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2016 (10) TMI 995 - ITAT AHMEDABAD

2016 (10) TMI 995 - ITAT AHMEDABAD - TMI - Disallowance of loss made on account of fire claim & loss of cylinders - Held that:- There is no dispute about the genuineness of the claim of the assessee about loss due to fire and insurance claim. Ld. Assessing Officer on presumption has held that the assessee has recouped loss without giving any cogent findings. Ld. CIT(A) has elaborately discussed the facts and circumstances; and based thereon has held that there is no evidence to substantiate the .....

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d. AO has grassed over the pertinent facts which have been rightly streamlined by the ld. CIT(A). No infirmity in the order of the ld. CIT(A) on this issue, which is upheld. - Disallowance on account of Commission Expenses - Held that:- From the record it clearly emerges that the assessee has submitted full address and PAN of the commission agents. It is also observed that the amount has been paid through cheque by deducting TDS which clearly indicates that the services have been rendered b .....

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pheld on this issue and this ground of the Revenue is dismissed. - ITA No. 2170/Ahd/2013 - Dated:- 30-8-2016 - SHRI R.P. TOLANI, JUDICIAL MEMBER For The Revenue : Shri Aditya Shukla, Sr DR For The Assessee : Shri H.V. Gandhi, AR ORDER This appeal by the Revenue is directed against the order of the Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad dated 14.06.2013 for AY 2010-2011. 2. The effective grounds raised in this appeal are to the effect that the ld. CIT(A) has erred in law and on facts .....

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of ₹ 8,59,388/- made on account of commission expenses which Assessee failed to prove that any services had been obtained for the purpose of Assessee's business. iv) deleting the disallowance u/s.40A(2)(b) of the Act of ₹ 71,631/- made on account of interest on account of higher rate of interest paid to related party as compared to non related parties without any provable Jurisdiction. v) deleting the addition of ₹ 47,228/- made on account of late payment of employees contr .....

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ing materials. During the course of assessment proceedings, assessee was asked to explain in respect of the additions in questions. The assessee vide its reply dated 18.12.2012 explained the same. The Assessing Officer, however, was not satisfied and made the additions. 5. Aggrieved, the assessee preferred first appeal, where the ld. CIT(A) deleted the various additions made by the ld. Assessing Officer. Ld. CIT(A) deleted the disallowance of loss amounting to ₹ 58,64,440/- [Rs.18,90,239/- .....

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hat there has been major fire in the factory premises of appellant, the fact which remained uncontroverted by the AO in the assessment order. The AO has not allowed the loss booked in books of accounts as the same has not been reimbursed by the insurance company. The factual position is analysed. The expenses on account of loss due to fire have been debited into the Profit & Loss account as under:- (i) Loss due to fire (stock)........................ ₹ 1,27,51,163/- (ii) Loss due to fi .....

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e has been valued vide Insurance Company report dated 12/02/2010 at ₹ 2,07,91,861/-. The claim further valued by Insurance Company as on 30/03/2010 at ₹ 1,50,00,000/-. The loss of stock is stated to be fully covered under insurance policy. After detailed working done along with Excise Department, the appellant has booked loss of stock at ₹ 1,27,51,163/-. However, actual claim passed by insurance company is at ₹ 1,08,60,924/- which is fully disclosed as income by the appel .....

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-23 which was field with AO. This was also not the loss claimed on loss of capital item such as building(s) etc. The loss is finally assessed by insurance company at lesser value than actual for reason unknown and it is common knowledge that insurance company as per their business practice never allow full loss to be assessed / reimbursed. It is my opinion that loss of stock was much higher but figures were pruned as per entries in RG-23 and same required to be respected. As per ratio laid down .....

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e has been insurance claim and the amount received from insurance company has been credited in books of accounts. This is stark reality as the crossverification is not possible for something which has lost in fire. But how one can assume that fire engulfed only part of stock and not the stock not reimbursed by the insurance company. I am convinced that fire shall be nondiscriminatory, if the part of stock destroyed which relate to successful insurance claim, so it will be for stock for which ins .....

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der insurance policy up to ₹ 1,20,00,000/-, i.e. stock not covered by insurance company is at ₹ 2,13,64,181/-. The appellant has booked loss of stock at ₹ 76,45,315/-. However, actual claim passed by insurance company is at ₹ 22,32,578/- which is fully disclosed as income by the appellant in next Assessment Year. Therefore, the appellant has not got any benefit to recoup the loss in its books of accounts by an amount of ₹ 54,23,737/-. This is the claim of ₹ 54 .....

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d that no benefit of MODVAT remained with them as any credit was passed on to purchaser(s) of cylinders. Loss for destroyed cylinders was not containing any such credit to be self utilised. I see the loss of ₹ 29, 74,201 /- @ 64.03% not allowed by insurance company in final computation by them being the cylinder stock under-insured. Astonishing fact remains that loss for 3300 cylinders was originally computed at ₹ 4,99,00,000/- and the insurance claim passed is of only ₹ 22,32, .....

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#8377; 39,74,201/- is getting confirmed in the computational papers of insurance company. The loss is as per third party duly confirmed by auditor. The AO has not questioned the genuineness of the claim but allowed the claim to the extent passed by the insurance company. There has been insurance claim and the amount received from insurance company has been credited in books of accounts. This is stark reality as the cross-verification is not possible for something which has lost in fire. But how .....

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201/- is genuine claim and same is allowed out of total claim of ₹ 54,23,737/-. 5.1 Ld. Departmental Representative relied on the order of the Assessing Officer. 5.2 On the other hand, ld. Counsel for the assessee contends that ld. CIT(A) has given elaborate findings in the appellate order. It is not disputed that the fire incident took place. The relevant valuation of damaged goods was made and submitted to the insurance authorities which was duly processed and an amount of fire claim was .....

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Ld. Assessing Officer on presumption has held that the assessee has recouped loss without giving any cogent findings. Ld. CIT(A) has elaborately discussed the facts and circumstances; and based thereon has held that there is no evidence to substantiate the findings of the ld. AO. In view thereof, I see no infirmity in the order of the ld. CIT(A) on this issue which is upheld. Thus, Revenue s ground on this issue is dismissed. 6. Apropos Ground No.2, i.e., regarding disallowance of ₹ 25,18, .....

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elating to reimbursement / non-TDS are clearly discernible. The details are culled out and reproduced in tabular form below:- Name of CHA Contract Service TDS Reimbursement TDS Amt.Rs. Amt.Rs. Amt. Rs. Amt.Rs. Preeti Clearing Agency 15031 339 186921 0 Preeti Farieight Pvt. Ltd. 205415 4406 1212609 0 Translog Express Pvt. Ltd. 244618 4820 1 007443 0 Liladhar Pasoo Forward Pvt. Ltd. 66180 1324 111147 0 TOTAL 531244 10889 2518120 0 As can be seen above, the appellant has been careful in deducting T .....

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harged for that year "in accordance with, and [subject to the provisions (including provisions for the levy of additional income-tax of, this Act] in respect of the total income of the previous year [***] of every person : Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under sub-section (1) Income-tax shall be .....

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t section 40(a)(iii) is not applicable to reimbursement of expenses to the employee of the appellant. The ratio is squarely applicable in instant case when it comes to the disallowance of ₹ 25,18,121/- u/s. 40(a)(ia) of the I. T. Act, 1961. I further rely on the ratio laid down in the case of ACIT vs. Minpro Industries, ITAT, Jodhpur Bench (2012) 143 TTJ (Jd) 331 wherein it is held that "reimbursement to the agents who have already made payments on behalf of assesses were not covered .....

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ddition to bills for fees payable on account of technical services and since the amount of bills so raised was towards the actual expenses incurred by them, there was no element of any profit involved in the said bills. It was, thus, a clear case of reimbursement of actual expenses incurred by the assessee and the same, therefore, was not of the nature of payment covered by section 194J requiring the assessee to deduct tax at source therefrom. The CBDT Circular No. 715, dated 8-8-1995 relied upo .....

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to the reimbursement of actual expenses and the assessee-company was not liable to deduct tax at source from such reimbursement. Thus, the impugned order of the Commissioner (Appeals) was upheld. The AO is, therefore, directed to be deleted the disallowance of ₹ 25,18,121/-. The ground of appeal is accordingly allowed. 6.1 Ld. Departmental Representative supported the order of the Assessing Officer. 6.2 On the other hand, ld. Counsel for the assessee contends that the amount paid in quest .....

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able for TDS. The ld. CIT(A) has rightly appreciated the issue and deleted the disallowance. 6.3 I have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. From the record it clearly emerges that the impugned amount paid by the assessee is in the nature of reimbursement of expenses for which there is no liability of TDS u/s 194H. The ld. AO has grassed over the pertinent facts which have been rightly streamlined by the ld. C .....

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e submission made by the appellant during the course of appellate proceedings. The evidences submitted which are collated in tabular form below:- Sr no. Name Commission Amt. Rs. TDS Deducted Rs. Net Amt. Rs. Remark 1 Suresh Lakhani 9,Shiv Nagar.Yogi Darshan, Nr.Rajshree Bajaj Auto,Gondal Road.Rajkot (Gujarat) ABAPL3841 A 84000.00 5665.00 78335.00 Rs.1 2000, Ch. No. 923, BOB, Dtd. 22.05.09 Rs.15000, Ch. No. 837, BOB, Dtd. 4.08.09 Rs.10000, Ch. No.552, BOB, Dtd. 22.09.09 Rs.20000, Chq.944, BOB, Dt .....

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11.10 4 HS Dalai 37,Sweet Home Society, Ambavadi, Ahmedabad (Gujarat) ABRPD9920E 141620.00 14163.00 127457.00 Rs.70000, Chq. No. 0074, BOB Dt. 12.01.11 Rs.57457, Chq. No. 223, BOB Dt. 28.03.11 5 PR Shah 37,Sweet Home Society, Ambavadi, Ahmedabad (Gujarat) ACIPS7111 G 156059.00 15803.00 140256.00 Rs.150000, Chq.No. 737, BOB Dtd. 07.10.10 6 Harshit Dalai 37,Sweet Home Society, Ambavadi, Ahmedabad (Gujarat) AJHPD 7286 K 202321.00 20232.00 182089.00 Rs.150000, Chq.No.725, BOB Dtd. 01.10.10 Rs.32089, .....

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8,31,013/-. The appellant was asked to reconcile as this figure is less by an amount of ₹ 28,375/-, if compared with the total disallowance. A letter dated 13/06/2013 filed saying that no TDS was deducted for following two commission agents: SI. No. Name of the persons to whom commission paid Amount (Rs.) 1 Shri Jitendra Vanchani ₹ 15,000/- 2 Karan Vora ₹ 13,375/- TOTAL ₹ 28,375/- In view of above, it is decided that the amount of commission paid equivalent to ₹ 28 .....

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am Sunder Jajodia [28 SOT 541] ii) ACIT Vs. Jindal Snow Pipes Ltd. [1 18TTJ 228] iii) CIT Vs. Textool Co. Ltd. [2 1 5 Taxman 170] iv) Kanubhai Ramjibhai Makwana Vs. ITO [3983/Ahd/2008 dt. 03/12/2010] v) CIT Vs. Five Star Holidays [202 Taxman 614] vi) Kuldeep Raj Mahaj'an Vs. Addl. CIT [214 Taxman 1] vii) J. K. Woollen Manufacturers Vs. CIT [72 ITR 612] I am inclined to accept the argument of appellant and rely on the ratio laid down by Hon'ble Gujarat High Court in the case of Rohini Bui .....

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AO having not found the payment of commission to be bogus payments, deduction thereof is allowable." The appellant has submitted copy of debit notes of commission agents, full addresses, PAN and the amount has been paid through cheque by deducting TDS, indicates that the services have been rendered for appellant's business by these commission agents. In my opinion, the appellant has discharged its onus by filing all possible details including debit notes and TDS and successfully establ .....

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assessee, on the other hand, contends that the assessee has submitted all the relevant details about the genuineness of commission agents in the form of full addresses of the commission agents, their PAN, details of the cheque through which the amount paid and the amount of TDS deducted. The services rendered by these commission agents have been explained. A plethora of evidence filed by the assessee has not been rebutted and instead, on surmises and conjectures, the commission has been disallo .....

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ough cheque by deducting TDS which clearly indicates that the services have been rendered by these commission agents for the appellant s business. Therefore, I find no infirmity in the order of the ld. CIT(A) on this issue, which is upheld. Accordingly, this ground of the Revenue is also dismissed. 8. Apropos Ground No.4 regarding disallowance of interest of ₹ 71,631/- u/s 40A(2)(b) of the Act, the ld. CIT(A) deleted the said disallowance by observing as under:- I have carefully considered .....

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ersons. Therefore, it has been submitted that it is erroneous to conclude that loans from banks are at cheaper rate than 18%. The appellant has given interest to the related parties @ 18% which is reasonable and is lower than what it would have cost effectively to the appellant had that amount been borrowed from banks. I have gone through the judgment of CIT Vs. Indo Saudi Services (Travel) (P) Ltd. [310 ITR 306(Bom)] and feel that the ratio laid down therein is relevant to the k issue under con .....

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