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2014 (6) TMI 985 - AT - Income TaxAddition on account of unaccounted receipt from National Dairy Development Board (NDDB) - Held that:- We find that the assessee is able to explain by filing details of packaging charges received to the sum of ₹ 1,20,27,912/- and why the difference kept in. The assessee has reconciled the figure of ₹ 7,22,171/- being the amount of packaging charges already booked in the Ay 1999-2000 and it has been verified by the AO as well as CIT(A). The second figure of ₹ 4,62,597/- being the amount received from NDDB was reflected under the head “other incomes” as is evident from the statement forming part of assessee’s paper book appearing at pages 27 to 31. From the above reconciliation it is clear that the assessee is able to explain why difference between the receipts as noted in TDS certificate and receipt declared by assessee arose. Accordingly, this amount of ₹ 12,32,996/- has rightly been deleted by CIT(A) and we confirm the same. This ground of appeal of revenue is dismissed. Disallowance of interest on borrowed money - Held that:- We find that the assessee company contributed a sum of ₹ 2,10,48,250/- by way of its shares in the joint venture. The assessee company under the name of Metro Dairy Ltd. produces milk in joint venture with WBSCMPFL and NDDB. The joint venture is a business enterprise and investment by assessee in the same is wholly and exclusively for the purpose of business. The assessee company filed copy of joint venture agreement amongst assessee, WBSCMPFL and NDDB before the AO, before CIT(A) and even now before us. Once the investment is made in a joint venture and all the monies borrowed were used wholly and exclusively for the purpose of business, no interest can be disallowed. This issue is covered by the decision of Hon’ble Calcutta High Court in the case of CIT Vs. Rajib Lochan Kanoria (1994 (2) TMI 42 - CALCUTTA High Court ). Even this issue is covered by the decision of Hon’ble Bombay High Court in the case of CIT Vs. Reliance Utilities & Powers Ltd.(2009 (1) TMI 4 - BOMBAY HIGH COURT ) wherein it is held that if there is interest free funds available to assessee to meet its investments and at the same time the assessee has raised loans it can be presumed that investments were from interest free funds available. Even otherwise, for the purpose of consistency, the assessee has made this investment from AY 1994-95 to 1999-2000 no such interest was allowed by AO and accepted this fact. In term of the above, we are of the considered view that the CIT(A) has rightly deleted the disallowance and we confirm the same. Addition under the head ‘Scooby Doo Promotion expenses’ - Held that:- As explained by the assessee before the AO that it did not receive any bill from Parley Agro Pvt. Ltd. but remitted ₹ 19/- per tray of Frooti Mango drink containing 27 tetra packs of the said juice. The assessee submitted complete breakup of ₹ 49,44,199/- paid/payable to Parley Agro Pvt Ltd. It was claimed by the assessee that it was under compulsion to participate in the scheme as a prudent businessman and accordingly, paid its share of expenses. It was the objection of the revenue that no services in exchange of payment to Parley Agro Pvt. Ltd. was received by the assessee company but it seems that the objection of the revenue is unjustified in view of the fact that the advertisement in the form of Scoobi Doo animation film was shown in Television and All India display of such film was intended for increase of the sale of “Frooti”. This being a promotional scheme assessee received huge success in business and this being a business itself, assessee’s expenses are also business expenses. We are of the view that the CIT(A) has rightly deleted the disallowance and we confirm the same Addition on account of increase in closing stock of stores & spares etc. - Held that:- We find from the reconciliation that the increase in the value of stock from ₹ 48,19,274/- to ₹ 48,37,047/- i.e. ₹ 17,772/- was properly accounted by the assessee and in view of this, CIT(A) has rightly deleted the addition and we confirm the same. Addition on unaccounted receipts from Dhara Vegetable Oil & Food Co. Ltd - Held that:- We find that as per TDS certificate issued to assessee by Dhara Vegetable Oil & Food Co. Ltd. the total bill of packaging charges amounting to ₹ 87,11,115/- and not ₹ 87,21,394/- as noted by the AO in the assessment order. The assessee explained before us that the gross bill of ₹ 87,11,115/-, it reversed the packaging charges of the earlier years attributable to under despatch packing material and added the packaging charges relating to under despatch packing material and the current year and there was discrepancy. We find that the assessee has determined the income chargeable under the head Profit and Gains of business in accordance with the method of accounting regularly employed by the assessee and also reconcile the discrepancy in the packaging charges vis-à-vis closing stock. Once the assessee explained the same, the addition cannot be made. Accordingly, we confirm the order of CIT(A) deleting the addition Addition of amount received by assessee from Metro Dairy Ltd on account of TDS credit - Held that:- AO failed to correctly appreciate the submissions made by assessee in regard to real nature of receipt of the assessee. It is a fact that assessee has received a sum of ₹ 4,62,911/- on account of reimbursement of expenses incurred by assessee on a joint venture project carried on with Metro Dairy Ltd. Since this amount represented reimbursement of expenses it was not in the nature of income in the hands of the assessee. CIT(A) has rightly deleted the same and we confirm the same. Addition on account of obsolete stores - Held that:- From the details of closing stock as on 31.03.2003 has shown in the statement enclosed with the assessee’s letter it is noticed that the total of the various items of closing stock of stores and spares was at ₹ 51,32,752/- from which obsolence amounting to ₹ 2,5,705/- was deducted. From the statement it is clear that this amount shown by the assessee as provision for obsolence rather it is a deduction claimed on account of obsolete stores and spares written off. This being an usual practice in the manufacturing industry to write off obsolete stores annually and therefore, claim as deduction from the closing stock is fully justified. Addition on account of remission of sales tax - Held that:- The sales tax remission given under West Bengal Incentive Scheme 1993 and 1999 was not for assisting the assessee in carrying out its business operation but incurred the promotion of industries in the State of West Bengal and consequently, following the decision of Hon’ble Supreme Court in the case of Sahaney Steel & Press Works Ltd. Vs. CIT [1997 (9) TMI 3 - SUPREME Court ] holding the sales tax remission as capital receipt.
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