TMI Blog2014 (1) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... et - The AO has categorically verified that the entire interest has been charged to profit and loss account - This needs to be further verified being a factual matter - The issue was restored to the files of AO for fresh adjudication. Unaccounted production - Held that:- The assessee has shown total production of finished goods at 60,96,408 Kgs during the year under consideration - The AO further observed that the assessee has used 3,52,313 kgs of material for home consumption - The assessee has not filed the report of expert - The issue was restored for fresh adjudication. Whether commitment charges are eligible for deduction u/s. 80IB(4) - Held that:- The commitment charges are in the nature of interest on delayed payments received from the customers which is directed related with the sales of the assessee - Following Nirma Industries Ltd. [2006 (2) TMI 92 - GUJARAT High Court] - There is a direct nexus between the commitment charges and the business of the assessee - The commitment charges are derived from the business of the industrial undertaking and therefore eligible for claim of deduction u/s. 80IB(4) of the Act - Decided against Revenue. - I.T.A. No. 5004/Mum/2009, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 33,39,224/- as bad debts. The assessee was asked to substantiate his claim of bad debts. The assessee filed copies of accounts of those parties in respect of whom the bad debts were claimed. On perusal of the copies of account, the AO noticed that in respect of one party i.e. M/s. M.G.M. Corporation Rs. 2,35,000/- written off as bad debts was given as advance in earlier years and in respect of one another party M/s. H.M.G.I. Ltd., the AO noticed that the assessee has written off bad debt at Rs. 18,08,163/-. The AO further noticed that the assessee has given Rs. 5,02,162/- to this party during the year under consideration towards reimbursement of the expenses and the balance amount was given by way of advance towards various expenses in earlier years. The assessee was further given an opportunity to substantiate his claim of write off in the light of the conditions prescribed u/s. 36(2) of the Act. The assessee did not file any submission. The AO was of the firm belief that these amounts were not taken into account in computing the income of the assessee of the earlier years, therefore, the same cannot be allowed as bad debt and accordingly disallowed the claim to the tune of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. It was also explained that the bank deposits are for the purpose of business and therefore directly connected to the business of the assessee. 14.1. After considering the facts and the submissions of the assessee, the Ld. CIT(A) at para-6.4 of his appellate order observed that the assessee could not adduce any evidence in support of his claim. The Ld. CIT(A) further observed that normally it is the surplus fund generated from the business which are kept in bank in the form of deposit, therefore, the interest earned thereon cannot be treated as business income. Since no connection between the interest on fixed deposits and the business of the industrial undertaking of the assessee has been proved through evidence, the Ld. CIT(A) confirmed the disallowance made by the AO. 15. Before us, the Ld. Counsel for the assessee reiterated that the fixed deposits were made for getting letter of credits/guarantees from the bank. Therefore, there is a direct nexus between making of the fixed deposits and the nature of the business of the assessee. 16. The Ld. Departmental Representative relied upon the orders of the lower authorities. . 17. We have carefully perused the orders of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of transaction from the copy of account. The AO went on to disallow proportionate interest to the tune of Rs. 3,00,000/-. 20. Aggrieved by these disallowances of interest, the assessee carried the matter before the Ld. CIT(A). It was strongly contended that the assessee has correctly capitalized the interest on capital work in progress till the date of commencement of operation and the interest of Rs. 6,38,590/- relates to the period post commencement of operation and therefore deserves to be allowed as business expenditure. 20.1. After considering the facts and submissions of the assessee, the Ld. CIT(A) at para-7.4 of his order observed that the assessee has not been able to controvert the finding of the AO. The Ld. CIT(A) further observed that the assessee has not furnished any evidence except for a bank certificate which does not prove anything as to which part of the interest has been capitalized and which part has been claimed in P L account. The Ld. CIT(A) confirmed the disallowance of interest of Rs. 6,38,590/-. In respect of disallowance of interest amounting to Rs. 3,00,000/-, the Ld. CIT(A) was of the opinion that the disallowance of interest should be proport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Revenue s grievance is two fold. The first grievance of the Revenue relates to the deletion of addition of Rs. 94,18,600/- made on account of unaccounted production on admitting certain new evidences submitted by the assessee which is in violation of provisions of Rule 46A and second grievance relates to the deletion of commitment charges of Rs. 10,24,019/- received by the assessee from suppliers as income derived from business in terms of Sec. 80IB(4) of the Act. 26. During the course of the assessment proceedings, on verification of the quantitative details as given in the audit report, the AO observed that the assessee has shown total production of finished goods at 60,96,408 Kgs during the year under consideration. The AO further observed that the assessee has used 3,52,313 kgs of material for home consumption. The AO was not convinced with the ratios emanating from the production figures. The AO has discussed the issue relating to the production and the consumption at length on para 4.5 of his assessment order and finally came to the conclusion that the wastage and the actual consumption shown by the assessee is in variance with standard input. According to the AO, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns prescribed for the admission of new evidences under Rule 46A of I.T. Rules. 29. The Ld. Counsel for the assessee fairly conceded that the expert opinion was filed for the first time before the Ld. CIT(A). After carefully perusing the orders of the lower authorities, we find merit in the submission of the Ld. DR that the expert opinion was never before the AO, therefore, finding of the Ld. CIT(A) based on such expert opinion is in violation of the principles of natural justice and also in violation of provisions of Rule 46A. Therefore, in the interest of justice and fair play, we restore this issue back to the files of the AO. The assessee is directed to file the expert opinion before the AO. The AO is directed to decide the issue afresh in the light of the opinion of the Professor of IIT Delhi after giving reasonable opportunity of being heard to the assessee. The first grievance of the Revenue is allowed for statistical purpose. 30. The second grievance relates to allowing of commitment charges of Rs. 10,24,019/- as eligible for the claim of deduction u/s. 80IB(4) of the Act. 31. During the course of the scrutiny assessment proceedings, the AO noticed that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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