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2016 (2) TMI 168 - AT - Income TaxDeemed dividend addition u/s 2(22)(e) - CIT(A) deleted the addition - whether the advance made by M/s Adampur Distributors Pvt. Ltd. is for business transaction or it is a loan or advance? - Held that:- The ledger extract of M/s Adampur Distributors Pvt. Ltd. clearly establishes that M/s Adampur Distributors Pvt. Ltd. purchased gold from M/s Mustafa Gold Mart, a proprietary concern of the assessee. It is also not in dispute that upto 2007-08, M/s Adampur Distributors Pvt. Ltd. engaged in the business of jewellery and later on, the business was diversified. To revive the gold jewellery business, M/s Adampur Distributors Pvt. Ltd. advanced money to M/s Mustafa Gold Mart for purchasing gold jewellery. In fact, M/s Mustafa Gold Mart delivered gold jewellery to M/s Adampur Distributors Pvt. Ltd. In those circumstances, it is obvious that the transaction between M/s Adampur Distributors Pvt. Ltd. and M/s Mustafa Gold Mart, is a business transaction. Hence, the advance paid by M/s Adampur Distributors Pvt. Ltd. to M/s Mustafa Gold Mart cannot be construed either as loan or advance. Therefore, this Tribunal is of the considered opinion that the provisions of Section 2(22)(e) of the Act cannot be applied to a business transaction. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the order of the CIT(Appeals) is confirmed. - Decided in favour of assessee Disallowance under Section 40A(2)(b) commission paid to Shri Ishtiaq Ahmed - CIT(A) deleted the disallowance - Held that:- It is for the assessee to decide whether commission is to be paid to any particular individual or not. In the interest of the assessee and for promoting the business, if the assessee comes to a conclusion that payment of commission is required, then the Assessing Officer cannot step into the shoes of the assessee and say that the payment of commission is not required. In this case, it is not the case of the Revenue that the payment of commission is not required. The only contention of the Assessing Officer is that the payment is unreasonable and excessive. As rightly submitted by the Ld.counsel for the assessee, the recipient Shri Ishtiaq Ahmed has disclosed the receipt of commission and paid taxes. The Assessing Officer accepted the income declared by the above said Shri Ishtiaq Ahmed as commission. In those circumstances, as rightly found by the CIT(Appeals), the disallowance made in the hands of the assessee is not justified.- Decided in favour of assessee Addition under Section 41(1) - CIT(A) deleted the addition - Held that:- Assessing Officer made deduction on the ground that the sundry credit existed for more than 7 years, therefore, the liability ceased to exist. This Tribunal is of the considered opinion that merely because the credit existed for more than 7 years, the liability cannot cease automatically. Time for legal suit to recover the amount may be barred under the provisions of Limitation Act, however, the right of the creditor to recover the amount still exists by other modes. In other words, what is barred is filing civil suit to recover the money but the other means are not barred at all. Moreover, the liability is shown in the year under consideration also. Therefore, the assessee accepted liability during the year under consideration. When the assessee accepted the liability, the period of limitation gets extended. In those circumstances, there is no question of any cessation of liability. It is not the case of the Revenue that the creditors waived the amount due to them. In those circumstances, the CIT(Appeals) has rightly deleted the addition - Decided in favour of assessee Addition made on account of unexplained jewellery - CIT(A) deleted the addition - Held that:- The quantity of gold jewellery depends upon the status of the assessee in the society. The assessee, being a businessman, commands respect in the locality where he resides. Therefore, naturally the parents of the girl would give gold jewellery as Sthreedhan property. This is a customary practice which prevails in the country. The customary practice that prevails in this part of the country cannot be brushed aside by the Assessing Officer to disbelieve the claim of the assessee. By taking into consideration the customary practice prevails in the country and the society of the assessee where he resides, this Tribunal is of the considered opinion that the assessee’s wife would have received gold jewellery as Sthreedhan property during her marriage and also would have received gifts on the occasions like marriage, birthday, etc. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the addition made by the Assessing Officer - Decided in favour of assessee Disallowance of expenses - Held that:- In the absence of proper vouchers, the CIT(A) has correctly restricted the disallowance to 20% claimed by the assessee. Disallowance made in respect of exemption claimed under Section 10 - assessee has also claimed travelling allowance as exempted - Held that:- The uniform allowance and conveyance allowance to the extent of ₹ 42,000/- and ₹ 9,600/- respectively have to be allowed since it is for the purpose of business or the employment carried out by the assessee. In respect of travelling expenses, the claim of the assessee was that he had to travel for advertisement at many places in the city of Chennai. This Tribunal is of the considered opinion that while claiming expenditure for the commission, the assessee has claimed salary and other expenses for making advertisement. Therefore, it may not be correct to say that the assessee had to travel for advertisement purpose. In other words, the travelling expenses for making advertisement was included in the expenditure claimed by the assessee for commission receipt. Therefore, another claim of ₹ 1,16,700/- is not justified. Accordingly, the order of the CIT(Appeals) is set aside in respect of travelling allowance to the extent of ₹ 1,16,700/- and the Assessing Officer is directed to make addition of ₹ 1,16,700/- towards travelling expenses. Charging of interest under Section 234B - Held that:- The return filed consequent to the notice issued under Section 153A has to be taken for computing interest under Section 234B of the Act.
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