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2022 (5) TMI 105 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - HELD THAT:- We do not see any infirmity into the order of the Ld.CIT(A) as the Ld.CIT(A) had decided the issue by following the binding precedent, same is hereby affirmed. Moreover, the assessee failed to demonstrate as to what is the basis of suo motto disallowance - On the contrary, it goes to prove that there was some expenditure which the assessee had incurred for earning of exempt income. Looking to the amount of investment, we are not satisfied with the explanation of the assessee. Hence, this ground of the assessee’s appeal is dismissed. Disallowance being interest expenses in proportionate to the funds outstanding with the subsidiary company - CIT(A) ruled against the assessee for want of cash flow - HELD THAT:- It is not clear whether the Ld.CIT(A) during the appellate proceedings had called for cash flow for verifying the veracity of claim of the assessee. CIT(A) ought to have decided the issue by making the necessary enquiry through the Assessing Officer but proceeded to confirm the addition without verifying the correctness of the explanation of the assessee. We are of the considered view that the assessee should have filed cash flow statement in support of its claim that the advances to its subsidiary were made out of its own interest free funds. We deem it proper and the interest of justice to set aside this issue to the Assessing Officer for decision afresh. The Assessing Officer would give a definite finding with regard to the utilization of own fund for making interest free advances to its subsidiary and also ascertain the factum of business expediency qua the transaction in question. All these issues are required to be decided after carrying out the necessary enquiry by the Assessing Officer. This ground of the assessee’s appeal is allowed for statistical purpose. Disallowance on account of advances of rent written off - HELD THAT:- There is no dispute with regard to the fact that the advances were given through banking channel. In support of the claim that the amount was given for hiring of the premises for opening showroom, the correspondence exchanged between the parties was also filed before the authorities below. The Revenue has not rebutted these evidences by placing any contrary material on records. The assessee filed sufficient evidences in support of the claim of hiring of commercial premises for opening of shop/showroom. Therefore, looking to the facts and material placed before us, we are of the considered view that the advances were given in the course of business by the assessee and for the purpose of commercial expediency. In our considered view, the assessee had rightly claimed it as business loss. Therefore, we hereby, direct the Assessing Officer to delete the addition. This ground of assessee’s appeal is allowed. Disallowing advertisement and publicity expenses AND sale promotion expenses - Allowable business expenditure or not? - HELD THAT:- There is no dispute with regard to the fact that the expenditure was incurred in travelling and stay of the Directors of the company. AO had disallowed this expenditure on the basis that the assessee failed to deduct tax. Hence, there is contradictory stand of the authorities below for making and sustaining the disallowance. Therefore, the AO is directed to delete the disallowance of sale promotion expense. However, the disallowance of advertisement and publicity expenses is sustained as the assessee failed to rebut the finding on fact recorded by the Ld.CIT(A). This ground of assessee’s appeal is partly allowed. Disallowance of advances written off - HELD THAT:- There is no dispute with regard to the fact that the advances were given through banking channel. In support of the claim that the amount was given for hiring of the premises for opening show room, the correspondence exchanged between the parties was also filed before the authorities below. The Revenue has not rebutted these evidences by placing any contrary material on records. The assessee filed sufficient evidences in support of the claim of hiring of commercial premises for opening of shop/showroom. Therefore, we are of the considered view that the advances were given in the course of business by the assessee and for the purpose of commercial expediency. In our considered view, the assessee had rightly claimed it as business loss. - Decided in favour of assessee. Disallowance being 20% on account of expenditure incurred through credit card - HELD THAT:- We find that the authorities below have made disallowance purely on adhoc and conjecture basis without citing the specific instance of expenditure incurred for personal use. In our considered view merely stating that the expenditure incurred for personal use could not be ruled out, would not be sufficient to make disallowance @ 20% of total expenditure. There has to be some basis regarding adoption of rate at 20% for disallowance. Therefore, in the absence of specific instances regarding expenditure incurred was found to be personal in nature hence, such disallowance on adhoc basis cannot be sustained. We, therefore, direct the Assessing Officer to delete the disallowance. This ground of assessee’s appeal is allowed. Disallowance u/s 14A - no exempt income earned - HELD THAT:- The issue is squarely covered in favour of the assessee by the judgement of Jurisdictional High Court in the case of M/s Cheminvest Ltd vs CIT [2015 (9) TMI 238 - DELHI HIGH COURT] has held that in the case where no exempt income is earned, no disallowance u/s 14A of the Act, is called for. Addition u/s 40A(3) - HELD THAT:- We find that Ld. CIT(A) has given finding on fact that there is no violation of provision of section 40A(3) of the Act. Ld. Sr. DR could not point out any violation by the assessee. Therefore, the decision of Ld.CIT(A) is affirmed. Addition on the basis that the expenditure on current repairs as capital in nature - HELD THAT:- We agree with the Ld AR that the contention of the AO, that certain items of expenses are not directly covered under current repairs, has no basis. Similarly, the ad hoc disallowance of 20% also has no basis - we do not find any expenditure of capital nature in the evidence filed before me. Therefore see no reason to sustain the ad hoc addition made by the Assessing Officer, the same is therefore, deleted - Decided in favour of assessee. Addition towards foreign exchange notional loss - HELD THAT:- The appellant has not dealt in any foreign exchange derivatives. The notional loss has occurred during the course of normal business transaction. And lastly, the department has not objected to such method been followed by the appellant in the earlier years. Therefore, the addition made by the AO on a/c of marked to market losses, is deleted - Decided in facour of assessee. TDS u/s 195 - Addition u/s 40(a)(i) of the Act for non deduction of TDS - HELD THAT:- The appellant before the Assessing Officer has submitted the complete details of payments made to foreign parties alongwith their names, addresses, details of TDS, wherever applicable and the reason wherever tax was not deducted. From the facts perused so far it appeared that the Assessing Officer did not have the specific information in his possession. On the other hand the appellant has submitted the full information available with him - Thus addition to be deleted. Disallowance of expenditure related to tours and travelling - HELD THAT:- We find that the disallowance was made purely on adhoc basis. The AO has not pointed out any specific instance. Therefore, we do not see any reason to interfere in the order of Ld.CIT(A), the same is hereby affirmed. Ground No.6 raised by the Revenue is thus, dismissed.
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