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2014 (11) TMI 645 - ITAT JODHPURDisallowance out of interest – Held that:- AO was of the view that memorandum and article of association of the assessee did not authorize the assessee to become a partner in a firm, so this capital could have been used by the assessee in a routine business and if the assessee had not been introduced the capital into the partnership for running M/s. Lizard Lounge then the interest liability of the assessee would have been lower - no new investment was made by the assessee in the partnership business to run restaurant during the year under consideration because the partnership was entered into on 22/02/2007 i.e the period relevant to the A.Y. 2007-08 and the investment was at ₹ 1,29.53 Lac as on 31/03/2007 which came down to ₹ 82.95 Lac during the year under consideration, so, there was a reduction in the capital during the year under consideration - the assessee was having sufficient interest free funds available which were at ₹ 4,341 Lac as on 31/03/2007 and the AO had not established the nexus between the borrowed funds and the amount used for non-business purpose - there was no prohibition for the assessee to enter into any partnership business, therefore, disallowance on account of notional interest was arbitrary and the CIT(A) rightly deleted the same – Decided against revenue. Disallowance out of Rebate & Discount account – Facts not properly appreciated or not – Held that:- CIT(A) rightly noted that the assessee had allowed discount as per the credit note - the trading discount /rebate was being allowed by the assessee in the earlier years to various purchasers and this consistent practice being followed - it had not been shown that the discount was non-genuine, excessive or unreasonable - the discount was to the customers of the assessee for the commercial expediency to increase the sales - the similar type of trading discount was allowed in the earlier years and there is no deviation in the facts of the years under consideration vis-à-vis facts involved in the earlier years - the commission and trade discount was given by the assessee to the customers for the commercial expediency to increase the sales and nothing is brought on record to substantiate that the payment was non-genuine, excessive or unreasonable – the order of the CIT(A) is upheld – Decided against revenue. Disallowance out of sales promotion expenses – Held that:- CIT(A) rightly was of the view that the sales promotion expenses had decreased to ₹ 16.68 Lac as compared to the earlier year's expenses of ₹ 19.18 Lac, in spite of increase in turnover - turnover of the assessee increased in comparison to the earlier year, but there was decrease in the sales promotion expenses – the order of the CIT(A) is upheld – Decided against revenue. Deletion of freight and forwarding expenses – Held that:- The adhoc addition made by the AO was without any basis - He did not point out any specific instance where the expenses incurred on account of transportation and forwarding were not related to the business of the assessee - the assessee furnished the complete details relating to the expenses incurred on account of freight and forwarding - the freight and forwarding expenses had been incurred in the transportation of the goods sold by the assessee on F.O.R. basis and those expenses had not been proved to be non-genuine, bogus or unreasonable – the order of the CIT(A) is upheld – Decided against revenue.
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