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2020 (2) TMI 264 - AT - Income TaxBogus purchases - estimation of income - profit element embedded in these purchase transactions to factorize for profit - HELD THAT:- Primary onus casted upon assessee, to prove the transactions, remained undischarged. The stated factual matrix, in our considered opinion, would make it a fit case to make estimated additions to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey / unorganized market and undue benefit of VAT against such bogus purchases, which learned first appellate authority has rightly done so. Accepting the submissions that the assessee was dealing in low margin item like iron & steel which would warrant lower estimation and keeping in view the healthy Gross profit rate of 5.43% already reflected by the assessee, we restrict the estimation to net 5% of alleged bogus purchases of ₹ 3,40,80,030/- which comes to ₹ 17.04 Lacs.- Decided partly in favour of assessee. Disallowance u/s 14A - HELD THAT:- It transpires that the dividend income of ₹ 51,250/- stated to be earned by the assessee has been found to be taxable and Ld. AO has been directed to include the same while computing taxable income. Therefore, there would be no exempt income earned by the assessee and hence, no disallowance u/s 14A would be warranted as held by Hon’ble Madras High Court in Chettinad Logistics P. Ltd. [2017 (4) TMI 298 - MADRAS HIGH COURT] as relied upon by Ld. CIT(A). Therefore, finding no fault in the adjudication of Ld. CIT(A), we dismiss this ground of appeal. Disallowance u/s 36(1)(iii) - AO was directed by CIT-A to exclude interest on letter of credit & interest on car loan while computing the disallowance and consider only the balance interest component while computing the proportionate disallowance. HELD THAT:- We find that Ld. CIT(A) has clinched the issue in correct perspective and met the assessee’s submissions with due application of mind. No fault could be found in the directions of Ld. CIT(A) for exclusion of interest on letter of credit and interest on car loan since the same did not have any nexus with interest free loans advanced by the assessee. Resultantly, this ground stand dismissed. Disallowance u/s 40(a)(ia) on mere reimbursements - HELD THAT:- Undisputed position that emerges is that the assessee has duly deducted tax at source against service charges whereas no tax has been deducted against mere reimbursements. These reimbursements were supported by the supporting bills of the agents and there was no profit element in it. All these expenses were pure reimbursement in nature. This being the case, no TDS was required on such reimbursements. The decision of this Tribunal in Utility Powertech Ltd. V/s ACIT [2010 (4) TMI 1063 - ITAT MUMBAI ] also supports the same view. This decision has been rendered after considering the decision of Hon’ble Bombay High Court in CIT V/s Siemens Aktiongesellschaft [2008 (11) TMI 74 - BOMBAY HIGH COURT] Therefore, we find no fault in the action of Ld. CIT(A) in deleting the same by relying upon the order for AY 2012-13. This ground stands dismissed. - Decided in favour of assessee.
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