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2017 (11) TMI 847 - ITAT BANGALOREDisallowance of technical consultancy fee - assessee has claimed that shri S.S. Mallikarjun is the chief promoter of distilleries and because of his dynamic support the assessee could expand its production and technical upgradation - whether shri S.S. Mallikarjun has rendered any service apart from his capacity of Managing Director of the assessee company? - Held that:- The assessee has produced certain certificates in this regard showing his knowledge and undergoing training and technical qualifications. However, no documents or material has been produced by the assessee to show which service has been rendered by shri S.S. Mallikarjun to the assessee. The assessee being a company was required to produce atleast some decision taken by the Board of Directors regarding the technical consultancy services to be rendered by shri S.S. Mallikarjun against which the fee was to be paid over and above the salary and other remuneration being a Director / Managing Director of the assessee company. In the absence of any material evidence regarding the service actually rendered by shri S.S. Mallikarjun the mere competence or qualification cannot be a criteria for allowing the payment made by the assessee on account of technical consultancy fee. - Decided against assessee Disallowance of interest u/s. 14A - contention of the assessee that the investment was made for the purpose of the business of the assessee - Held that:- Contention of the assessee is relevant in respect of the disallowance made u/s. 37(1) and not for the purpose of disallowance u/s. 14A. So long the assessee is showing the investment in the shares the said transaction clearly falls in the ambit of section 14A as a dividend income from the investment is exempt u/s. 10(38) of the IT Act. Further the assessee has raised the contention by pointing out that the increase in the overdraft limit during the year is only ₹ 2,79,00,000/- and there is much more corresponding increase in the current assets. However we note that neither the AO nor the CIT(A) has analysed these facts or given any finding on this issue. This aspect is relevant only when there is no direct nexus between the borrowed fund and investment. In case there is a direct nexus between the borrowed fund and investment and if it is found that the investment has been directly made from the overdraft account then the increase in the current assets is not relevant. Accordingly, we set aside this issue to the record of the AO for proper verification Addition on excess price paid towards purchase of jowar flour - Reworking of grain price by adopting the average rate of ₹ 950 per quintal - Held that:- The average rate computed by the CIT(A) is the maximum rates prevailing at these three APMCs. The assessee claimed before the CIT(A) that the AO should have considered the rates for moderate good jowar. Therefore the assessee itself has not claimed that it has purchased the best jowar available in the market. Accordingly, having considered the facts and circumstances of the case we are of the view that the mean rate which is minimum + maximum / 2 of all three APMCs to be considered for working out the average market price of jowar during the year under consideration. The AO is directed to apply the rate of ₹ 800/- per quintal. Disallowance made on account of husk purchase - excess of purchases during the year under consideration as compared to earlier year - Held that:- The total husk required for generation of this quantity of steam was computed at 25,379 MTs against which the assessee has shown the purchase of 10,312.75 MTs of husk during the year and the remaining fuel was used as biogas. The CIT(A) after considering all these facts has restricted the disallowance to 10% of the total disallowance made by the AO. In view of the above facts we do not find any reason to interfere with the impugned order of the CIT(A) qua this issue when the revenue has not brought before us to counter the facts recorded by the CIT(A). Disallowance on account of sundry creditors by invoking the provisions of section 41(1) - Held that:- The assessee filed the details of all the cases except the three cases for which the CIT(A) has confirmed disallowance. The details filed by the assessee have not been disputed by the revenue and therefore we do not find any error or illegality in the order of the CIT(A) qua this issue
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