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2017 (10) TMI 1002 - AT - Income TaxAdditions made on the basis of the fall of GP rate - CIT-A deleted the addition - Held that:- The variance in GP rate, according to the Ld. CIT (A) had to be considered in holistic view, but picking up some units for penalization without reward to the units where the GP rate was increased is bad. In respect of FL 2 Unit, gas division, parvat fabrication and parvat wires the declination was in significant Ld. CIT (A) observed that there is marginal declination. In respect of all these units Ld. CIT (A) observed that no specific case of inflation of direct expenses or suppression of receipts was found by the AO. Merely because there is decrease in the GP rate addition could be made in the absence of any specific finding as to the incorrectness of the accounts. On this aspect, we are in agreement with the Ld. CIT (A) because the AO had to take both the increased and decreased in GP rate in respect of all the units as a whole but leaving the profit making units unrewarded it is not fair to pick up only such units where the GP rate is on a fall. - Decided against revenue Addition made on account of interest earned on year marked funds - CIT-A deleted the addition - Held that:- As per the comments of C&AG the interest earned on these ‘earmarked fund’ shall be transferred and credited to the ‘earmarked fund’ and the corporation has no authority to use or expand or utilized the interest earned for its own purposes, and any credit of this ‘earmarked fund’ to the accounts of the assessee results in understatement of loss and current liabilities. However, AO felt that the interest earned on the ‘earmarked fund’ would also go to the same kitty of funds of the company, as such, the interest amount of ₹ 12,32,322/- has to be treated as income. Ld. CIT (A) on this aspect found that in respect of all the assessment years 2005-06 and 2006-07 also in appeal Ld. CIT (A) accepted the contention of the corporation and held that the interest earned on ‘earmarked fund’ FDR cannot be treated as income of the corporation. Following the same in respect of the AY 2007-08 also Ld. CIT (A) granted relief to the assessee. No change of facts from those of the assessment years 2005-06 and 2006-07 is brought to our notice. We do not find any illegality or irregularity in the Ld. CIT (A) in taking the same view on identical facts - Decided against revenue
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