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The Principal Commissioner of Income Tax-3, Ludhiana Versus M/s Malwa Industries Ltd., Ludhiana

2015 (9) TMI 1361 - PUNJAB AND HARYANA HIGH COURT

Addition u/s 36 (1)(iii) - ITAT upholding the decision of Ld. CIT(A) deleting the addition - whether the assessee company has debited huge amount to profit and loss account on account of interest expenditure? - Held that:- Similar addition had been made in appellant's case during the assessment years 2005-06 and 2006-07 and the addition was deleted by CIT(A) following the decision of the Hon'ble Supreme Court in the case S.A. Builders Ltd. Vs. Commissioner of Income Tax [2006 (12) TMI 82 - SUPRE .....

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urchases made from the sister concerns is not correct method. In view of the fact that there are fluctuations in price of waste on day to day basis, the correct method is to compare the rates of purchases made by the appellant from sister concerns at a particular point of time by comparing the same with the rates given for the similar goods to other outside parties at the same point of time. As mentioned above the relevant details were duly produced at the time of assessment proceedings but the .....

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Disallowance of bank charges amounting - ITAT deleted the addition - Held that:- These expenses have been incurred by the appellant on account of processing fees paid by the appellant to bank to process the working capital facility to meet day to day requirement of funds which is recurring in nature. Further as clarified in the written submissions the fund based and non fund based working capital facilities sanctioned by the banks had been utilized by the appellant to meet the day-to-da .....

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nue was not able to displace the reasoning and the findings of fact recorded by the CIT(A) and the Tribunal so as to raise any law point.- Decided against revenue.

Disallowance of expenses incurred on account of building repair and maintenance - ITAT deleted the addition - Held that:- The Tribunal also recorded that the genuineness of the expenses. The said expenses were incurred for maintenance of road and boundary wall as the factory building of the assessee was already in existence .....

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the revenue under Section 260A of the Income Tax Act, 1961 (in short the Act ) against the order dated 10.9.2014 (Annexure-3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench A , Chandigarh (hereinafter referred to as the Tribunal ) in ITA No. 714/CHD/2012, for the assessment year 2007- 08, claiming the following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT Chandigarh Bench is justified in upholding the decision o .....

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s 40A(2)(b) as the assessee has inflated the purchases made from M/s Malwa Cotton Spinning Mills Ltd.? iii) Whether on the facts and circumstances of the case the Hon'ble ITAT Chandigarh Bench is justified in upholding the decision of Ld. CIT(A); deleting the addition of ₹ 22,41,628/- on account of bank changes without appreciating that the assessee company has made addition in fixed assets during the A.Y. Under consideration? iv) Whether on the facts and circumstances of the case the .....

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cs and filed its return of income on 31.10.2007 for the assessment year 2007-08 at a total income of ₹ 5,68,74,300/-. The assessee paid the tax under Section 115JB of the Act. The case was selected for scrutiny and notice was issued to the assessee. The Assessing Officer framed the assessment under Section 143(3) of the Act vide order dated 18.12.2009 (Annexure-1) by making the following additions:- i) Addition amounting to ₹ 2,90,652/- under Section 36(1)(iii) of the Act; ii) Disall .....

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sing Officer. Being dissatisfied with the order of the CIT(A), the revenue filed an appeal before the Tribunal. The Tribunal vide order dated 10.9.2014 (Annexure-3) dismissed the appeal and directed the Assessing Officer to adopt the book profits as per the profit and loss account and not to make addition on account of disallowance worked out under Sections 36(1)(iii), 40A(2)(b) of the Act, bank charges and expenses incurred on account of building repair and maintenance. Hence, the present appea .....

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urchases made from M/s Malwa Cotton Spinning Mills Ltd. According to the learned counsel, additions of ₹ 22,41,628/- on account of bank charges and ₹ 3,06,251/- as expenses incurred on account of building repair were deleted by the CIT(A) without appreciating that the assessee had made addition in fixed assets and the expenses were of recurring nature. 5. After hearing learned counsel for the revenue, we do not find any merit in the said submissions. The CIT(A) while deleting the add .....

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eme Court in the case S.A. Builders Ltd. v. Commissioner of Income Tax reported in 288 ITR 1. It is seen that similar addition had been made in appellant's case during the assessment years 2005-06 and 2006-07 and the addition was deleted by CIT(A) following the decision of the Hon'ble Supreme Court in the case S.A. Builders Ltd. Vs. Commissioner of Income Tax. The order of the CIT(A) has been upheld by the Hon'ble ITAT for both the assessment years in ITA No. 696/Chandi/2008 for asse .....

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sessee on the basis of which the matter had been decided in its favour has been displaced by any higher court. 7. Further, the CIT(A) while deleting the addition made by the Assessing Officer amounting to ₹ 2,77,318/- under Section 40A(2)(b) of the Act had recorded that the assessee had submitted date-wise and item-wise detail of material purchased from related concern and outside independent parties during the relevant period which showed that there was wide fluctuations of price during t .....

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chased from related concern and outside independent parties in the month of August 2006, September 2006, November 2006, January 2007, February 2007 and March 2007. It is seen that there are wide fluctuations of price over the months. It is also seen that on the date when material was purchased from Malwa Cotton Spg. Mills Limited the rates of same item purchased from outside parties were matching and comparable. In this regard it is seen from the assessment order that during the assessment proce .....

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mportant to compare the item wise prices. As mentioned in the assessment order details for such purchases made on specific dates of the month of November 2006 from related concern and from parties other than the sister concerns were duly produced before the A.O. and it was contended that on the date on which flat waste was purchased from M/s Malwa Cotton Spinning Mills Ltd., the rates of same item purchased from outside parties was higher. However, the AO did not accept this explanation and this .....

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e appellant from sister concerns at a particular point of time by comparing the same with the rates given for the similar goods to other outside parties at the same point of time. As mentioned above the relevant details were duly produced at the time of assessment proceedings but the AO chose to ignore the evidence. As submitted by the appellant, date wise and item wise detail of material purchased from related concern and outside independent parties in the month of November 2006, January 2007, .....

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ch may call for interference by this Court. Thus, no legal issue arises in this regard. 9. Taking up next issue, the addition of ₹ 22,41,628/- made by the Assessing Officer on account of bank charges debited to the profit and loss account was deleted by the CIT(A) by observing that the said amount was incurred by the assessee on account of processing fees paid to the bank to process the working capital facility to meet day to day requirement of funds which was recurring in nature. These fa .....

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funds which is recurring in nature. Further as clarified in the written submissions the fund based and non fund based working capital facilities sanctioned by the banks had been utilized by the appellant to meet the day-to-day requirement of funds for business. The working capital facilities are generally for a period of one year and such charges are levied by the bank every year. As pointed out by the AR of the appellant, it is seen that similar addition had been made during the Asstt. Years 2 .....

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this account is deleted. This ground of appeal is accordingly allowed. 10. The Tribunal had affirmed the said deletion. Again, learned counsel for the revenue was not able to displace the reasoning and the findings of fact recorded by the CIT(A) and the Tribunal so as to raise any law point. 11. Lastly, while deleting the addition of ₹ 3,06,251/- made by the Assessing Officer on account of building repair and maintenance expenses, the CIT(A) had held as under:- 7.3. I have carefully consid .....

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