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2016 (10) TMI 924 - AT - Income TaxDisallowance of 5% paddy purchases - AO made the additions for the reasons that gate passes maintained by the assessee are not giving true and correct position of purchases - Held that:- As during the course of appellate proceedings, the assessee has furnished copy of order passed by agricultural marketing committee and reconciled the quantity of paddy purchases with MSP to its books of accounts. The CIT(A) has recorded categorical finding of facts that the purchases recorded by the assessee and purchases as per the AMC reports are matched. The revenue failed to prove the finding of facts recorded by the CIT(A) is incorrect. Therefore, we are of the view that the CIT(A) has rightly deleted additions made towards disallowance of paddy purchases. - Decided in faour of assessee. Disallowance of certain expenditure on adhoc basis - Held that:- Considering huge volume of business of the assessee, the expenditure incurred by the assessee under freight charges and other expenditure is meager in nature. We further observed that all the expenditure is covered under fringe benefit tax. The A.O., while assessing the fringe benefit tax has accepted the expenditure claimed by the assessee as genuine in nature. Therefore, we are of the view that once the expenditure has been accepted as genuine, there is no reason for the A.O. to doubt the same for the purpose of allowing deduction against business income. The CIT(A) after considering the relevant facts, has rightly sustained part of the additions and directed the A.O. to delete the remaining additions. Disallowance of expenditure incurred under the head ‘exchange loss’ - Held that:- We do not find merits in the findings of the A.O., for the reason that in the present case on hand, the A.O. himself has accepted that the loss claimed by the assessee are on account of cancellation/renewal of forward exchange contracts, which has been debited by the bankers. The assessee has filed details of forward exchange contracts and bank accounts. On perusal of the bank statements, we find that the losses incurred by the assessee is on account of cancellation/renewal of forward exchange contracts, which is crystallized and debited by the bankers. Considering facts and circumstances of this case, we are of the view that foreign exchange loss incurred by the assessee on account of entering into forward contracts with banks for the purpose of hedging loss in connection with its import/export business has to be regarded as business loss. The CIT(A) after considering the relevant explanations rightly deleted the additions made by the A.O. We do not see any reasons to interfere with the order of CIT(A). Hence, we inclined to uphold the CIT(A) order and reject the ground raised by the revenue
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