TMI Blog2015 (6) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... sister concern. We find that ld. CIT(A) by a well reasoned and detailed order has deleted the made by A.O by holding that there was no provision in the Act to tax income which has not accrued and further it was not a case of Section 40A(2)(b). Before us Revenue has not placed any material on record to support its contentions or controvert the findings of ld. CIT(A). We therefore find no reason to interfere with the order of ld. CIT(A) - Decided against revenue. - I.T. A. No.721/AHD/2009 - - - Dated:- 15-5-2015 - Shri Anil Chaturvedi and Shri Kul Bharat,JJ. For the Petitioner: Smt. Sonia Kumar, Sr. D.R. For the Respondent: Shri J.P. Shah, A.R. ORDER PER SHRI ANIL CHATURVEDI,A.M. 1. This appeal filed by the Revenue is against the order of CIT(A)-I, Surat dated 24.12.2008 for A.Y. 2005-06. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is a company stated to be engaged in the business of dyeing and printing of fabrics on job work charges. Assessee filed its return of income for A.Y. 2005-06 on 29.10.2005 declaring total income at ₹ 82,03,177/-. The case was selected for scrutiny and thereafter the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. The facts in this year are also exactly same as in the A.Y. 2003-04. The A.O. has not made out any case that the issue is covered by the provisions of section 40A(2)(b). According to the A.O. the assessee and the lender are companies which are interrelated. The entire case of the AO is that the payment is excessive and without any business prudence. The A.O. has not doubted the genuineness of payment. In view of these facts being same as in A.Y. 2003-04, respectfully following the decision of ITAT dated 28.2.07 in ITA NO.2878/AHD/2006 for A.Y.2003-04, the disallowance made during the year is deleted. Hence these grounds of appeal are allowed. 5. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us. 6. Before us, ld. D.R. supported the order of A.O. On the other hand ld. A.R. submitted that identical issue arose in the case of Assessee in earlier years and Assessee has been allowed relief by the Tribunal. He therefore submitted that since the facts of the case year under appeal are identical to that of earlier years as also noted by ld. CIT(A), the ground of Revenue needs to be dismissed. 7. We have heard the rival submissions and perused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on account of bulk job given to it by KA and issued credit notes to KA for the discount and it has received the net amount after the discount. During the financial year ended on 31.03.2005 relevant to A.Y. 2005-06 out of the total job work 1,47,48,475 meters done by the appellant company. 93,08.785 meters of job work was done for M/s. Kamla Associates which constituted about 63% of the total job work volumes of the company. Only 1,86.867 meters of lob work was done for Garden Silk Mills Ltd which constituted 1.25%. In case of other outside parties totaling to 66 innumbers, the aggregate meters of Job work were 52.52.882 meters constituting appellant 35% with an average volume of 79.588 meters per party. Kamla Associate being the biggest customers having 63% share of business of the Company. The job lots provided by Kamla Associates much bigger than the other parties. The net rate charged from M/s. Kamla Associates has been determined after taking into consideration all the aspects of commercial expediency. M/s Kamla Associates was the biggest customer of the appellant company. The job work business procured from Kamla Associates contained the bigger job lots compared to the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sec.40A(2) is applicable only in those cases of expenditure in respect of which payment has been made or if to be made to any specified person and Assessing Officer is of the opinion that, such expenditure is excessive or unreasonable having regard to the fair market value. Accordingly the disallowance can be made u/s.40A(2) if and only if there has been case of expenditure, else no disallowance can be made be made by invoking section 40A(2) of the Act. With reference to the facts of the case, the appellant had given credit notes for rate difference/ discount to M/s Kamla Associates on commercial expediency during the assessment year in question. The said rate difference was in the nature of discount which was reduced from the receipts and the net receipts were credited to profit and loss accounts. The said facts were never disputed by the Assessing Officer. On facts and in law circumstances of the case the disallowance is not justified on the ground that the discount given in the sales bill, does not enter the books of the assessee as an expenditure. It was submitted that u/s.40A(2) only when the expenditure is incurred, which is found to be excessive or unreasonable in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined after taking into consideration all the aspects of commercial expediency, the rate difference given by Assessee were in the nature of discounts which were reduced from receipts and the net receipts were credited to Profit and Loss account and that provisions of Section 40(A(2) are applicable only in case of expenditure. We further find that ld. CIT(A) by a well reasoned and detailed order has deleted the made by A.O . Before us Revenue has not placed any material on record to controvert the findings of ld CIT(A). We therefore find no reason to interfere with the order of ld. CIT(A) and this ground of Revenue is dismissed. Ground no. 3 is with respect to deletion on account of suppression of job charges received from sister concern. 12. During the course of assessment proceedings and on perusing the comparative chart of rate per meter of processing charges, AO noticed that Assessee has charge lower processing charges to its group companies as compared to the amount charged to outside parties for the dyeing and printing job. He noticed that Assessee has charged average rate of ₹ 10.55 per meter to outside parties for dyeing and ₹ 15.07 for printing as against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 15.04 per meter but even if the rate of Garden Silk Mills is adopted still the assessee has charged ₹ 1.06 per meter less from Kamla Associates. In value terms this comes to ₹ 80,30,582 (1.06 x 7576021). The A.O., therefore, held that even in comparison with Garden Silk Mills, the assessee has charged ₹ 91,75,606/- less from Kamla Associates even in comparison with Garden Silk Mills for both dyeing activity as well as printing activity. The A.O. made the addition of ₹ 91,75,606/- on this account. The appellant has on the other hand stated that the argument of the AO is based on averages and not on specific jobs. The jobs done for Garden Silk Mills (GSM) and Kamala Associates (KA) are comparable in some instances but the jobs done for outside parties are not at all comparable with either GSM or KA. The appellant had filed detailed qualitative chart with the AO and the same has been given during the appellate proceedings. The argument of the appellant as reproduced above is acceptable that for so many reasons the rate charged would differ from Job to job. The appellant has shown that the rates are not comparable and hence averaging cannot give the correct ..... 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