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2015 (4) TMI 592 - AT - Income TaxDisallowance on account of loss due to flood - CIT(A) allowed the claim - Held that:- The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. We find that the ld.CIT(A) has observed that the assessee followed the principle and signed in the notified accounting standards. Therefore, the assessee claimed loss due to flood, on mercantile basis in the year in which the said loss (liability) had arisen. We also find that the AO has disallowed the claim on the basis that the extent of damages due to flood was not ascertainable in the assessment year under consideration. It is not in dispute that loss has occurred during the year under consideration, however the dispute is that the loss and quantification thereof are not ascertainable in the year under consideration. We do not agree with this reasoning of AO in rejecting the claim in view of the principle laid down by the Hon'ble Apex Court in the case of Bharat Earth Movers vs. CIT [2000 (8) TMI 4 - SUPREME Court] - Decided against revenue. Disallowance u/s 14A - CIT(A) restricting the disallowance - Held that:- CIT(A) has given a finding that the assessee has been able to establish this fact from its account that no portion of interest bearing-funds were utilized by the applicant in making the aforesaid investments and, therefore, the applicant has not really incurred any direct expenditure for earning the exempt income. This finding of ld.CIT(A) has not been controverted by the Revenue by placing any material contrary. Therefore, we no reason to interfere with the order of the ld.CIT(A) on this issue, same is hereby upheld. In respect of disallowance to 0.5% of value of investments amounting to ₹ 42,423/-, the ld.CIT-DR submitted that the order of the ld.CIT(A) is justified on this ground. We find that the assessee has not challenged the finding of the ld.CIT(A) by filing a cross-objection, therefore this finding of ld.CIT(A) is not interfered - Decided partly in favour of revenue. Late delivery charges debited by the assessee disallowed - CIT(A) allowed the claim - Held that:- in this case, no remand report was sought for from the AO by the ld.CIT(A) before deleting the disallowance on the basis of evidence adduced by the assessee-company. The AO has categorically given a finding that no evidence was produced to prove that such late delivery charges have been crystallized during the year under consideration. We find that the ld.CIT(A) has also not given any finding as to what were the terms of agreement between the assessee and the customers. Thus we cannot approve the finding of the ld.CIT(A), therefore the order of the ld.CIT(A) on this issue is set aside and the issue is restored back to the file of ld.CIT(A) for decision afresh since the order passed by the ld.CIT(A) is not a speaking order - Decided in favour of revenue for statistical purposes. Disallowance u/s.40A(2)(a) - CIT(A) allowed the claim - Held that:- The GP Margin of the firm for FY 04-05 was 18.71% and also during the period from April-July, 2006 it was 18.80%. On a matching basis the GP Margins earned by the appellant company have also shown increasing trend, as they improved from 15.69% in FY 2003-04 to 18.95% in FY 2005-06. Further, the GP Margin earned by the firm in case of third party sales (unrelated parties) in the period from April-July 2006 is 18.65% - i.e. within comparable range vis-ŕ-vis the overall GP Margin earned by the firm in the same period. By inference, it can be concluded that for related party sales also, the firm would have earned similar margin. The appellant has also explained by way of written submissions to the AO the commercial expediency for which it was incumbent on part of the firm to transfer large position of the semi-finished goods to the appellant company prior to the takeover date. Thus the addition made by the AO u/s.40(A)(2)(b) is correctly deleted. - Decided against revenue.
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