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2022 (4) TMI 610 - ITAT AHMEDABADDisallowance of payment of labour charges made to various labour contractors - AO observed that the assessee-company has not made payments to some of the labour contractors, because there was no verifiable evidence to support the claim of the assessee - CIT-A restricted addition to 10% - assessee company is engaged in executing contracts and subcontracts - HELD THAT:- AO without considering vital aspects has rejected claim of the assessee in a very brief and summary manner. Ld. CIT(A) while granting substantial relief to the assessee, has recorded a finding that assessee-company carried out contract works at various remote locations across the country; that gross profit during the year was higher at 26.42% as against the GP admitted in the preceding two assessment years 2008-09 and 2009- 10 at 24.17% and 17.40% respectively; that all these details were also submitted to the AO during the assessment proceedings. No such disallownaces were made in the earlier year or in the subsequent years on account of low GP rate. TDS was deducted on all payments made to contractors and their PAN were furnished except four parties; substantial payments have been made through account payee cheques. AO has not pointed out any defects in the books of accounts nor doubted nature of the work carried out by the assessee. All these vital aspects about the genuineness of the payment were not considered by the AO while making outright rejection. Therefore, considering the nature of business of the assessee, higher GP rate declared during the year, and the fact that the AO has not pointed out any discrepancies in the books of accounts maintained by the AO, the ld.CIT(A) has justified in restricting the addition to 10% of the impugned addition. - Decided against revenue. Disallowance of interest expenditure - HELD THAT:- We find that the ld.AO has made the impugned addition on some presumption and assumption that the assessee-company would have diverted interest bearing funds to non-business purpose. Such observation was not based on some material evidence. Though the assessee has furnished sufficient details to prove the case that it has sufficient interest free funds to make such investment and advances, and made for the business purpose, but the AO has not appreciated the same in right perspective. Therefore, we are in agreement with the reasoned finding of the ld.CIT(A), which is based on the appreciation of facts and figures provided by the assessee during the assessment proceedings as well as appellate proceedings. Thus, we are not inclined to disturb his order on this issue. We uphold the same. This ground is rejected. Disallowance under section 14A of the Act r.w Rule 8D - HELD THAT:- As pointed out by the assessee, when similar claim of the assessee for assessment year 2013-14 was agitated by the Revenue before the Tribunal, the Tribunal restricted the disallowance to the extent of exempt income. This decision is based on various judicial decisions, more particularly, the decision in the case of Chudgar Ranchodlal Jethalal [2015 (4) TMI 437 - ITAT AHMEDABAD] uphold the claim of the assessee by holding that disallowance under section 14A cannot be in excess of exempt income. DR has not disputed the same, nor pointed out any disparity of the facts or non-applicability of ratio of that decision in the instant case. Therefore, applying principle of consistency on the similar set of facts and circumstances, we are not inclined to deviate from the view taken by the ld.CIT(A) on this issue. Accordingly, we uphold order of the ld.CIT(A), and reject this ground of Revenue.
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