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2016 (4) TMI 464 - ITAT AHMEDABAD

2016 (4) TMI 464 - ITAT AHMEDABAD - TMI - Addition on account of interest free loan to sister concern from interest bearing funds - CIT(A) deleted the addition - Held that:- It is evident that the CIT(A) first of all holds that assessee’s sister concern has already paid substantial incentive in the shape of extra discount of ₹ 57,86,650/- in the impugned assessment year followed by ₹ 1,58,66,599/- in the succeeding assessment year. Coming to the fact as to whether the assessee invest .....

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involving commercial expediency based on facts do not invite any interest disallowance as held in SA Builders’ case (2006 (12) TMI 82 - SUPREME COURT ). The Revenue does not refer to any evidence on record rebut both these factual findings. We find no reason to interfere with the CIT(A)’s order directing to delete the impugned interest disallowance - Decided in favour of assessee

Disallowance of claim for bogus/expired and damaged goods - CIT(A) deleted the addition - Held that:- As d .....

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d not brought on record any evidence that the appellant had made sale outside the books. Even, no evidence during the course of search were found, which was relevant to A.Y. 2005-06. The Settlement Commission also accepted the assessee’s disclosure of further any additional disclosure on this issue. Thus, we do not find any reason to intervene in the order of the CIT(A).- Decided in favour of assessee

Excess depreciation allowance - Held that:- The Revenue invites our attention to pap .....

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ency. - Decided on favour of revenue for statistical purposes. - ITA No. 1344/Ahd/2011 - Dated:- 11-3-2016 - Shri Pramod Kumar, Accountant Member and Shri S. S. Godara, Judicial Member For The Revenue : Shri S.L. Chandel, Sr. D.R. For The Assessee : Shri P.K. Tandon, A.R. ORDER PER : S. S. GODARA, JUDICIAL MEMBER:- This Revenue s appeal for A.Y. 2007-08, arises from order of the CIT(A)-IV, Ahmedabad dated 14-02-2011 in appeal no. CIT(A)- IV/192-B/CC-2/09-10, in proceedings under section 143(3) o .....

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r the same involved utilization of any interest bearing funds. The assessee pleaded to have invested only out of its interest free reserves for commercial expediency in order to look after its subsidiary interest. It sought to highlight its business interest and to have taken huge credits therefrom. The Assessing Officer quoted its failure in proving non-diversion of interest free funds in the impugned investments. This resulted in interest disallowance in question of ₹ 45,81,105/-. 3. The .....

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eme Court in the case of S.A. Builders 288 ITR 1 (SC) that interest on borrowed funds cannot be disallowed if the assessee has advanced interest free loan to sister concern as a measure of commercial expediency. What is to be seen is "business purpose" and what the sister concern did with the money advanced. This is not a case of interest free loan to sister concern. The appellant had made investment of ₹ 500.00 lakhs in the share capital of the subsidiary company M/s Corned Phar .....

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in the shape of extra discount which was for ₹ 57,86,650/- in the A.Y. 2007-08 and for ₹ 1,58,66,599/- for the A.Y. 2008-09. These things are part of record of the Assessing Officer. The goods of the sister concern are sold by the appellant company and the appellant company making profit out of it and taxes on such profit are paid which are only on account of the existence of sister concern. Apart from it, the sister concern M/s Corned Pharmaceutical Ltd. had made the payment of S .....

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the loan funds, even then the interest cannot be disallowed where the loan was given for the business purpose and as a measure of commercial expediency. The Assessing Officer had thus not correctly applied the decision of the Hon'ble Supreme Court in the case of S.A. Builders 288 ITR 1 (SC). He had not correctly held that the appellant had not discharged the onus casted upon the appellant company. 5.4 However, the investment of ₹ 500.00 lakhs was made by the appellant in the share capi .....

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sallowed. The Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd, 313 I.TR 340 (Bom.) had held that if sufficient interest free funds are .available to an assessee to meet its investments and at the same time, the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. The Assessing Officer had not examined this issue in the proper perspective. He had not tried to examine the issue properly though sufficient ma .....

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ipment from Karnataka Bank, the closing balance of which was for ₹ 1,85,60,780/-. This loan was for specific purposes of R&D equipments and the same was not available to the assessee for investment. The another loan was also taken from the same Karnataka Bank for cash credit limit, the closing balance of which was for Rs, 1,94,26,221/-. There is no increase in the unsecured loan and the increase may be on account of accrued interest. The Assessing Officer had not given any finding that .....

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view of the decision of the Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd. 313 ITR 340 (Bom.), it is presumed that the investment was from the interest free funds available. Considering the above discussion and following the decision of the Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd. 313 ITR 340 (Bom.), it is held that the appellant was having sufficient interest free funds and the investment of ₹ 500.00 lakhs made in t .....

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s already paid substantial incentive in the shape of extra discount of ₹ 57,86,650/- in the impugned assessment year followed by ₹ 1,58,66,599/- in the succeeding assessment year. Coming to the fact as to whether the assessee invested its interest bearing funds in its sister concern or not, the lower appellate findings under challenge read that the assessee s non-interest bearing funds are much more than the investments in question. The CIT(A) follows hon ble Bombay high court decisi .....

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elete the impugned interest disallowance of ₹ 45,81,105/- in question. This first substantive ground fails. 5. The Revenue s next substantive ground challenges the CIT(A) s order deleting disallowance of claim for bogus/expired and damaged goods amounting to ₹ 44,07,572/-. Both parties are in agreement that tribunal s in assessment year 2006-07 ITA 2642/Ahd/2009 decides the very issue in assessee s favour as under:- 2. The assessee is engaged in the business of manufacturing and trad .....

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re reflected in the p&l account. The A.O. found that accounting treatment of goods reflected is contrary to the accounting standard specified in the 11th Division to the Income Tax Rule. There was a search and seizure operation u/s.132 of the IT Act on 09.09.2004 on the premises of the appellant. The appellant filed a settlement petition before the Settlement Commission, Mumbai. The ld. A.O. observed that the investigation wing during the course of search had recorded statement of Shri Kirit .....

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d by the order of the A.O., the assessee carried the matter before the CIT(A) who had deleted the addition by observing as under: 3.1 I have carefully considered the contentions of Learned Counsel as well as gone through the records. On perusal of assessment order, it has been noticed that the Assessing Officer had made addition only on the basis of statements of two employees of the Appellant Company who were not looking after sales/marketing/goods returned/destroyed. It was also admitted by bo .....

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nce, their statements were not corroborated with documents/records before making any estimate. On the other hand, the Appellant had submitted before the Assessing Officer party-wise details of debit advice and claims of various parties. It was held by Hon ble Allahabad High Court in case of CIT vs. Smt. Usha Tripathi (249 ITR 4) that the estimate of income without reference to seized documents could not be upheld. Moreover, estimate is not warranted without rejection of books of accounts u/s 145 .....

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r account and confirmation of M/s. Saffroys and copy of settlement etc. Ld. CIT D.R. vehemently argued that the appellant himself admitted before the Settlement Commission that he had obtained bogus purchase/expenses, bogus sales and unaccounted purchase. On that basis, he had made disclosure of additional income from A.Y. 1999-2000 to 2005-06. Thus, she requested to confirm the addition. 4.1 At the outset, ld. Counsel for the appellant has drawn our attention on the settlement petition where th .....

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figure on account of expired/damaged goods. The Department only relied upon the statements of person dealing with the production who were not aware of the fact as damaged and expired of goods were being dealt by the marketing staff even in statement also the Executive had admitted the percentage of expired goods 4 to 5%. Thus, it is allowable expenses. He prayed to confirm the order of the CIT(A). 5. We have heard the rival contentions and perused the material on record. It is practice in the p .....

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