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Cheminova India Limited Versus ACIT 10 (1) , Mumbai

2016 (9) TMI 545 - ITAT MUMBAI

Disallowance made u/s 14A - Held that:- We notice that the Ld CIT(A) has restricted the disallowance to 5% of the dividend income. However he has committed an error in working out the disallowance of 5% of the dividend income. Accordingly we modify the order of passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/s 14A to 5% of the dividend income.- Decided in favour of assessee partly - Disallowance made out of bad debts claim - Held that:- As the assessee has .....

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owance.- Decided in favour of assessee - Adhoc disallowance of manufacturing and other expenses - Held that:- there is merit in the submissions so made by the Ld A.R. In case of companies, which are having large volume of transactions, it would be practically difficult to bring all the evidences in one go. Hence the ledger account copies are furnished to the tax authorities and normally they are verified on a test check basis. In the instant case, the assessee has furnished copies of invoice .....

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d that the change in the sales product mix coupled with the inflationary increase of prices and expenses have contributed to the increase in manufacturing expenses. When we look at this analysis furnished by the assessee, we do not find any infirmity in it. We notice that the AO has also not commented adversely on this analysis. - Any deficiency noticed in the samples given would normally trigger further investigation. According to the assessee, the AO did not find any defect and further, di .....

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ms of expenditure. Accordingly, we set aside the order passed by the Ld CIT(A) on this issue and direct the AO to delete the ad-hoc disallowance - Decided in favour of assessee - I.T.A. No. 5282/Mum/2014 - Dated:- 3-8-2016 - Shri B.R. Baskaran (AM)& Ramlal Negi (JM) For The Assessee : Shri Rajan R. Vora & Ms. Charul Toprani For The Department : Dr. Darsi Suman Ratnam ORDER Per B.R. Baskaran (AM) :- The appeal filed by the assessee is directed against the order dated 28- 03-2014 passed by .....

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d by Auriga Industries A/S Denmark. 3. The first issue relates to the disallowance made u/s 14A of the Act. During the year under consideration, the assessee had earned dividend income of ₹ 60,510/-. The AO applied the provisions of Rule 8D and computed the disallowance at ₹ 2,67,781/-. The Ld CIT(A), by following the decision rendered by Hon ble Bombay High Court in the case of Godrej & Boyce Manufacturing Ltd (328 ITR 81), held that the provisions of Rule 8D shall not be applic .....

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mitted an error in working out the disallowance of 5% of the dividend income. Accordingly we modify the order of passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/s 14A to 5% of the dividend income. 6. The next issue urged by the assessee relates to disallowance made out of bad debts claim. The assessee had claimed deduction towards bad debts to the tune of ₹ 20,27,182/-. The AO called for details of bad debts. Out of those details, the AO noticed that the .....

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ndustries Ltd. The Ld A.R submitted that the date of invoice was 27-01-2004, but the assessee inadvertently mentioned the date as 27-01-2007. Hence the AO has drawn conclusion that the assessee was having business dealings with the above said party and accordingly disallowed the bad debts claim. The Ld A.R submitted that this fact, along with copy of relevant invoice, was furnished to Ld CIT(A), but the first appellate authority chose to confirm the addition. He further submitted that the decisi .....

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ued by CBDT, wherein the decision rendered by Hon ble Supreme Court in the case of TRF Ltd (supra) has been followed, there is no justification in disallowing the sum of ₹ 55,000/- actually written off. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance. 9. The next issue urged by the assessee relates to the adhoc disallowance of ₹ 2.00 crores made out of manufacturing and other expenses. The AO noticed that the sales r .....

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f trading goods. It was further submitted that the fixed over head expenses have increased by ₹ 10 crores which are in line with cost inflation index. It was also submitted that the discount offered to its customers has also increased due to market competition. With regard to the increase in interest expenditure, it was submitted that there was actually decrease in interest and finance charges by ₹ 0.74 crores. Further, there was increase in cash discount of ₹ 1.21 crores and t .....

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nished ledger account copies and sample copies of bills in support of expenses, i.e., the assessee has not furnished entire bills for verification. Accordingly he recommended that the addition of ₹ 2.00 crores should be sustained. Accordingly, the Ld CIT(A) took the view that the assessee has failed to furnish evidences as required by the AO to his satisfaction and accordingly, the assessee has failed to prove the expenses in terms of requirements of sec. 37(1) of the Act. Accordingly he c .....

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he AO did not find fault with the details furnished by the assessee. Further the AO did not call for any other details also. However, the assessing officer, even after carrying out verification of the details furnished by the assessee issued a remand report in support of the addition, after expiry of considerable period of 2 years. He submitted that the copies of those 20 volumes of evidences have been furnished before the Tribunal also. He submitted that the evidences available with the assesse .....

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n submissions. 14. On the contrary, the Ld D.R supported the order passed by Ld CIT(A). He submitted that the assessee did not produce all the evidences during the course of remand proceedings also. 15. We have heard the rival submissions on this issue and perused the record. We notice that the assessing officer has made ad-hoc disallowance out of manufacturing and other expenses on the reasoning that the assessee did not furnish all the evidences in support of their claim. At the time of hearin .....

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, the assessee would have made arrangements to transport all of them to the office of the AO. 16. In our view, there is merit in the submissions so made by the Ld A.R. In case of companies, which are having large volume of transactions, it would be practically difficult to bring all the evidences in one go. Hence the ledger account copies are furnished to the tax authorities and normally they are verified on a test check basis. In the instant case, the assessee has furnished copies of invoices a .....

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as stated that the change in the sales product mix coupled with the inflationary increase of prices and expenses have contributed to the increase in manufacturing expenses. When we look at this analysis furnished by the assessee, we do not find any infirmity in it. We notice that the AO has also not commented adversely on this analysis. 18. The next major increase is in the Employee Cost to the tune of ₹ 1.15 crores. It is stated that this cost is an item of fixed cost and the increase in .....

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that the cash discounts were offered to the customers for early payment of the dues and it has been accounted by issuing credit notes to the customers. If the customer makes payment in advance, then the cash discount was deducted from the prices and the same was shown in the invoices itself. Because of these measures, the collections from debtors have increased by ₹ 57.51 crores. Besides the above, the assessee has also offered Sales promotion discount schemes and further given special di .....

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