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The ACIT, Circle 2 (2) , Mumbai Versus M/s. Kaytee Corporation Pvt. Ltd.

2015 (12) TMI 193 - ITAT MUMBAI

Disallowance of sampling expenses - CIT(A) allowed claim - Held that:- The Assessing Officer was not convinced with the level of sampling expense incurred vis-a-vis the amount incurred in the preceding assessment year. In our considered opinion, the variation in the level of expenses, vis-a-vis an earlier year can be a ground to further investigate the matter, but the same by itself cannot be a ground to disallow any expenditure, specially, without bringing on record any infirmity or falsity in .....

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, clearly bring out the nature of the advances to the sister concerns, being trade advances. The assessee company had pointed out before the CIT(A) that the amount advanced to M/s. Premier Knit Processors Pvt. Ltd. was for purchasing yarn of requisite quality and getting garments manufactured at various factories at Tirupur for supplying to the assessee. It was also pointed out that the said concern was providing dyeing services to the assessee. It was pointed out that due to such arrangement, a .....

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imely delivery and quality of products, which was crucial for meeting the export obligations. These aspects have been appreciated by the CIT(A), and in our view, there is no cogent material before us, which would require us to distract from ultimate finding of the CIT(A).- Decided in favour of assessee.

Unexplained investment in shares - CIT(A) allowed claim - Held that:- The assessee explained that all investments except to the extent of ₹ 50,000/-, were made in the past years .....

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Ms. Aarti Vissanji ORDER Per G. S. Pannu, AM The captioned appeal by the assessee is directed against the order of the CIT(A)-5, Mumbai dated 13/01/2012, pertaining to the Assessment Year 2005-06, which in turn has arisen from an order passed by the Assessing Officer dated 28/07/2012 under section 143(3)of the Income Tax Act, 1961 (in short the Act ) . 2. In this appeal the Revenue has raised the following two Grounds of appeal:- 2. On the facts and in the circumstances of the case and in law, .....

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77; 16,44,647/- for interest attributable for investment . in shares and failed to appreciate that above disallowance is almost in the nature of disallowance u/s 14A and not in the nature of diversion of interest free funds which Ld. CIT(A) misinterpreted. 3. In so far as the first issue is concerned, the same arises from the action of the Assessing Officer in disallowing an amount of ₹ 35,04,272/- out of sampling expenses. The respondent-assessee is engaged in the business of both trading .....

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to the nature of business, assessee was required to keep making innovative designs, patterns, colours, etc., which are sent to the customers, who are situated in various parts of the world for approval. The requisite details were also furnished, however, the Assessing Officer was not satisfied. It was observed by the Assessing Officer that though assessee had furnished details of expenditure but no evidence or detail in respect of the despatch of the samples or names of the parties were given an .....

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diture on sampling could not be disallowed and it was also pointed out that no such disallowance was made in the past or in the subsequent years. The CIT(A) noted the submissions putforth by the assessee and has deleted the addition on the ground that there was no material brought on record by the Assessing Officer to prove that the expenses under the head sampling were either bogus or inflated or were not incurred for the business purposes. Against the aforesaid decision, the Revenue is in appe .....

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ive for the assessee also pointed out that requisite details of sampling expenses were furnished to the Assessing Officer and it was also pointed out that there was no such disallowance either in the past or in the subsequent years. Ld. Representative for the assessee had referred to a chart showing the turnover and sample expenses incurred for the last 10 years to point out that the ratio of sampling expenses over turnover cannot be static and it varies, having regard to assessee s nature of bu .....

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in the preceding assessment year. In our considered opinion, the variation in the level of expenses, vis-a-vis an earlier year can be a ground to further investigate the matter, but the same by itself cannot be a ground to disallow any expenditure, specially, without bringing on record any infirmity or falsity in the claim made by the assessee. In the present case, in our view, the CIT(A) made no mistake in deleting the disallowance of ₹ 35,04,272/- made by the Assessing Officer , which w .....

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st free loans to its sister concerns, namely, M/s. Premier Knit Processors Pvt. Ltd. - ₹ 4,49,43,996/- and M/s. Kaytee Apex Ltd. - ₹ 83,41,385/-. The Assessing Officer also noticed that assessee had debited interest expenditure of ₹ 1,21,01,211/- in its Profit & loss account. The Assessing Officer disallowed the interest proportionate to the aforesaid amount and quantified the amount at ₹ 16,34,647/- by invoking section 36(1)(iii) of the Act. 9. Before CIT(A), assesse .....

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t assessee had sufficient own interest free funds to cover the impugned advances and, therefore, no disallowance was called for having regard to the judgment of the Hon ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd., 313 ITR 340(Bom). Against such decision of the CIT(A), the Revenue is in appeal before us. 10. Before us, Ld. Departmental Representative appearing for the Revenue has assailed the order of the CIT(A) by merely reiterating the stand of the Assessing .....

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t attributable for investment in shares, whereas the disallowance of ₹ 16,34,647/- (assailed in the Ground of appeal) comprises of interest attributable not only to the investment in shares but also to the interest free advances made by the assessee to its sister concerns, and in this context, she has referred to Para-5.1 of the assessment order. Be that as it may, the Ld. Representative for the assessee has referred to the details placed in the Paper Book to substantiate the findings of t .....

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. The Annual Financial statements of the assessee, a copy of which has been placed at Pages 1 to 35 of the Paper Book, clearly bring out the nature of the advances to the sister concerns, being trade advances. The assessee company had pointed out before the CIT(A) that the amount advanced to M/s. Premier Knit Processors Pvt. Ltd. was for purchasing yarn of requisite quality and getting garments manufactured at various factories at Tirupur for supplying to the assessee. It was also pointed out th .....

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