justified in making addition based on the balance sheet figures or merely assumption of his own but to marshal concrete evidence for his findings. Accordingly, the CIT(A) held that the rate of interest of 12% of borrowed funds should not have been considered as excessive. We find that the assessee has satisfactorily explained the business exigencies for raising loan from other parties, and utilising the same wholly and exclusively for the purpose of business, and the rationale for kee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hurried generalization. The learned counsel for the assessee has drawn our attention to page no.10 of the paper book, containing reply of the assessee dated 14.11.2008 to the show cause notice of the AO dated 7.11.2008, wherein the assessee has clarified on the issue of claim of brokerage raised by the AO in the assessment proceedings. With regard to necessity of engaging brokers for the sale goods, it was clarified by the assessee in the reply that in the earlier year total sales were not made through brokers, but during the year the entire sales were made through brokers, looking to the market situations and to avoid possibilities of bad debts. The assessee has also given reason for variation in brokerage rate in the items of sales viz. viscos yarn and nylon yarn. The assessee has furnished before the AO the copies of sales register and other records to prove its case, as is evident from its reply and the observations of the CIT(A) in the impugned order. The assessee has also produced before us the copies of ledger account of brokerage expenses and bills and ledger account of parties at page no.16 to 84 of the paper book. This has not been disputed by the Revenue before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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