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2022 (5) TMI 1465 - AT - Income TaxService Tax Claim - claim denied on the ground that the said demand was related to earlier years and the said Service Tax liability of the assessee or the recipient was on that point of time disputed by the parties - AO has not taken cognisance of the fact that the Service Tax was paid by the assessee during the year under consideration - HELD THAT:- The deduction in respect of the Service Tax is statutory liability irrespective of the period to which such liability pertains to. Thus, the assessee is eligible for the deduction of the said amount during the year under consideration. The CIT(A) was right in deleting the said addition and there is no need to interfere with the findings of the CIT(A). Ground no.1 of Revenue’s appeal is dismissed. Trade promotion expenses - D.R. submitted that the said expenses are allowable as and when the income is offered and thus the CIT(A) was not right in deleting the same in view of the findings of the Assessing Officer that no evidence was produced before the AO - HELD THAT:- The assessee incurred these expenses which are customary practice and the same was allowed in earlier assessment years by the Revenue. These expenses are incurred to maintain cordial and long-lasting relationship with the customers as well as within the business co-ordinator/partners for the benefit of the business. The same are allowable under Section 37 - The said amount is 0.20% compared to assessee’s turnover - Thus, the CIT(A) rightly deleted this addition and there is no need to interfere with the findings of the CIT(A). Ground no.2 of Revenue’s appeal is dismissed. Nature of expenses - land restoration expenses - revenue or capital expenditure - HELD THAT:- The issue is identical in the present assessment year to that of A.Y. 2007-08 wherein the Tribunal has observed that if corresponding income has been offered for tax then corresponding expenses should also be allowed. To that extent the findings of the CIT(A) in assessee’s favour for A.Y. 2008-09 is correct. Hence, ground no.3 of Revenue’s appeal is dismissed. Employees contribution to PF - HELD THAT:- It is pertinent to note that the Hon’ble High Court of Gujarat has decided this issue against the assessee in the case of Suzlon Energy Limited [2020 (2) TMI 792 - GUJARAT HIGH COURT] Therefore, we are allowing ground no.4 of Revenue’s appeal. Bogus purchases - A.R. submitted that the purchases made from the four partiers upon which the CIT(A) observed that the parties are genuine - HELD THAT:- It is pertinent to note that the parties were not produced before the Assessing Officer as well as before the CIT(A), but the Assessing Officer also has not issued any notice to call for these parties. The fact also remains that the sales were never disputed and thus purchases were in consonance with the sales made by the assessee. Thus, the deletion of 75% of bogus purchases by the CIT(A) was correct and there is no need to interfere with the findings of the CIT(A). The decision relied by the Ld. A.R. that of Gujarat Ambuja (Export) Limited [2014 (2) TMI 1344 - GUJARAT HIGH COURT] is factually distinguishable and hence not applicable in the present case. Ground no.5 of the Revenue’s appeal is dismissed. Allowing standard deduction u/s 24(1) - D.R. submitted that treating the rent income as house property income when the assessee has claimed expenses relevant to leased house property as business expenditure amounts to double deduction and, therefore, the AO has rightly made this addition - HELD THAT:- CIT(A) has rightly observed that rental income was on account of leasing out part of its business & factory building and not of plant and machinery or other equipments. Since the assessee has not changed the head of income at all i.e. “rental income” as “income from house property”, the same cannot be changed into “income from business and profession” in subsequent year. The CIT(A) has rightly deleted the same addition and there is no need to interfere with the findings of the CIT(A). Hence, ground no.6 of Revenue’s appeal is dismissed. Disallowance under Section 36(1)(iii) - D.R. submitted that the CIT(A) was not correct in directing the Assessing Officer to disallow the interest worked out as per formula given by him as against amount worked out by the Assessing Officer - HELD THAT:- It is not disputed by the Revenue that the interest-free funds are lesser than the interest-free advances. The CIT(A) has properly given part relief thereby directing the Assessing Officer to work out the proportionate interest on specific formula envisaged by the CIT(A) in the order. Therefore, there is no need to interfere with the findings of the CIT(A). Ground no.7 of Revenue’s appeal is dismissed. Disallowance made in respect of losses on account of reacquisition of assets - A.R. submitted that the assessee sold certain assets in A.Y. 2007-08 declaring profit but the said transaction of sale was never materialised and, therefore, the assessee in assessment year 2008- 09 reversed the said transaction by booking loss of equipment amount - HELD THAT:- It is pertinent to note that the fact remains that the actual transaction of sales never took place in A.Y. 2007-08 and, therefore, the reversal was called by the assessee in A.Y. 2008-09 but the assessee has not given the details as to what caused the reversal of entries. Therefore, the said transaction of sale whether happened in A.Y. 2007-08 or in subsequent year that of 2008-09 was not proved by the assessee. CIT(A) has rightly confirmed this addition as such kind of reversal entry is not acceptable in respect of the transaction which has not been proved by the assessee before the Revenue Authorities. Hence, ground no.1 of the assessee’s appeal is dismissed. Disallowance being irrecoverable deposit written off in books - HELD THAT:- The contentions of the assessee that the said expenses/sum becomes irrecoverable were not disputed by the Revenue Authorities. Therefore, the Assessing Officer as well as the CIT(A) was not correct in treating the same as capital loss. The case laws relied upon by the Ld. A.R. are very much relevant in assessee’s case. Ground no.5 of the assessee’s appeal is allowed. Disallowance being professional charges - A.R. submitted that the said expenses were wholly and exclusively incurred for the business purpose are revenue in nature - Alternatively, the Ld. A.R. submitted that the assessee is eligible for claiming 1/5th of such expenses under Section 35D - HELD THAT:- As pertinent to note that the CIT(A) has not called for any remand report from the AO in connection with the claim of deduction under Section 35D and, merely on technical ground that there is no material available on assessment record, dismissed this claim of the assessee. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer for proper adjudication after verifying the evidences produced before the Assessing Officer. Needless to say the assessee be given opportunity of hearing in respect of claim of deduction under Section 35D of the Act. Ground nos.6 & 7 are partly allowed for statistical purpose. Disallowance u/s 14A - HELD THAT:- The investments which were made by the assessee are more than the interest-free funds and the assessee has earned exempt income in the present A.Y. Therefore, as per the various decisions of the jurisdictional High Court as well as by the Apex Court, the disallowance under Section 14A of the Act is not just and proper on the parts of the Assessing Officer and the CIT(A). Ground No.11 of the assessee’s appeal is, therefore, allowed.
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