2014 (2) TMI 53 - ITAT DELHI

Disallowance out of preceding year expenses – Held that:- The assessee company is having many divisions all across the country and there can be instances and cases, where bills for expenses are received at much later dated or beyond the financial year and expenses could not be booked when they are incurred – Relying upon the decision in Nagri Mills Co. Ltd. [1957 (9) TMI 30 - Bombay High Court ] - The expenses were incurred wholly and exclusively for the purpose of business - The bonafide and genuineness of expenses is not doubted - Assessee claims that expenses to the tune of Rs.75,51,613/- were to be disallowed u/s 43B of the Act for the reason that these were not paid during the relevant period and these expenses can be allowed only on actual payments – Such expenses shall be allowed in the year of actual payment – Partly allowed in favour of Revenue.

Repair expenses – Held that:- The Assessing Officer has asked only general details and no specific bills were called for - The Assessing Officer must have applied his mind with the details submitted by the assessee and must have pinpointed the discrepancies and omissions - Ad hoc disallowance cannot be resorted to in the absence of any specific discrepancy noted in the details submitted by the assessee – Relying upon the decision in National Industrial Corporation [2002 (8) TMI 93 - DELHI High Court] - The order of CIT(A) is upheld.

Commission paid to managing director – Held that:- The Assessing Officer has made an ad hoc disallowance without appreciating the facts of the case that the turnover and profit of the company has been increased during the year - The payment has been made in accordance with Schedule-XIII of the Companies Act, 1956 and this payment has also been approved by the Board of Directors and shareholders of the company – The order of CIT(A) is upheld.

Commission expenses – Held that:- The assessee has furnished complete details of expenses along with evidences - The Assessing Officer without making specific inquiry about the expenses made adhoc disallowance out of commission expenses - The Assessing Officer was free to examine further the commission agents to whom the payments were made by the assessee - The assessee has submitted explanation for making the payments which the Assessing Officer has not found false - The assessee is having large number branches and the commission agents procure orders, facilitate in collection of payment from the customers and, therefore, the payments were made for the work carried out by the agents for the smooth running of the business of the assessee – Decided against Revenue.

Depreciation on machinery and wind electric generators – Held that:- The firm from whom the machines were purchased were non-existent but the facts show that the wind electric generators were installed at the premises of TNEB which has been confirmed by the TNEB which is a Government Undertaking - Merely not finding M/s. Airo Energy Ltd. that too without summoning the same at the premises cannot be made a basis to draw the conclusion that firm was non-existent - The evidence in the form of certificate from TNEB assumes a credence and deserves to be considered for allowing the depreciation on the assets - The confirmation filed from TNEC did not constitute additional evidence and the same was filed before the Assessing Officer – The CIT(A) was correct in deleting disallowance – Decided against Revenue.

Disallowance of depreciation on machinery – Held that:- The Assessing Officer made a presumption that wind electric generators purchased from M/s. Ashish Engineering Works was not genuine – He made the disallowance to cover up the possible leakage towards the bogus purchase on which assessee was entitled 100% depreciation other than the wind electric generators division - The AO has failed to establish that no assets have been purchased or installed and in that circumstances, he can resort to disallow the depreciation - No efforts have been made to establish that the details submitted by the assessee were not correct – Decided against Revenue.

Lease rent paid – Held that:- The assets were in existence as per the spot verification report dated 08.03.2001 of the chartered engineer appointed by the Income-tax Department - The lease rent paid is in respect of the assets purchased in the earlier years also deserve to be allowed in this year also - All the assets which have been acquired/ purchased by lessors from the five parties – The order of CIT(A) upheld – The lease rent was genuine and should be allowed.

Lease rent on machinery, lease management fee and lease rent of building – Held that:- The lease rent has been paid by banking channels - The assets had been found by the Chartered Engineer on the spot verification and the same was reported by him in his report dated 08.03.2001 - The suppliers of the machinery/equipments were well know like Tata Iron & Steel Co. etc. including Government organization BHEL - The lease rent paid on the assets in the subsequent years has never been disallowed by the revenue authorities nor the genuineness has been doubted - The lessors have confirmed having given the machinery on lease, the machinery was existed on the spot and being used - Decided against Revenue.

Interest paid on utilization of funds for non-business purpose – Held that:- The CIT(A) has proved the genuineness of the lease rent paid, then the interest paid cannot be said to for non-business purpose – Decided against Revenue.

Transactions with certain parties genuine or bogus – Held that:- Most of the payments made to these parties have been received back during the year, under consideration - The transactions relating to four parties shows there is a peak debit in the books of the assessee rather than the peak credit - There can be no addition on account of peak debit because it represents amount advanced through books of account to a particular party - The credit in the accounts represents the advance during the year under consideration - Once the advance made to a party and the same amount was received back then there cannot be any addition for escapement of income - The Assessing Officer has failed to discharge the onus with regard to establishing the fact regarding the benami of these sources of the assessee - The Assessing Officer could have enquired regarding the person who has introduced the accounts from the account opening form and the necessary enquiries could have been made from the banks but nothing of such type has been done by the Assessing Officer - Merely stating that the cheques have been issued to the parties and received back during the year under consideration cannot be a basis for making such huge addition of Rs.20 crores – Decided against Revenue.

Staff welfare and sales promotion expenses – Held that:- The assessee has failed to furnish complete details of the expenses incurred - The Assessing Officer has restricted the disallowance to 10% on account of staff welfare and sales promotion expenses - Keeping in view of the nature of expenses, CIT (A) was justified in sustaining the addition being 10% of these expenses being treated as not allowable in view of the provisions of section 37(2) of the Act – Decided against assessee.

Foreign traveling expenses – Held that:- Assessing Officer had disallowed this amount out of foreign traveling expenses as details submitted were not sufficient to explain the expenditure to justify - Such disallowances are being made in past years – Decided against assessee.

Amount paid in cash in excess of Rs.10,000 – Held that:- The expenditure incurred in cash is covered by Rule 6DD(h) – Decided in favour of assessee.