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TMI Blog2015 (4) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery charges debited by the assessee. [4] The Ld.CIT(A) has erred and on facts in deleting the disallowance of expenditure of Rs. 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 31/12/2009, thereby the Assessing Officer (AO in short) disallowed the loss claimed on account of flood amounting to Rs. 1,81,50,813/-, disallowance u/s.14A of the Act amounting to Rs. 8,53,917/- and disallowance of expenses relatable to increase in share capital amounting to Rs. 7,33,000/-. Apart from this, AO made disallowance of expenses related to land/transfer of property of Rs. 26,000/-, disallowance of inward clearing expenses paid towards capital assets of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 and in view of the fact that the volume of damages occurred and loss suffered and the exact quantification of loss could not be made. Therefore, there were some modifications in the claim made before the Insurance Company by the assessee. He submitted that this should not be the ground for throwing out the assessee. He further submitted that wherever the additional insurance claim reasoned by the assessee-company was offered for taxation. 4. We have heard the rival submissions, perused the material available on record and gone through the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 5. Ground No.2 is against in restricting the disallowance of Rs. 8,53,917/- made by the AO to the extent of Rs. 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 assessee has incurred interest of Rs. 5,25,15,064/- and the year end investment stands Rs. 1,79,69,000/-. The assessee-company is in receipt of exempt income. The AO applying the Rule 8D made disallowance in respect of the interest expenditure amounting to Rs. 8,11,495/- and towards administrative expenses amounting to Rs. 42,423/-. The ld.counsel for the assessee submitted that the AO was not justified in applying the Rule8D when it has been held by the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg.Co.Ltd. vs. Dy.CIT & Anr. reported at (2010) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deleting the disallowance. 7.1. On the contrary, the ld.counsel for the assessee submitted that the AO failed to appreciate the fact that liability of late delivery charges has crystallized only during the financial year in question and, therefore, the amount debited to P&L account are pertaining to the current financial year. The ld.counsel for the assessee submitted that before the ld.CIT(A) all the objections raised by the AO were duly replied and the ld.CIT(A) was, after considering the submissions, rightly allowed the claim. He submitted that in the business of the assessee, this kind of the charges ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 submissions made by the parties, we cannot approve the finding of the ld.CIT(A), therefore the order of the ld.CIT(A) on this issue is set aside and the issue is restored back to the file of ld.CIT(A) for decision afresh since the order passed by the ld.CIT(A) is not a speaking order as the ld.CIT(A) has not given any finding as to what were the evidences which were before him for arriving at the conclusion that the assessee has paid late delivery charges in terms of the contractual terms and the liability crystallized during the year under consideration. In the absence of such finding, we cannot confirm the finding of the ld.CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 from April-July 2006 is 18.65% - i.e. within comparable range vis-à-vis the overall GP Margin earned by the firm in the same period. By inference, it can be concluded that for related party sales also, the firm would have earned similar margin. The appellant has also explained by way of written submissions to the AO the commercial expediency for which it was incumbent on part of the firm to transfer large position of the semi-finished goods to the appellant company prior to the takeover date. In view of the above, the addition of Rs. 30,73,341/- made by the AO u/s.40(A)(2)(b) is deleted." 10.1. The above finding on fact is not controver ..... X X X X Extracts X X X X X X X X Extracts X X X X
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