TMI Blog2015 (4) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... T [2000 (8) TMI 4 - SUPREME Court] - Decided against revenue. Disallowance u/s 14A - CIT(A) restricting the disallowance - Held that:- CIT(A) has given a finding that the assessee has been able to establish this fact from its account that no portion of interest bearing-funds were utilized by the applicant in making the aforesaid investments and, therefore, the applicant has not really incurred any direct expenditure for earning the exempt income. This finding of ld.CIT(A) has not been controverted by the Revenue by placing any material contrary. Therefore, we no reason to interfere with the order of the ld.CIT(A) on this issue, same is hereby upheld. In respect of disallowance to 0.5% of value of investments amounting to ₹ 42,423/-, the ld.CIT-DR submitted that the order of the ld.CIT(A) is justified on this ground. We find that the assessee has not challenged the finding of the ld.CIT(A) by filing a cross-objection, therefore this finding of ld.CIT(A) is not interfered - Decided partly in favour of revenue. Late delivery charges debited by the assessee disallowed - CIT(A) allowed the claim - Held that:- in this case, no remand report was sought for from the AO by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,81,50,813/- made by the Assessing Officer on account of loss due to flood which occurred in the month of August, 2006. [2] The Ld.CIT(A) has erred and on facts in restricting the disallowance of ₹ 8,53,917/- made by the Assessing Officer to the extent of ₹ 42,423/- u/s.14A of the Act. [3] The Ld.CIT(A) has erred and on facts in deleting the disallowance of ₹ 5,08,11,590/- made by the Assessing Officer on account of late delivery charges debited by the assessee. [4] The Ld.CIT(A) has erred and on facts in deleting the disallowance of expenditure of ₹ 30,73,341/- covered u/s.40A(2)(a) of the Act. [5] On the facts and in the circumstances of the case, the ld.Commissioner of Income-tax(A)-XIV, Ahmedabad ought to have upheld the order of the Assessing Officer. [6] It is therefore, prayed that the order of the ld.Commissioner of Income-tax(a)-XIV, Ahmedabad may be set-aside and that of the Assessing Officer be restored. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 31/12/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration. It was also pointed out by the AO that claim of the assessee included the amount of ₹ 33,97,704/- related to the extensive repair works taken for damaged capital assets after the flood. He submitted that under these facts, the AO was justified in holding that the action of the assessee for making the claim is pre-mature action and taken in haste by the assessee to reduce the taxable profit for the year under consideration. Thus, an amount of ₹ 1,81,50,813/- is disallowed by the AO and added back to the income of the assessee. On the contrary, ld.counsel for the assessee supported the order of ld.CIT(A) and submitted that there is no dispute with regard to fact that the assessee suffered loss on account of flood during the year under consideration, he submitted that the assessee made claim in accordance with prescribed accounting standards. He reiterated the submissions as were made before the ld.CIT(A). He submitted that the AO was not justified in rejecting the claim merely on the basis that the claim being pre-mature. He submitted that the surveyors assessed the claim on the basis of their own methodology, but the assessee has suffered losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of damages due to flood was not ascertainable in the assessment year under consideration. It is not in dispute that loss has occurred during the year under consideration, however the dispute is that the loss and quantification thereof are not ascertainable in the year under consideration. We do not agree with this reasoning of AO in rejecting the claim in view of the principle laid down by the Hon'ble Apex Court in the case of Bharat Earth Movers vs. CIT reported at 245 ITR 428 (SC). Thus, this ground of Revenue's appeal is rejected. 5. Ground No.2 is against in restricting the disallowance of ₹ 8,53,917/- made by the AO to the extent of ₹ 42,423/- u/s.14A of the Act by the ld.CIT(A). The ld.CIT-DR submitted that the ld.CIT(A) grossly erred in restricting the disallowance. He further supported the order of the AO. 5.1. On the contrary, the ld.counsel for the assessee supported the order of the ld.CIT(A) and reiterated the submissions made before him. 6. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO observed in the assessment order that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue by placing any material contrary. Therefore, we no reason to interfere with the order of the ld.CIT(A) on this issue, same is hereby upheld. In respect of disallowance to 0.5% of value of investments amounting to ₹ 42,423/-, the ld.CIT-DR submitted that the order of the ld.CIT(A) is justified on this ground. We find that the assessee has not challenged the finding of the ld.CIT(A) by filing a cross-objection, therefore this finding of ld.CIT(A) is not interfered. Thus, this ground Revenue's appeal is partly allowed. 7. Ground No.3 is against the deletion of disallowance of ₹ 5,08,11,590/- made by the AO on account of late delivery charges debited by the assessee. The ld.CIT-DR submitted that the ld.CIT(A) was not justified in deleting the disallowance. He submitted that the AO has given a clear finding that many of the cases the invoices pertain to the AYs 2004-05, 2005-06, 2006-07 and 2007-08. He submitted that the AO has also given a finding that the assessee has not produced any evidence in support of its claim that the liabilities crystallized in the year under consideration. He submitted that under these facts, the ld.CIT(A) was not justified in deleti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were procured. Further, it appears that in spite of the shorter time available during the Assessing Proceedings, the Appellant has tried to submit maximum possible data, and evident that the A.O. has not taken a proper cognizance of the information made available by the Appellant. Hence the addition of ₹ 5,08,11,590 made by the AO on this ground is deleted. 8.2 We find that the ld.CIT(A) has given a finding that the liabilities pertaining to the late delivery charges crystallized during the year under consideration based on the final position conveyed by the marketing department of the appellant and the evidence adduced by the appellantcompany. Admittedly, in this case, no remand report was sought for from the AO by the ld.CIT(A) before deleting the disallowance on the basis of evidence adduced by the assessee-company. The AO has categorically given a finding that no evidence was produced to prove that such late delivery charges have been crystallized during the year under consideration. We find that the ld.CIT(A) has also not given any finding as to what were the terms of agreement between the assessee and the customers. After considering the totality of the facts and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern has been taken over w.e.f. 01.08.2006 at the Book Values of the assets and liabilities of the concern is not disputed. Again, as explained by the AR only for the valuation purposes, the value have been considered as per the Audited Balance Sheet of the concern as at 31.03.2006; Further, the share valuation of the acquirer appellant company, whose shares have been issued to the vendor (proprietor of the transferor firm) has also been carried out based on Balance Sheet as at 31.03.2006. I do not find anything objectionable to this, it being a commercial matter between the parties. There is also reasonable merit in the submissions by the AR, establishing that in general, the Margins of Transformers Industry Players have improved during fiscal year 2004-05 and also fiscal year 2005-06. Thus, the GP Margin of the firm for FY 04-05 was 18.71% and also during the period from April-July, 2006 it was 18.80%. On a matching basis the GP Margins earned by the appellant company have also shown increasing trend, as they improved from 15.69% in FY 2003-04 to 18.95% in FY 2005-06. Further, the GP Margin earned by the firm in case of third party sales (unrelated parties) in the period fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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