TMI Blog2019 (10) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect 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 expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he registration granted to M/s. Herbicure Healthcare Bio-Herbal Research Foundation with retrospective effect cannot in any way affect the weighted deduction which has to be granted in light of Explanation appended to sec. 35(1)(ii) of the Act. However, the Ld. CIT(A) has confirmed the action of the AO. Aggrieved, the assessee is before us. 6. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee had claimed exemption u/s. 35(1)(ii) of the Act for making donation of ₹ 1,55,00,000/- to M/s. Herbicure Healthcare Bio-Herbal Research Foundation which enjoyed registration u/s. 35(1)(ii) of the Act granted on 14.03.2008 and renewed vide dated 13.08.2012 which fact has not been disputed. The only ground on which the AO has denied the claim of weighted deduction was that it has come to his knowledge that the founder of M/s. HHBHRF has admitted before the department that it was indulging in the nefarious practice of giving accommodation entry to the entities like assessee and a whistleblower has also supported this allegation. However, when the AO issued notice u/s. 133(6) to M/s. HHBHRF, it did not support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration certificate once granted by him to the assessee under Section 12A till 01.10.2004. It is for the reasons that, first, there was no express provision in the Act vesting the CIT with the power to cancel the registration certificate granted under Section 12A of the Act. Second, the order passed under Section 12A by the CIT is a quasi judicial order and being quasi judicial in nature, it could be withdrawn/recalled by the CIT only when there was express power vested in him under the Act to do so. In this case there was no such express power. 22. Indeed, the functions exercisable by the CIT under Section 12A are neither legislative and nor executive but as mentioned above they are essentially quasi judicial in nature. 23. Third, an order of the CIT passed under Section 12A does not fall in the category of orders mentioned in Section 21 of the General Clauses Act. The expression order employed in Section 21 would show that such order must be in the nature of a notification , rules and bye laws etc. (see - Indian National Congress(I) v. Institute of Social Welfare [2002] 5 SCC 685. 24. In other words, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n till 01.10.2004; and lastly, Section 21of the General Clauses Act has no application to the order passed by the CIT under Section 12A because the order is quasi judicial in nature and it is for all these reasons the CIT had no jurisdiction to cancel the registration certificate once granted by him under Section 12A till the power was expressly conferred on the CIT by Section 12AA(3) of the Act w.e.f. 01.10.2004. 8. We hold that the ratio decidendi of the aforesaid judgement of the Hon ble Apex Court would squarely be applicable to the facts of the instant case. Infact the assessee s case herein falls on a much better footing than the facts before the Hon ble Apex Court. In the case before Hon ble Apex Court, 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 organizat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of approx. ₹ 28 cr. in this assessment year, and out of this amount only ₹ 4.51 cr. has been given as interest free advance to related and unrelated parties as spelled out by the AO in his order. Since the assessee had own funds of ₹ 148.27 cr. plus ₹ 28 cr. the presumption is that when the assessee has in its possession mixed funds which includes its own fund in sufficient quantity, the presumption that its own funds were utilized for giving interest free advances/loans has to be drawn. This principle has been laid by the Hon ble Bombay High Court in Reliance Utility Powers Ltd. Vs. CIT 313 ITR 343 (Bom) and Hon ble Madras High Court in CIT Vs. Hotel Savera 239 ITR 795 (Mad) and Tin Box Company Vs. CIT (2001) 249 ITR 216 (SC), Hon ble Calcutta High Court in CIT Vs. Britannia Industries Ltd. 280 ITR 525. Therefore, 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the power plants has to be monitored continuously or else the power plants have to be shut down if there is any deficiency in supply of coal. Therefore, the employees had to be constantly moved and they in-turn have to constantly monitor the movement of coal to various consumers. Therefore, the expenditure has been booked on actual basis only and since the partners are aged more than 80 years the question of personal element in expenditure on the aforesaid claim does not arise. It was also brought to our notice that in the subsequent year ie,AY 2014-15 which is before us, the AO only has made disallowance on two counts i.e. in respect of travelling and business promotion and on other counts he has not made any disallowance. 16. After having heard the rival submissions, we note that the assessee is into coal business. We also note that there are only two partners aged about 82 and 80 years and the AO for AY 2014-15 only made disallowance for two counts i.e. for travelling as well as for business promotion and has not made any disallowance for the other counts which is enumerated above. We also note that the assessee firm had a turnover of ₹ 56 cr. and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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