Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (12) TMI 748 - ITAT AHMEDABAD

2016 (12) TMI 748 - ITAT AHMEDABAD - TMI - Disallowance u/s. 14A - Held that:- From going through the audited balance sheet of the assessee and more specifically schedule-5 of the paper book we observe that there are various investments regularly made during the year in the Mutual Funds and tax free bonds, some of them are brought forward, some have been sold out and in some cases there have been addition to the previous balance. In all regular activity in the investment account has been carried .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 8D comes into fore play. We find that as per rule 8D (iii) amount of ₹ 3,53,002/- has been calculated and looking to the size and variety of investments, we find that the disallowance has been reasonably sustained by ld. CIT(A). We uphold the same. Accordingly, this ground of assessee is dismissed. - Addition made u/s. 41(1) - Held that:- One last opportunity may be given to assessee and we restore this limited issue to the file of Assessing Officer for verifying unpaid liability of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ses. - Assessing Officer erred in rejecting the books of account and estimate the profit. - ITA Nos. 983 and 1065/Ahd/2013 - Dated:- 11-11-2016 - R.P. Tolani, Judicial Member and Manish Borad, Accountant Member Sanjay R. Shah, AR for the Appellant K. Madhusudan, Sr. DR for the Respondent ORDER Manish Borad, Accountant Member 1. These cross appeals by assessee and Revenue for Asst. Year 2009-10 are directed against the order of ld. CIT(A)-VIII, Ahmedabad, dated 22.01.2013 in appeal No. CIT .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cted for scrutiny assessment. Notice u/s. 143(2) of the Act was issued and duly served. Necessary questionnaire and query raised by Assessing Officer were duly replied by assessee from time to time. Income was assessed at ₹ 2,29,34,267/- after making addition of ₹ 58,93,409/-. 3. Appeal was partly allowed by the first appellate authority. 4. Now both the assessee and Revenue are in cross appeals before the Tribunal. 5. First we take up assessee's appeal wherein modified grounds o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ons of Sec 14A r.w.r. 8D were attracted to the facts of the present case. 2.2 That in the facts and circumstances of the case the Ld. CIT(A) ought not to have upheld the Sec. 14A r.w.r. 8D by AO. 3.1 The Ld. CIT(A) has grievously erred in law and on facts in upholding the disallowance u/s. 14A at ₹ 3,53,002/- and thereby confirming the disallowance of ₹ 3,53,002/-. 3.2 That in the facts and circumstances of the case the Ld. CIT( A) ought not to have confirmed the disallowance u/s. 14 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e disallowance/additions as confirmed by CIT(A) may please be deleted or 6. Ground No. 1 is of general nature, which needs no adjudication. 7. Ground No. 2 wherein assessee has challenged the order of ld. CIT(A) for upholding the disallowance u/s. 14A at ₹ 3,53,002/-. 8. Ld. AR submitted that disallowance of ₹ 12,58,430/- was made by Assessing Officer u/s. 14A in addition to ₹ 25,000/- disallowed by the assessee suo motu being expenditure towards earning exempt income. Ld. CIT( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l average investments of the assessee as a result of which disallowance of ₹ 9,90,552/- under rule 8D(iii) was sustained to ₹ 3,53,002/-. Ld. AR further submitted that there has been no specific expenditure incurred by assessee towards tax free investment and ₹ 25,000/- offered by assessee is sufficient to cover up the interest cost and in lack of specific finding by assessing authority about the expenditure directly or indirectly relating to have been spent for managing the in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed that assessee in appeal before ld. CIT(A) has itself requested to give direction to disallow maximum of ₹ 3,53,002/- which itself means that to the extent of ₹ 3,53,002/- assessee is agreed for the disallowance. 10. We have heard the rival contentions and perused the material on record. The issue raised in this modified ground is relating to disallowance upheld by ld. CIT(A) at ₹ 3,53,002/-. We find that assessee has earned tax free interest income of ₹ 55,02,903/- and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

We further observe that ld. CIT(A) has rightly followed the decision of the Tribunal in the case of DCIT v. M/s. Trade Apartment Ltd. in ITA No. 1277/Kol/2011 for Asst. Year 2008-09 pronounced on 30th March 2012 wherein it has been held:- 3. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 4. As learned CIT(A) has rightly observed, once there is no net interest expenditure, as is the case bef .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

deduction and expenses have been claimed for deduction, there cannot be any disallowance either. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A). Respectfully following the above decision we are in consensus with the view taken by ld. CIT(A) deleting the disallowance of interest under rule 8D(iii) of the Rules. 11. As far as disallowance of ₹ 3,53,002/- is concerned it has been calculated by a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

amount of expenditure towards administrative cost, salary expenditure, bank charges etc. cannot be ignored in the given circumstances. Further looking to the provisions of rule 8D(iii) r.w.s. 14A of the Act we believe that it is not easy for the Assessing Officer to go into the intricacies of the books of accounts in order to extract particular details in order to calculate the cost incurred towards managing investment. In order to cure this situation amended Rule 8D comes into fore play. We fi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssment proceedings ld. Assessing Officer observed that outstanding amount payable to seven parties totaling to ₹ 20,44,109/- are being brought forward from last many years and no payments were made to these parties after creating of trading liability. Further no transactions were entered into with these seven parties. Ld. Assessing Officer also observed that assessee has no whereabout of these parties and the credit balances of these parties must have been written off as income in the book .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rved by him that out of the impugned disallowance u/s. 41(1) of the Act of ₹ 22,44,109/- a sum of ₹ 12,10,695/- related to five parties who were either paid off/written back as income and accordingly deleted the same leaving behind the sustained disallowance u/s. 41(1) of the Act towards two creditors - Pal Peogeot Limited ₹ 5,49,929/- and Oriental Transport Co. ₹ 4,93,486/-. Ld. CIT(A) partly allowed this ground by observing as follows:- 5.3. I have gone through the cont .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

wo creditors viz. Pal Peugeot Ltd. and Orient Transport Co., with which appellant has dispute, no evidence have been produced but it was explained that they are trying to solve the dispute, through mediator. No addition can be sustained in respect of creditors which have been paid or written back in subsequent years. If it is sustained, then there will be double taxation which is not permitted in the law. As far as outstanding balances of two creditors which are in disputes the appellant has not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

before the Tribunal. 15. Ld. AR reiterated the submissions about these two parties-Pal Peogeot Limited ₹ 5,49,929/- and Oriental Transport Co. ₹ 4,93,486/- that there were disputes with these parties and would be resolved in the near future but could not place any other material evidence to support his contentions. 16. On the other hand, ld. DR supported the order of Assessing Officer to the effect that Revenue has raised similar type of ground in their appeal against the order of ld .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the form of table as mentioned below:- SR. NO. PARTY NAME CL. BAL AS ON 1/03/2009 STATUS PAGE NOS. 1. SS Traders 74,977.98 Written back on 31/03/2011 2. Malin& Associates 11,14,547.00 Payment made on 24/11/2010 3. Master Enterprise 6,969 Written back on 1-4-2009 4. Pal Peugeot Ltd. 5,39,928.96 There is dispute with parties and will be resolved within one or two months. '- 5. Universal Engg, Mfg. Industry 11,505 Written back as on 31 -OS- 2010 6. Chinubhai Kalidas & Bros 20,695 (Dr.) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

before us that since the date of order of ld. CIT(A) dated 22.1.2013 wherein it was submitted that the dispute about above referred two parties will be resolved within one or two months, then what is the status as on date i.e. whether the dispute has been resolved and the impugned due has been repaid or any other communication between the assessee and these two parties evidencing that the dispute is still persisting. To this question ld. AR could not fairly reply but requested strongly to rely o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

made by Hon. Supreme Court in the case of CIT vs. Sugauli Sugar Works (P) Ltd. in Civil appeal No. 2344 of 1992 wherein it was observed that whether the liability is actually barred by limitation is not a matter which can be decided by considering the assessee's case alone but has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceab .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e before various authorities. The assessee is submitting that there is a dispute and liability may arise in future. But in support thereof there is not a single evidence. During the course of hearing before us, ld. AR requested to provide one more opportunity to prove the genuineness of the unpaid liability of ₹ 10,33,414/- payable to two parties. Before us ld. DR raised no objection against the request made by ld. AR. We are, therefore, of the view in the given facts and circumstances of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the impugned amount of ₹ 10,33,414/- will be sustained as an addition u/s. 41(1) of the Act. Accordingly, this ground is allowed for statistical purposes. 19. Ground No. 5 not pressed, hence it is dismissed as not pressed. 20. Now we take up Revenues appeal in ITA No. 1065/Ahd/2013 1. The Ld. CIT(A) has erred in law and on facts in restricting the addition to ₹ 10,33,414/- out of ₹ 22,44,109/- made u/s. 41(1) of the I.T. Act. 2. The Ld. CIT(A) has erred in law and on facts in r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing Officer may be restored to the above extent. 21. We will deal the grounds at seriatim. 22. Ground No. 1 reads as under:- 1. The Ld. CIT(A) has erred in law and on facts in deleting the addition made for low GP amounting to ₹ 21,30,870/- even when no satisfactory explanation was given for the: decline in GP before the Assessing Officer. 23. During the course of assessment proceedings ld. Assessing Officer taking the basis of lower G.P. in percentage to last two years G.P., deduction in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ances were reconciled which occurred due to some arithmetical error and there was no other mistakes pointed out by the Assessing Officer in the books of account of assessee. 25. Aggrieved, Revenue is now in appeal before the Tribunal. 26. Ld. DR supported the order of Assessing Officer whereas the ld. AR relied on the order of ld. CIT(A). 27. We have heard the rival contentions and perused the material on record. Revenue is aggrieved with the order of CIT(A) allowing assessee's appeal in del .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

-10 for which Revenue is under appeal:- PARTICULARS Gross Profit % Net Profit % 2006-07 15.85% 5.93% 2007-08 16.8% 8.87% 2008-09 23.14% 13.84% Avg. Net Profit % 18.60% 9.55% . For the year under consideration (ie. A.Y. 2009-10) 22.78% 12.15% From the above table it can be seen that average n.p. for last three years is 9.53% whereas in the year under appeal it is 12.15% which is higher than the average. Similarly we also observe that the reduction in sales and raw material consumed is also at par .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in amount of commission recorded by the both the parties. Disputes arises because in books of Suchal Enterprise, commission is accounted for on net basis (after deducting TDS) while in books of appellant same has been accounted for on gross basis. Reconciliation has been submitted before me. In case of M/s. Laxmi Machine tools, the difference arises because sales for the month of March has been accounted in next April in their books of account white appellant has accounted for in the month of Ma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

before, me the confirmations of remaining branches and worked out reconciliation of figures between amounts of the party with 'he appellant and vice versa-which tallies. In-view of the above, neither the sales are understated nor are the expenses inflated in the books of account of the appellant. Therefore, when there is no defect found in books of account, AO is not justified in rejecting the same. Appellant also relies on the decision of Gujarat High Court in case of CIT vs. Vikram Plasti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

omparison, basis of one year is not justified. Therefore, comparison made by the AO is not correct. Further the AO has made the comparison of value of sales with item of raw material which may produce absurd result. In view of the above, I hold that AO is not justified in making the addition of NP on the basis that it is lower than immediately previous year as the same is without any concrete basis. Therefore, the AO is directed to delete the addition of ₹ 21,30,870/-. This ground of appea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

The Ld. CIT(A) has erred in law and on facts in deleting the addition made on account of profession fees amounting to ₹ 2,00,000/- without appreciating the facts that expenditure is not for day-to-day business transaction and was incurred for dispute of land which is not a revenue expenditure. 29. Brief facts relating to this ground are that assessee incurred ₹ 2 lacs for paying professional charges for defending the dispute relating to a land being a business asset of the company. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g dispute over the land at Vatva. From perusal of record, we observe that assessee has incurred legal expenditure of ₹ 2 lacs for contesting the dispute regarding the holding of lease since several years and the expenses were incurred for the purpose of legal advice for dispute of the land. Such expenditure as per assessee was wholly and exclusively for the purpose of business and is required to be allowed under section 37(1) of the Act. This fact placed before us has not been controverted .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in respect of fixed asset which is giving enduring benefit to the company, therefore, it should be capitalized against which the appellant submitted that it is not incurred for the purpose of purchasing the fixed assets but for defending or maintaining the asset which is used for the purpose of the business of the appellant. Appellant also submitted the judgment of Hon'ble Bangalore Tribunal in case of Deputy Commissioner of Income-tax v. ITC Hotels Ltd. 1 SOT 703 wherein on identical facts .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

usiness expenditure. Similarly, professional fees paid for safeguarding title to the asset should also be allowed as business Expenditure. Hon'ble Bangalore Tribunal in case of ITC Ltd. (supra) on identical facts has allowed expenditure as revenue expenditure. Following the same, I direct the AO to delete the disallowance of professional fees of ₹ 2.00 Lac and allow the same as revenue expenditure. This ground of appeal is allowed. We are, therefore, of the view that the amount of S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version