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2012 (11) TMI 906 - AT - Income TaxAddition made on account of cessation of liability u/s 41(1) - non-filing of confirmations of Creditors by assessee - lapse of more than 3 years - no transaction - Revenue contended that right to recover the said amount has become barred by limitation, therefore, the provisions of Section 41(1) are invoked - Held that:- The assessee’s consistent stand has been that he had not made any entry in the profits and loss accounts during the year under appeal and there was no remission or cessation of liability during the year under appeal, this shows the intention of the assessee for making payments to these parties. Further, A.O. has not been able to demonstrate any cogent reason and has not brought any material on record to show that these liabilities have ceased in the year under appeal. Simply because assessee was not able to produce any confirmation regarding the creditors, the conclusion cannot be arrived that the liability has ceased to exist. Therefore, CIT(A) rightly deleted the addition - Decided in favor of assessee. Dis-allowance of interest expenditure on borrowed funds on account of interest free advances being provided to other parties - assessee contended that it was having interest free fund of Rs.6.94 crores against interest free advance of Rs.1.06 crores and therefore, dis-allowance on interest was uncalled for. Held that:- Aforesaid contention of assessee requires verification at the end of the A.O. and for this purpose the matter is restored to the file of the A.O. Dis-allowance u/s 40(a)(ia) - payment to labour contractor - seasonal business - assessee contended that assessee engaged labour on piecemeal basis without any type of written or oral contract - Held that:- Provision of section 40(a)(ia) could not be invoked where tax u/s 194C was not deducted from labour charges paid to labour sardars as there was no agreement between the assessee and the labour sardars to supply labour. CIT(A) rightly deleted the addition Dis-allowance made on account of repairing and maintenance for want of bills - assessee contended before CIT(A) that the expenditure was fully supported by vouchers and supporting evidence was also available - Held that:- Amount that has been spent by self made vouchers is less than 10% of the total repair expenses incurred by the assessee during the year under appeal which appears to be quite reasonable as it is some times not possible to obtain bills for each and every expenditure incurred as repairing expenses are paid to different persons which may not have the bills with them. In light of aforesaid, CIT(A) rightly deleted the dis-allowance.
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