TMI Blog2014 (10) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... arious details like address, PAN No, copies of the invoices were not furnished by the Assessee and therefore the genuineness was not proved and therefore the expenses were disallowed by AO - CIT(A) has noted that various details like copy of the advertisement contract, copy of bills and other material were furnished before him and after considering the evidences submitted before him, CIT(A) deleted the addition - nothing has been placed on record to demonstrate that on the additional evidences that were submitted by Assessee before CIT(A), any remand report was called from AO - the AO should be granted an opportunity to examine the additional evidences which were submitted by Assessee before CIT(A) – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of revenue. Sales promotion expenses disallowed – Held that:- AO while disallowing the expenses has noted that no details were furnished by the Assessee nor has the Assessee proved that the expenses crystallized during the year - CIT(A) has noted that before him the Assessee has filed the details of expenditure in respect of which the bills were received after the end of the relevant period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t bring anything on record to show that the said advances were made out of borrowed funds ignoring the fact that it is the onus of the assessee, who claims any expenditure to prove that said expenditure including the expenditure claimed u/s, 36(i)(iii) was for business purposes, as held in the cases reported at 258 ITR 363{DEL), 254 ITR 449(DEL) etc. 2. The ld.CIT(A) has erred in law and on the facts of the case in holding that the assessee had otherwise interest free funds ignoring the fact that the assessee was required to prove by demonstrative evidence that on the date on which the advances were made, the assessee had interest free funds and there was no diversion of interest free bearing funds for non business purposes, as held by Hon'ble Mumbai !TAT in the case of Sanghavi Swiss Refills P. Ltd. Vs. 1TO 85 ITD 59. 3. The Ld.CIT(A) has erred in law and on the facts of the case in directing the A.O. to allow the disallowance of ₹ 9,60,000/- made on account of publicity and advertisement expenses,, after admitting fresh evidence in violation of Rule 46A, without affording opportunity to the A.O. 4. The Ld.CIT(A) has erred in law and on the facts of the case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s P. Ltd has also made presentation before the Board. After discussion at length, members of the Board approved to advance ₹ 600 lacs to Shubham Appliances P. Ltd. and authorize Shri. D.P. Goyal, Resident Director to take necessary actions and decisions in the matter from time to time. Members of the Board them passed the following resolution. RESOLVED THAT the company do take technical assistance and technical know how for improving the efficiency of the Vanaspati plant located at Rakhial and authorize Shri. D.P. Goyal, Resident Director to take necessary actions and decisions in the matter from time to time. RESOLVED FURTHER THAT the interest free advance of ₹ 600 lacs be made to Shubham Appliances P. Ltd. subject to the condition that they will provide necessary details and action plan for improvement of efficiency on or before 31,5.2003 and upon failure the advance given shall be refunded by 30th June, 2003. 4.2 As per the above resolution payments were made from 26.02.2003 to 10.03.2003 amounting to total ₹ 5,44,25,000/-. As the project was not implemented the amount was received back. It is mentioned in copy of resolution passed on 19.06.2003 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted party of the Assessee and the transaction has not been doubted. He further submitted that the Assessee was having sufficient interest free funds in the form of Capital and Reserves and therefore the presumption was that the interest free funds have been used for the purpose of making advance. He also placed reliance on the decisions in the case of Raghuvir Synthetics 354 ITR 222 (Guj), Reliance Utility Power Ltd 313 ITR 340 (Bom) and S A Builders 288 ITR 1 (SC). 7. We have heard the rival submissions and perused the material on record. It is a fact that ₹ 5.44 crores was given as an advance to Subham Appliances for the new project of the Assessee. It is also a fact that the project could not be implemented and the amount advanced was returned back to the assessee in subsequent year. CIT(A) while deleting the addition has given a finding that the inter corporate deposits advanced by the Assessee were recalled during the year and it was the source of advance. CIT(A) has further noted that AO has not established the nexus between the borrowed funds and the advance given to Subham Appliances to prove that the money has been advanced out of borrowed funds. Before us, Id A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... muneration for services rendered by kamayani Sales. (ii) Copy of form No. 16A issued by the appellant company to Kamayani Sales for payment of remuneration and TDS thereon. (iv) Copy of survey report Madhuram Vanaspati prepared by Kamayani Sales Agency for 2002-03. (v) Printed pamphlets of products of Madhusudan Industries Ltd. (Page 178 to 184 of the paper book). 6. I have considered the above submission and gone through the documents. On perusal of the above documents it is clear that Kamayani Sales has rendered services to the appellant company for the period 1.04.2002 to 31.03.2003 for which total payment of ₹ 9,60,000/- has been made on different dates out of which ₹ 10,080/- has been deduction as tax at source. The details of publicity work done by Kamayani Sales is also evident from the survey report and copy of pamphlets for publicity and sales promotion of products of the company which were prepared by Kamayani Sales Promotion P. Ltd. On consideration of the above facts and details filed, I hold that the above expenditure is an allowable business expenditure, hence, I direct the A.,O to allow the same. The appellant gets a relief of ₹ 9,60,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o noticed that Gujarat Soaps Ltd had not made any sales for Assessee during AY 2001-02, 2002-03 and 2003-04 and therefore according to AO there was no justification for the payment of sales promotion expenses. He accordingly disallowed the payment. Aggrieved by the order of AO, Assessee carried the matter before CIT(A) who deleted the addition by holding as under:- 6.2 I have considered the above submission and gone through the facts of the case. The appellant company vide agreement dated 31.7.98 has requisitioned the services of Gujarat Soaps P. Ltd. for marketing its products. It is agreed between the parties as per clause 4 of the agreement as under. And whereas 'GSL' will charge ₹ 1500 per month as fees for providing marketing services to 'MIL' and 'MIL' agrees to pay ₹ 1500 per month as retainership fees for the marketing services to be provided by the GSL for a period of one year. 'MIL' also agrees to reimburse the expenses like that salaries of sales persons, forwarding expenses, conveyance expenses etc. incurred by GSL' in full on submission of bill related to rendering of such services According, the company has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of justice and fair play, the AO be granted an opportunity to examine the agreement and other submissions made by Assessee before CIT(A). We therefore remit the issue to the file of AO to decide the issue afresh and as per law and after considering the additional evidences filed by the Assessee before CIT(A). Needless to state that AO shall grant adequate opportunity of hearing to the Assessee. Thus this ground of Revenue is allowed for statistical purposes. 5th ground is with respect to deletion of disallowance of prior period expenses amounting to ₹ 3,59,317/- 16. A.O noticed that Assessee had debited prior period expenses of ₹ 3,59,317/-. AO noted that since the Assessee did not furnish any evidence to prove that the liability of prior period crystallized during the year and since the Assessee was following mercantile system of accounting the expenses which did not pertain to the year could not allowed and therefore he disallowed the expenses. Aggrieved by the order of AO, the matter was carried before CIT(A). CIT(A) deleted the addition by holding as under:- 7.2 I have considered the above submissions. The appellant has filed details of expenditure in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for statistical purposes. ITA No. 548 /AHD/2008 (for A.Y. 2004-05) The grounds raised by Revenue reads as under:- 1. The Ld.CIT(A) erred in law and on the facts of the case in deleting the disallowance of ₹ 7,09,101/-, being proportionate interest expenses relatable to advances made to Esquire Holding Pvt. Ltd and Shubham Appliances Pvt. Ltd. 2. The Ld. CIT(A) erred in law and on the facts of the case in deleting the disallowance of ₹ 11,52,000/- out of advertisement and publicity expenses. 3. The Ld. CIT(A) erred in law and on the facts of the case in deleting the disallowance of ₹ 2,68,348/- out of sales promotion expenses. 4. The Ld.CIT(A) erred in law and on facts of the case in directing the A.O to compute the deduction u/? 80HHC unit-wise ignoring the fact that the Ld. CIT(A) himself had given contrary decision in the assessee's own case for A.Yrs.2000-01 2001-02 wherein the action of the A.O in taking all the units as a whole for the purpose of deduction u/s 80HHC of the Act was upheld. 5. The Ld. CIT(A) erred in law and on the facts of the case in directing the A.O not to include sales tax and excise duty in the total turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 16,865/-. Aggrieved by the order of AO, the matter was carried before CIT(A). CIT(A) granted partial relief by holding as under:- 8.2 I have carefully considered the submissions made by the ld. Authorised Representative. As regards the issue whether profits of the company as a whole are to be considered or the profits and turnover of only the export units are to be considered for working out deduction u/s. 80HHC, it is noticed that the appellant has claimed deduction u/s. 80HHC after taking into account the export sales made by the Solvent Extraction Divisions, situated at Nimbhahera in Rajasthan and Rakhial. In A.Y. 1993-94 the Hon'ble ITAT dated 6-7-2005 has upheld the order of CIT (A) giving direction to the A.O. to consider only the total turnover of units I,II III of the sanitaryware division for the purpose of computing deduction u/s.80HHC as submitted by the A.R. at page 102 of the paper book. The CIT(A)-VIII had also held for A.Y. 1998-99 vide order dated 30-1-2003 in para 11.5 that for the purpose of section 80HHC the export turnover, total turnover and the profits of the business is to be considered with respect to manufactured/traded goods which are exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80HHC was also decided in Assessee's favour by Tribunal in AY 2001-02. He also submitted a chart giving the breakup of miscellaneous income which as under:- 24. From the chart he pointed out that the issue of sale of scrap and bad debts recovery is covered in its favour by the decision of co-ordinate Bench in AY 2001-02. With respect to Miscellaneous income and sauda settlement, he submitted that the issue is covered against the assessee by the decision of Tribunal for Ay 2001-02. He therefore submitted that following the decision in earlier years, the issue be decided. 25. We have heard rival submissions and perused the material on record. We find that the issues connected with deduction u/s 80HHC for AY 2001-02 was raised was by Assessee and Revenue before Tribunal. The coordinate Bench of Tribunal decided various issues in AY 2001-02 (ITA No 782 765 of 2007 vide order dated 30.3.2012 by holding as under:- 2. The 1st ground of appeal filed by the Revenue is that the CIT(A) erred in directing the Assessing Officer to exclude Excise Duty and Sales Tax from total turnover while computing deduction under section 80HHC of the Income Tax Act, 1961 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt recovered ₹ 15,894/- Total ₹ 20,66,568/- 8 The CIT(A) confirmed the order of the Assessing Officer in respect of miscellaneous income ₹ 10,61,619/- and interest income ₹ 1,153/- ₹ 1,938/-. However, the CIT(A) held that the balance amount of miscellaneous income is business income and hence should not be excluded from the profit of business for the purpose of calculation of deduction under section 80 HHC of the Act. The assessee is in appeal through its ground no. 2 challenging the order of CIT(A) in respect of deduction for excluding of miscellaneous income ₹ 10,61,619/- and interest income ₹ 1,153/- and ₹ 1,938/-. The Revenue is in appeal against the balance amount for which the CIT(A) directed to allow the claim of the assessee u/s. 80HHC of the Act. 9 At the time of hearing, the Ld. Authorised Representative submitted that the sale stores/scrap at ₹ 8,61,923/-, sales rounding off ₹ 547/-, Sundry Dr./written off ₹ 53/-, Foreign Exchange variation ₹ 29,503/- bad debt recovered ₹ 15,894/- are to be decided in favour of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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