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ACIT, Circle 5 (1) , New Delhi. Versus M/s. Mount Everest Mineral, Water Limited and Vica-Versa

2016 (7) TMI 833 - ITAT DELHI

Disallowance u/s 14A - Held that:- When the AO has not recorded his dis-satisfaction nor disputed the audited books of account, he was not justified in invoking the provisions contained under Rule 8D. So, in these circumstances, we are of the considered view that CIT (A) has erred in sustaining the disallowance u/s 14A to the extent of ₹ 5,00,000/- In face of the fact that the assessee has suo motu made a disallowance u/s 14A to the extent of ₹ 2,60,564/- being the salary paid to the .....

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e ledger to specific ledger for FOC and complimentary and as such, an amount of ₹ 4,21,087/- is actually incurred as expenses on account of FOC and complimentary bottles given in the market as samples all over India. Ld. CIT (A), after noticing the factual mistake committed by the AO in treating the amount of ₹ 4,21,087/- as unascertained liability, has rightly deleted the same. So, finding no illegality or perversity in the order passed by the ld. CIT (A), we hereby decide ground ag .....

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bill since March 2009, the assessee on the basis of agreement provided an amount of ₹ 70,000/- from September, 2008 to March, 2009 after deducting the tax at source i.e during the relevant financial year. So, the mistake committed by the AO has been rectified by the CIT (A) and the findings returned by CIT (A) need no interference. - Decided against the revenue. - Addition u/s 41 - Held that:- It is settled principle of law that a company can write off any bad debts in its account in a .....

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s in Schedule 18, question does not arise to invoke the provisions of section 41 of the Act. - Decided against the revenue. - Disallowance of bad debt written off - Held that:- The assessee needs not to bring on record any material or evidence to write off any amount of bad debt as irrecoverable to prove the fact that the debt has actually become bad. When the AO has not disputed the books of account and the assessee has duly recorded the written off amount of debt of ₹ 19,01,217/- in .....

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JUDICIAL MEMBER : Since common questions of facts and law have been raised in both the aforesaid appeal and cross objection, the same are being disposed off by way of consolidated order to avoid repetition of discussion. 2. Appellant, Assistant Commissioner of Income Tax, Circle 5 (1), New Delhi (hereinafter referred to as the revenue ) by filing the present appeal, sought to set aside the impugned order dated 30.09.2013 passed by the Commissioner of Income-tax (Appeals)- VIII, New Delhi qua th .....

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acts and circumstances of the case & in law, the Ld. CIT(A) is justified in allowing claim of ₹ 70,000/- as provisional commission expense? 4. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) is justified in allowing claim of ₹ 3,07,88,306/- as bad debt under the head rebate and discounts? 5. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) is justified in allowing claim of ₹ 19,01,217/- as bad debt in absence of .....

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the appellant had already identified and suo mottu offered an amount of ₹ 260,564/- being expense attributable in earning exempt income. 4. Briefly stated the facts of this case are : pursuant to the notice under section 143(2) and 142 (1) of the Income Tax Act, 1961 (for short the Act ) issued during scrutiny proceedings, Shri Raj Pal, Assistant Manager (Accounts) of the assessee company put in appearance, filed requisite details/information, books of accounts which have been examined on .....

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sallowed and added back u/s 14A in the computation of income. Finding the explanation furnished by the assessee not tenable, Assessing Officer invoked provisions contained under Rule 8D for determining the expenditure incurred for making investment at ₹ 19,09,899/- and further an amount of ₹ 16,49,335/- u/s 14A to the income of the assessee. 5. From the details of bottles supplied free of cost (FOC) and complimentary, AO noticed that the assessee has made provisions of ₹ 4,21,0 .....

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₹ 12,73,355/- ₹ 16,97,855/-, ₹ 19,75,355/- ₹ 17,56,573/-, ₹ 14,38,899/-, ₹ 14,27,946/-, ₹ 1,46,695/- and ₹ 70,000/- on 31.07.2008, 31.08.2008, 30.09.2008, 31.10.2008, and again on 31.03.2009. Assessee has reversed all other provisions but ₹ 70,000/- provided for commission was neither reversed nor added back by the assessee and disallowed the same as unascertained liability and thereby made an addition of ₹ 70,000/-. 7. As per Annexure .....

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for the year under consideration. Finding the explanation furnished by the assessee not tenable, the AO came to the conclusion that assessee company had recovered ₹ 5,00,00,000/- in FY 2007-08 relevant to AY 2008-09 from promoters against disputable claims by debtors for discount and rebate and thus ₹ 5,00,00,000/- were kept by the assessee for provision in its books of account for discount and rebate and has not claimed any expenses, discount and rebate during FY 2007-08 relevant to .....

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ten off. Assessee was called upon to file the details and justification of bad debts written off which he has filed but finding the explanation not tenable, the claim of the assessee of bad debts has been disallowed and thereby made an addition of ₹ 19,01,217/-. 9. Assessee carried the matter before the ld. CIT (A) who has partly allowed the appeal. Feeling aggrieved, the revenue as well as assessee has come up before the Tribunal by challenging the impugned order passed by the ld. CIT (A) .....

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penses to the extent of ₹ 11,49,335/- on estimated basis and not as per Rule 8D read with section 14A and relied upon the order passed by the AO. However, on the other hand, ld. AR to repel this argument contended that the AO has illegally invoked the Rule 8D(2)(iii) for disallowance of the indirect expenditure without recording his dis-satisfaction of the claim and CIT (A) has also erred in sustaining the disallowance u/s 14A to the extent of ₹ 5,00,000/- without any justification a .....

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e incurred in relation to exempt income; that he must record his dissatisfaction with correctness of claim of expenditure made by the assessee or with correctness of the claim made by the assessee that no expenditure has been incurred and that determination of amount of expenditure in relation to exempt income under Rule 8D only come into play when AO rejects claim of assessee in this regard. 13. Undisputedly, assessee company earned dividend income to the tune of ₹ 4,31,81,095/- and claim .....

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categoric plea that except for incurring expenditure of ₹ 2,60,564/- on account of salary paid to Executive (Finance), no other expenditure has been incurred for earning of the said dividend income. AO has not disputed the audited books of account maintained by the assessee in respect of investing and earning dividend income along with expenditure incurred thereon, lying at page 65 of the paper book. From the books of account, the AO has not identified any other expenditure incurred by the .....

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his dis-satisfaction nor disputed the audited books of account, he was not justified in invoking the provisions contained under Rule 8D. So, in these circumstances, we are of the considered view that CIT (A) has erred in sustaining the disallowance u/s 14A to the extent of ₹ 5,00,000/- In face of the fact that the assessee has suo motu made a disallowance u/s 14A to the extent of ₹ 2,60,564/- being the salary paid to the Executive (Finance) employed for managing the investment for m .....

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The company has to give complimentary bottles free of cost. The turnover of the company is ₹ 21.99 crores i.e. 22 crores in this financial year. On such a turn over, the free of cost complimentary bottles given in the market as samples all over India is not a very big figure. Considering the submissions of the AR and the ledger account, I find it a reasonable expenditure for marketing of the mineral water bottles. Hence, this expenditure of ₹ 4,21,087 is allowed in full. The addition .....

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general expense ledger to specific ledger for FOC and complimentary and as such, an amount of ₹ 4,21,087/- is actually incurred as expenses on account of FOC and complimentary bottles given in the market as samples all over India. Ld. CIT (A), after noticing the factual mistake committed by the AO in treating the amount of ₹ 4,21,087/- as unascertained liability, has rightly deleted the same. So, finding no illegality or perversity in the order passed by the ld. CIT (A), we hereby d .....

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it is apparently clear that since the agent has not raised any bill since March 2009, the assessee on the basis of agreement provided an amount of ₹ 70,000/- from September, 2008 to March, 2009 after deducting the tax at source i.e during the relevant financial year. So, the mistake committed by the AO has been rectified by the CIT (A) and the findings returned by CIT (A) need no interference. Hence, ground no.3 is determined against the revenue. GROUND NO.4 OF ITA No.6536/DEL./2013 18. Ld .....

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7/- in the P&L Account. As per the section 36(i)(vii) the company can write off any amount of bad debts as irrecoverable in the accounts of the assessee in any year including first year of business without any proof that the debts has actually gone bad. This is the freedom given to the businessman today to account as per his wish. Whenever the bad debts are recovered from the parties, he has to take into account the receivable in the P&L Account on the credit side. Thus the AD should mak .....

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ncluding the first year of business without proving the fact that the debt has actually become bad. Assessee has rightly claimed provision for discount and rebate written back of ₹ 3,07,88,306/- duly disclosed in Schedule 18 of the tax audit report of the composite amount of ₹ 5,24,10,339/-. When the write back of ₹ 5,05,09,122/-, which includes the amount of ₹ 3,07,88,306/-, was duly credited in profit & loss account in the form of adjustment of bad debt expenses in .....

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