TMI Blog2012 (10) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... en & also provided interest free loan – AO issue show cause notice to assessee to explain why interest liability should not be disallowed – Assessee did not reply - Held that:- As interest free amount ( capital plus loan) was in possession of assessee which is more than amount of loan given. Therefore it cannot be said that the money was lent from borrowed funds and not from interest free funds. Decision in favor of assessee Disallowance of expense u/s 37 – Held that:- As AO have a clear finding in respect of staff welfare expenses and travelling and local conveyances expenses use by assessee and his family. Treat it as personal expenditure and disallowed the same. No verification has been made in respect of the personal user of telephon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit notes. In this connection, it is mentioned in the assessment order that the credit balance in the books of the Tata amounted to Rs. 2,84,098/- against the credit of Rs. 69,87,115/- in the books of the assessee. Thus, there is a difference of Rs. 72,71,213/-. It was submitted that the difference is on account of credit notes allowed to the assessee for which no information was received by him. The amount received by way of credit notes is in respect of various schemes floated by Tata Tele for popularising its products and the amount involved therein has to be paid to the dealers . As and when the assessee received the credit note, an entry was made in the books and the amount was passed on to the dealers. Therefore, no income accrues to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO that the assessee should have accounted for the credit notes in this year has no relevance in deciding the matter. The fact is that credit notes were accounted for as and when they were received and thereafter payments were made to the dealers. Therefore, no addition could have been made on this ground. 2.2. In respect of these grounds, Ld. Sr. DR referred to the assessment order and the impugned order. He relied on the assessment order and In particular submitted that since the assessee has been following mercantile system of accounting, the credit notes should have been accounted for on accrual basis. In reply, the Ld. Counsel for the assessee submitted that he is distributor of M/s. Tata Tele Services Ltd. in Rohtak. As pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schemes, the amount becomes debt to the dealers as and when the credit note is received. Thus, the assessee has no domain over the amounts involved in the credit notes because as per the scheme the amount is to be passed on to the dealers. The payment to dealers have not be doubted by the AO. In such circumstances, we do not find any error in the order of the Ld. CIT(A) which requires correction from us. Thus, these grounds are dismissed. 4. Ground No. 3 is in respect of credit balance of Rs. 95,710/- in the account of M/s. Johnson Johnson Ltd. . In this connection, it is mentioned in the assessment order that the assessee filed a copy of account from M/s. Johnson Johnson, which shows the liability at NIL as in January, 2007. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs to M/s. Shree Jee Sales, free of interest. The assessee was requested to show cause why interest liability relatable to this amount should not be disallowed. No reply was received. Therefore, the amount calculated @ 12% per annum has been disallowed. Before the Ld. CIT(A), it has been explained that in the aforesaid firm, the assesee s son is a partner. This firm is engaged in the business of distributing products of Reliance Communications Ltd. The money was lent on account of business exigency at the fag end of the year. The assessee had a balance of Rs. 24.70 lacs in his capital accounts as on 1.4.2006. He has also taken interest free unsecured loans of Rs. 10.14 lacs. Thus interest free capital and loans exceeded the amount l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amily members cannot be ruled out. Similarly use of conveyance by the assessee and his family can also not be ruled out. The staff welfare expenses on tea, cola etc. are not fully vouched and finally travelling and local conveyance expenses are also not fully vouched. Therefore, disallowances as mentioned above has been made. The disallowances have been deleted by the Ld. CIT(A) by mentioning that the same have been made merely on conjectures and surmises without pointing out any deficiency in the books or vouchers. 6.2 Before us, Ld. Sr. DR referred to the findings of the lower authorities. On other hand, the Ld. Counsel submitted that the disallowances are adhoc in nature, and, therefore, have been rightly deleted by the Ld. CIT(A). 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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