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2018 (11) TMI 546 - ITAT KOLKATADisallowance of assessee’s claim for depletion of closing stock - sales to related parties - assessee in the present case is a company which is mainly engaged in the business of trading and manufacturing of silk fabrics - Held that:- As submitted on behalf of the assessee company before the authorities below as well as before us, the sale of these products was mainly made by the assessee company always to the related parties and therefore, there was no justifiable reason for the AO to reject the said evidence and as unreliable merely on the ground that the invoices were raised by the assessee company on the related parties. It is pertinent to note here that the said invoices raised by the assessee mainly on the related parties in the subsequent year were accepted by the AO himself and it therefore, constituted the relevant and reliable evidence to support and substantiate the net realizable value of closing stock as determined by the assessee company as on 31st March, 2011. We are of the view that the addition made by the AO by rejecting the claim of the assessee for depletion of closing stock was not sustainable and the Ld. CIT(A) was fully justified in deleting the same. CIT(A) giving relief to the assessee on this issue and dismiss ground no 1 of the revenue’s appeal. Disallowance u/s 40(a)(ia) as well as section 37 - expenses on service charges for computer installed in its Kolkata office and maintenance of flats - Held that:- The said expenditure thus was incurred by the assessee company wholly and exclusively for the purpose of its business and the same was not liable to be disallowed u/s 37 as rightly held by the CIT(A). As regards the disallowance of the said expenditure u/s 40(a)(ia), it is observed that the expenditure on account of maintenance of flats to the extent of ₹ 5,95,754/- was made by the assessee company on account of payment to Cooperative Housing Society for regular maintenance and for purchase of certain attempts and since no tax at source was deductable from the said payments, the same were outside the purview of section 40(a)(ia) as rightly held by the CIT(a) while restricting the disallowance of ₹ 8,96,169/- made by the AO to the extent of ₹ 2,10,415/- thereby allowing the relief of ₹ 6,85,754/-. We therefore, uphold the impugned order of the Ld. CIT(A) on this issue and dismiss ground no 2 of the revenue’s appeal. Disallowance on account of irrecoverable advances written off - Held that:- It is observed that both the amounts of ₹ 1,44,553/- and ₹ 2,61,230/- represented the advances given by the assessee company to its employees and the VAT receivable on input respectively and since the said amounts were pertaining to the ordinary course of the assessee’s business, the loss suffered due to non-recovery of the same was the business loss, which in our opinion, was liable to be allowed as deduction as rightly held by the Ld. CIT(A). We, therefore, uphold the impugned order of the Ld. CIT(A) on this issue and dismiss ground no 3 of revenue’s appeal.
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