TMI Blog2012 (5) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... both being aggrieved by the order of CIT(A), are in appeal before us. The first ground of appeal by the Revenue is against the disallowance of ₹ 7,63,666/- on account of earlier year s expenses. 4. According to the Tax Audit Report, earlier year s expenses were ₹ 29,07,666/-. The assessee while computing the total income added ₹ 21,44,000/-. The A.O. therefore added the balance amount of ₹ 7,63,666/- (29,07,666 21,44,000). 5. Aggrieved by the order of A.O. the assessee carried the matter in appeal before the Ld. CIT(A). Before CIT(A), assessee contended that revised return was filed by it on 27-11-1997 and the expenses relating to Assessment Year 1995-96 was added back. Similarly, income of ₹ 7,64,190/- which pertained to A.Y. 1995-96 and which was already taxed in A.Y. 1996-97 was excluded. CIT(A) agreed with the contentions of assessee and deleted the addition. Now the Revenue is in appeal before us. 6. Before us, Ld. A.R. reiterated the contentions made before CIT(A). He also placed on record the revised return filed by the assessee on 27-11-1997 wherein it suo-moto added back the expenses of ₹ 21,44,000/- pertaining to Assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,06,779/- assessee claimed expenses of ₹ 2,91,23,005/- on payment basis. With reference to claim of ₹ 5,60,53,441/-, assessee furnished before CIT(A) certificate from IFCI, IDBI and ICICI of ₹ 4,24,51,241/-. CIT(A) directed the AO to verify the certificates and details furnished by Assessee and further directed him to delete the addition only in respect of payments which are fully verifiable and supported by documents. 13. Aggrieved by the order of CIT(A), the Revenue is in now in appeal before us. The Ld. D.R. relied on the order of AO. It was further contended that CIT(A) does not have power to set aside. On the other hand the Ld. A.R. contended that the assessee had suo moto disallowed the interest provision of ₹ 3,21,06,779/- in the past. Out of the aforesaid amount the assessee has claimed ₹ 2,91,23,005/- u/s 43B as the same was actually paid. CIT (A) had only directed to verify the actual payments and after verification the same was directed to be allowed. 14. We have heard both the parties and perused the documents. While adjudicating the issue, CIT (A) has observed as under:- 6.3.2. The A.O. may verify the documents of having paid th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the AO was right is disallowing the amount that was written off was in the nature of advance for purchase of capital assets and were not in the nature of debts as contemplated u/s 36(2) of the I.T.Act. On the other hand, the Ld. A.R. reiterated the contentions made before CIT(A). It further relied on the decision of Mohan Meakin Ltd. vs. CIT (2011) 11 Taxmann.com 141 (Del). 20. We have heard the rival contentions, perused the documents placed on record. It is an undisputed fact the amounts written off were in the nature of advance payments made for the capital assets. It is also an undisputed fact that the same were not considered as income in earlier years. The case of Mohan Meakin (Supra) which have been relied upon by the Assessee, is distinguishable on facts for the reason that in case of Mohan Meakin (supra) the advance was granted to a boot house, who in turn was its supplier for goods. Assessee had entered into agreement with Boot House to maintain continuity of supply of goods needed for export. The advance granted to boot house could not be recovered and therefore, it was written off. In Mohan Meakin s case the advance was granted during the course of business and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The Hon ble Supreme Court in the case of CIT Vs Woodward Governor India (P) Ltd (2009) 312 ITR 254 (SC) has held that increase or decrease in liability for repayment of foreign loan in respect of acquisition of an asset has to be taken ito account to modify the figure of actual cost in the year in which the increase or decrease in liability arises on account of fluctuation in rate of exchange. 27. As the facts in the case are identical to that of the case of Woodword Governor (supra), we respectfully following the decision of Hon ble Supreme Court are of the view that no interference is called for in the order of CIT(A) on this ground. We accordingly dismiss this ground of the Revenue. 28. Ground No.5 is regarding deletion of modvat credit on capital goods and allowance of depreciation on the same. 29. During the course of assessment proceedings the A.O. observed that assessee had purchased plant and machinery on which it received Modvat of ₹ 8,18,672/-. A.O. was of the view that as per provisions of Act, assessee should deduct the Modvat claim from Plant and Machinery. He therefore, disallowed the excess depreciation of ₹ 2,04,668/-on the amount of Modvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the Revenue is dismissed. ITA No.2352/AHD/2009. 37. The assessee s first ground of appeal is that the CIT(A) erred in confirming disallowance of ₹ 1,08,372/- being reimbursement to employees against traveling and for advertisement expenses u/s. 40A(3) of the Act. 38. The facts are that as per Tax Audit report, assessee has incurred cash expenses above ₹ 10,000/- amounting to ₹ 2,46,46,182/-. According to the Assessee, most of the above expenses are incurred on payment to transporters who did not accept cheque. Perusal of the details of expenses above ₹ 10,000/- revealed that it included sum of ₹ 1,08,372/- which does not relate to payment to transporters. It related to reimbursement given to employees of the company against traveling expenses and the payment made for advertisement. The details of above were submitted to the AO during the course of assessment proceedings. The AO was of the view that though the expenditure was incurred for traveling by the employees and for advertisement expenses, the assessee failed to prove the unavoidable circumstances under which payment in cash above ₹ 10,000/- was made and accordingly the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently during any previous year the assessee makes any payment in respect thereof in a sum exceeding [two thousand five hundred] rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, the allowance originally made shall be deemed to have been wrongly made and the Income Tax Officer may recomputed the total income of the assessee for the previous year in which such liability was incurred and make the necessary amendment, and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the assessment year next following the previous year in which the payment was so made: Provided further that no disallowance under this sub-section shall be made where any payment in a sum exceeding [ two thousand five hundred] rupees is made otherwise than by crossed cheque drawn on a bank or by a cross bank draft, in such cases and under such circumstances as may be prescribed, See Rule 6DD for cases and circumstances in which payment in a sum exceeding ₹ 10,000/- may be made otherwise than by a crossed cheque drawn on a bank or by a crossed ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal is regarding confirming of Notional interest on advances to subsidiary companies of ₹ 1,59,000/-. 46. During the course of assessment proceedings the AO observed that the assessee had made advances to subsidiary company and for which it was charging the subsidiary company interest @ 12% whereas, the assessee was paying interest on loan to bank and financial institutions as well as to other parties @ 18% and in this way the appellant has claimed excess interest on borrowed funds. The A.O. has mentioned that the assessee has failed to prove that advances at the lower rate to the subsidiary company were not made out of higher interest bearing borrowed funds. Therefore, the difference of interest of 6% on borrowed funds amounting to ₹ 1,59,000/- was disallowed. 47. On appeal, it was submitted that the appellant has charged interest @ 12% in earlier years and that appellant has sufficient interest free funds in the form of share capital. Thus, A.O. was not justified in calculating the notional interest @ 18%. More so, the A.O. has not proved the interest bearing funds have been diverted towards non-interest bearing advances. 48. After considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated the submissions made before CIT(A) and stated that the expenses incurred by Mr. Puri were for the purposes of business and therefore the same should be allowed. On the other hand the Ld. D.R. relied on the orders of the lower authorities. 56. We have heard the rival contentions and perused the material on record. Before us the Ld. A.R. could not furnish any tangible evidence to prove its contentions. In view of the foregoing, we are of the considered opinion that no interference to the order of the CIT(A) is called for and accordingly dismiss this ground of the assessee. 57. The next ground relates to the confirming of disallowance of repairs to factory building amounting to ₹ 32,048/-. 58. Before AO, Assessee has claimed expenditure of ₹ 1.74 lacs on account of repairs to the factory building. Perusal of the above expenses revealed that it included purchase of Sintex Tank of ₹ 32,048/- as per voucher dated 31.3.1996. The Ao was of the view that as the Sintex Tank is a capital asset the same was disallowed. However he allowed the depreciation of ₹ 4006/- on the same and accordingly he disallowed ₹ 28,042/- (Rs 32048-Rs.4006). 59. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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