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2014 (5) TMI 1171 - ITAT CHENNAIAddition u/s 40A(3) - argument of the Revenue is that when old gold purchases are made from A and new ornaments sold to B, provisions of Rule 6DD will not be applicable - Held that:- The transaction considered in this case is of same person purchasing new gold ornaments from the assessee against old gold ornaments. In such a case, clause (d) of Rule 6DD clearly applies. The said clause reads that where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee is exempted from the operation of Section 40A(3). Therefore, in the present case, as rightly pointed out by the Commissioner of Income Tax (Appeals), the case of the assessee is protected by clause (d) of Rule 6DD. The Revenue has raised a contention in the grounds that the assessee may not raise separate bills for purchase of old gold and for sale of new gold ornaments. This view is not correct. There is levy of purchase tax by the State Government on purchase of old gold ornaments. For that matter, the assessee has to keep a separate account of old gold purchase supported by purchase invoices. Likewise, sale of new gold ornaments are again subject to sales tax for which the assessee has to maintain separate sales account supported by sales invoices. - Decided in favour of assessee Disallowance being hedging loss treated by the assessing authority as speculative loss - Held that:- In the present case, the assessee has entered into a future contract to guard against the loss through future price fluctuations in gold. The assessee is in the business of manufacturing and merchanting of gold. Therefore, the future contract entered into by the assessee is straightaway covered by the first exception provided in clause (a) of Section 43(5). We find that the Commissioner of Income Tax (Appeals) is right in his decision. Unexplained cash credits - Held that:- The assessee- company has passed journal entries with the concerned amounts, crediting the personal account of the Director and debiting the various expenditure to nominal accounts of the assessee-company. In fact, all the credits reflected in the personal account of the Director of the assessee-company are correspondingly very much reflected on the debit side of different expenditures and nominal accounts of the assessee-company. In that way, these cash credits are self-explaining in the books of accounts itself. There is no basis for the Assessing Officer to treat these credits as unexplained cash credits - Decided in favour of assessee.
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