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2021 (10) TMI 827 - AT - Income TaxDisallowances u/s 14A r.w.r.8D - HELD THAT:- Upon perusal of assessee’s financial statements, it could be gathered that assessee’s own funds in the shape of share capital and free reserves far exceeds the investment made by the assessee and therefore, a presumption would run in assessee’s favor that the investments were funded out of own funds. Secondly, the assessee has not earned any exempt income during the year. Therefore, the additional interest disallowance is not sustainable in law as per the cited judicial pronouncements. Therefore, by deleting the disallowance we allow this ground of appeal. Adhoc 10% disallowance of labour / assortment charges - HELD THAT:- Except for general observations, no specific defects have been pointed out by Ld. AO in sample documents produced by the assessee. Similar expenditure incurred by the assessee in AYs 2012-13 & 2014-15 has been accepted. The complete details of the expenditure along with relevant ledgers were furnished by the assessee during assessment proceedings - There is no dispute about genuineness and admissibility of claim of expenses. Regarding the observation of Ld. AO that there was drastic increase in such expenses during the year, the same stood explained by assessee’s reply dated 19/01/2016 wherein it was submitted that the expenditure increased due to change in manufacturing pattern of the assessee which was necessitated due to customers requirements since the assessee diversified into small pieces for which higher labour charges were paid by the assessee. The net profit reflected by the assessee is 2.43% which is quite similar to net profit of 2.48% reflected in the earlier year. Thus, in terms of the cited decision R.G. BUILDWELL ENGINEERS LTD. [2017 (12) TMI 1614 - DELHI HIGH COURT] and considering the facts of the case, we are inclined to delete the adhoc disallowance as made by Ld. AO. This ground stand allowed.
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