TMI Blog2011 (9) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue is that the ld. CIT(A) has erred in reducing the trading addition by ₹ 12.00 lacs. 3.3 The assessee is engaged in the manufacturing and trading of mustard oil and oil cake. The AO examined the books of accounts and held that the books of accounts are not acceptable on account of following reasons though the results declared by the assessee are better as compared to the preceding year. a. There is variation in monthwise yield of mustard oil and mustard cake. b. Despite fall in sales, there is increase in packing, sales promotion and loading unloading charges. c. Closing stock is worked out on the basis of G P rate which is nothing but managing the gross profit declared. d. Royalty charged from Deepak Vegpro Pvt. Ltd. and Saurabh Agrotech (P) Ltd. should be based on quantity of oil sold instead of charging a fixed amount which is nothing but the modus operandi of the assessee not showing the actually royalty received. e. Records of quality of mustard seeds purchased and crushed is not maintained. f. No daily quantitative consumption records are maintained in respect of consumable store, viz. coal, wood. These claims are not subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee does not have interest free funds. As per provisions of section 14A read with general principal of section 37(1) the expenses which can attributable to the current years taxable income are only allowable, therefore, the interest as well as other establishment cost upto the proportionate extent to the funds diverted are required to be disallowed. Accordingly he disallowed interest and other expenses @ 13.5% of the alleged funds diverted i.e. ₹ 11,26,190 (83,42,160 * 13.5%) u/s 14A. 4.4 The CIT (A) has directed the A O to rework out the disallowance by giving following findings:- It is seen that the A O is justified in invoking the provision of section 14A of the Income Tax Act, 1961 under the given circumstances on the grounds as mentioned in the assessment order. However while making the disallowance, he ought to have brought clarity regarding the income earned and expenditure made for earning such income. On the other hand the AR ought to have assisted the A O in clarifying the position for determining whether disallowance needed to be made u/s 14A of the I. T. Act. The AR shall furnish the complete information to the A O. After examining the same the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for taxing such interest was justified. 2. Minda Invsetment Ltd. Vs. DCIT 52 DTR 001 order dt. 13.10.2010 Disallowance under section 14A required finding of incurring of expenditure in relation to exempt income where it was found that for earning exempted income no expenditure had been incurred, disallowance u/s 14A could not stand. 3. DCIT Vs. Maharashtra Seamless Ltd. 52 DTR 005 order dt. 16.12.2010 In this case CIT(A) deleted the disallowance on the ground that assessee had maintained that interest expenditure was incurred in respect of borrowing on cash credit limits utilized for normal business purpose of the assessee no part of borrowed funds has been utilized for making investment in tax free bonds that the AO had not established any nexus between the borrowed funds the investment in tax free bonds. These findings of CIT(A) was held justified it was held that where funds are mixed it is not possible to ascertain as to whether investment in tax free bonds was out of assessee s own fund, the AO did not establish nexus between borrowed funds the investment in tax free bonds, in such cases apportionment on pro rata basis was improper in the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals with the matter regarding how annual value of house property is to be determined. Accordingly he estimated the annual value of the said property at ₹ 4,32,000/-. 5.3 The ld CIT (A) directed the A O to obtain the rent of similarly placed property in similarly placed circumstances and apply the same to the instant case for assessing the income. 5.4 During the course of hearing, the ld. AR submitted through its written submission as under:- 1. Section 23 Annual Value how determined (relevant extract) be read as under: (1) For the purpose of section 22, the annual value of any property shall be deemed to be (a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or ------------- ------------- There is no dispute that in the present case the assessee has acquired the building for a sum of ₹ 64.65 Lacs for which interest free loan of ₹ 50 Lacs is given by one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermine the standard rent as per the provisions of rent control enactment. (vi) The standard rent is the upper limit, if the fair rent is less than the standard rent, then it is the fair rent which shall be taken as ALV and not the standard rent. The Hon'ble Delhi High Court also held that notional interest on interest free security deposit cannot be added for arriving at the annual letting value (ALV). We therefore, uphold the findings in restoring the issue. However, the AO will follow the principles given by Hon'ble Delhi High Court in determining the ALV. Hence, this issue is restored back on the file of the AO. 6.1 The 6th ground of appeal of the assessee is that the ld. CIT(A) has erred in sustaining a sum of ₹ 1.00 lac out of disallowance of packing material expenses. 6.2 The third ground of appeal of the revenue is that the ld. CIT(A) has erred in restricting the disallowance to the extent of ₹ 1.00 lac as against ₹ 6,30,218/- made by the AO on account of packing material expenses. 6.3 The assessee claimed packing material expenses for the year at ₹ 26,30,218/-. The AO observed that packing material expenses claimed is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 50,000/- out of loading and unloading expenses. 7.2 The 4th ground of appeal of the revenue is that the ld. CIT(A) has erred in restricting the disallowance to ₹ 50,000/- as against ₹ 2,32,140/- made by the AO. 7.3 The assessee claimed loading unloading expenses of ₹ 16.66,347/- on total sales of ₹ 34,55,26,342/- as against the expenses of ₹ 16,03,023/- claimed in preceding year on total sales of ₹ 39,61,98,046/-. The AO held that assessee could not explain the abnormal increase in loading and unloading expenses. He therefore disallowed ₹ 2,32,140/- keeping in view the percentage of expenses claimed in the preceding year. 7.4 The ld. CIT (A) confirmed the reasoning given by the AO for making the disallowance but restricted the disallowance to ₹ 50,000/- to meet the ends of justice after finding that there is substance in the submission of assessee and by considering the disallowance on higher side. 7.5 During the course of hearing, the ld. AR of the assessee through his written submission submitted as under:- Copy of ledger account of Loading Unloading expenses is at PB 33-34. All expenses are fully vouched. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
