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2017 (12) TMI 1395 - AT - Income TaxDisallowance made under section 14A - Held that:- in view of the availability of interest free funds in the form of share capital and reserves & surplus, being more than the investments made in securities, income from which was exempt from tax, there is no merit in making any disallowance under section 14A of the Act read with Rule 8D(ii) of the Rules. The assessee having applied the said funds in fixed and current assets, cannot be the basis for denying the availability of interest free funds available with the assessee i.e. share capital and reserves & surplus for making investments in tax free securities. Accordingly, we hold so. In view thereof, there is no merit in making any disallowance under Rule 8D(ii) of the Rules. However, we uphold the disallowance made under Rule 8D(iii) of the Rules on account of administrative expenses. Accordingly, the addition of ₹ 40,751/- in assessment year 2009-10 and ₹ 46,695/- in assessment year 2010-11 is upheld. The ground of appeal No.1 raised by the assessee in assessment years 2009-10 and 2010-11 is thus, partly allowed. Allowance of expenditure incurred on account of discount given to the dealers - Held that:- The perusal of the details would reflect that in none of the cases even after paying discount which the Assessing Officer felt was higher, the assessee had made the profits. The total turnover of the assessee for the year under consideration was about ₹ 32 crores and the total expenditure booked by the assessee on account of discount is ₹ 1 crore which less than 5% of the total sales. The assessee as businessman had taken business decision to make a policy for the distribution of its goods and to pay discount to different dealers in this regard. Such business decision cannot be negated by the Assessing Officer on the surmise that as per the Assessing Officer, the discount paid by the assessee was higher. The assessee is best judge of its business arrangement and in the absence of any evidence found that the expenditure has not been incurred, merely on the ground that the rate of discount paid is higher, the expenditure cannot be disallowed in the hands of assessee. Claim of bad debts - Held that:- Where the assessee has filed the outstanding statement and proofs of the entries made in the books of account in the respective previous years to which sales to the said parties were reflected and once the amount had not been recovered and had been written off in the books of account of the assessee, then the same is to be allowed as deduction under section 36(1)(vii) r.w.s. 36(2) of the Act. Accordingly, we hold so. Allowing late delivery charges - Held that:- no error in the order of CIT(A) in holding that the late delivery charges paid by the assessee were in the nature of expenditure carried out during the course of carrying on the business. The said late delivery charges were levied by the OEM customers, who were given specific orders to the assessee for delivery within time frame, but because of the delay in the project, clause for L.D. charges was applied and the amount was recovered from the assessee. In the totality of the above said facts and circumstances, we are of the view that the said expenditure is duly allowable in the hands of assessee.
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