TMI Blog2013 (9) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the revenue against the order dated 18.05.2012 of CIT (A)- XV, New Delhi pertaining to 2008- 09 assessment year on the following grounds :- 1. Whether Ld. CIT(A) was correct on facts and circumstances of the case and in law in deleting the disallowance of Rs.63,24,59,802/- made by the AO on account of cash purchases u/s 40A(3). 2. Whether Ld. CIT(A) was correct on facts and circumstances of the case and in law in deleting the disallowance of Rs.69,58,866/- on account of interest u/s 14A read with Rule 8D. 3. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 2. It was a common stand of the parties before the Bench that as far as ground no- 1 is concerned, it is a continuing issue over the years and the said issue is more or less settled by the orders of the Tribunal in assessee s case. The facts and circumstances remained identical as there is no change. However, Ld. CIT DR placed reliance on the assessment order. The relevant facts of the case are that the assessee company is engaged in the business of export of processed meat products and made cash purchases as in the earlier years. In the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 08 and my predecessor s order dated 04.03.2010, where both the authorities by relying on ITAT s order for assessment year 2005- 06 and 2006- 07 in appellant s own case, have held that the amount paid to the MD as commission is an allowable expense and doesn t come within the ambit of Section 36(1)(ii). Since in the year under consideration, there are no change in facts as were existing in assessment year 2005- 06, 2006- 07 and 2007- 08, accordingly relying on ITAT s order for those year, I am also of the view that the payment of commission to the MD Sh. Sirrajuddin Qureshi, is an allowable expenditure and hence addition made by the AO, deserves to be deleted. 4. The assessee agitated the issue before the CIT(A) who deleted the addition on the following ground :- 7. I have gone through the appellant s submission and have also perused the ITAT s order dated 13.08.2010 for assessment year 2007- 08 and my predecessor s order dated 04.03.2010, where both the authorities by relying on ITAT s own order for assessment year 2005- 06 and 2006- 07 in appellant s own case, have held that the cash payments made by the appellant for purchases made, falls within the clauses (f) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been yielded or received by the assessee. In appeal before the First Appellate Authority, taking into consideration, the submissions advanced on behalf of the assessee, the CIT(A) deleted the sum of Rs.69,58,866/- and restricted the disallowance to 9,37,500/- on account of administrative and other charges by applying the formula of 0.5% on the average investment of Rs.18.75 crore. 9. Aggrieved by this the revenue is in appeal before the Tribunal whereas Ld. CIT DR submitted that the issue has go back to the file of the AO in order to work out the disallowance in alignment with the judgements of the Jurisdictional High Court in the case of Maxop Investment. Ld. AR objected to the restoring of the issue while doing so, attention was invited to the arguments advanced before the CIT(A) to show that no disallowance could be made u/s 14A as the assessee had not incurred any expenditure as the investments were made in the FYs 1995- 96, 1996- 97, 1997- 98 in which years the assessee had sufficient share capital and reserves in surplus. The loans taken from IFCI and other banks etc., in those years were towards fixed assets and towards working capital which was being monitored by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial statements of the appellant s business for the year under consideration as well as for the years 1995- 96, 1996- 97 and 1997- 98 iun which investments are made. The main plea of the appellant is that no disallowance under Section 14A be made as they have not incurred any expenditure. The investments of Rs.18,75,00,000 was made long back in financial year s 1995- 96, 1996- 97, 1997- 98 and in those years they had sufficient Share Capital and Reserves and Surplus as under and thus no interest disallowance is warranted. Further the loan taken from the IFCI and other banks etc. were towards fixed assets and towards working capital, which is being monitored by banks as they have to file monthly stock statements with the banking authorities. The above plea of the appellant has duly been examined and from the perusal of financial statements for assessment years 1996- 97, 1997- 98 and 1998- 99 following facts emerge :- Particulars A.Y.1996- 97 A.Y.1997- 98 A.Y.1998- 99 Share Cap ital Opening Balance 5,20,65,500 5,20,73,000 7,92,59,978 Addition during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year Share Capital and Reserves were to the tune of Rs.40.54 crore, whereas, as against the secured loan of Rs.22.21 crore from IFCI the fixed assets rose to the extent of Rs.32.41 crore and as against working capital limit of Rs.15.26 crore the debtors and stock were to the tune of Rs.28.85 crore. When we compare the figure of secured loan, debtors, fixed assets of assessment year 1997- 98 into those of assessment year 1996- 97, it is seen that there is comparative increase of secured loan and decrease of working capital loan on one hand whereas on the other hand there is a huge increase in appellant s fixed assets and with no change in debtors and stock, this shows that appellant s profit and share capital are used to fund the fixed assets. Therefore in a scenario when Share Capital and Reserves are used to acquire fixed assets, than in such a situation in my opinion there is sufficient material to come to the conclusion that appellant has substantial own funds to make investments of Rs.9.37 crore in assessment year 1997- 98. (c) Similarly in the assessment year 1998- 99, when the further investment of Rs.6.38 crore were made, it is seen that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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