TMI Blog2017 (1) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon’ble High Court, we confirmed the decision of CIT (A) and this issue of Revenue’s appeal is dismissed. Addition made being work-in-progress - Held that:- AO has made adhoc disallowance of 1% on raw material and CIT (A) deleted the same as there is no evidence. We find no infirmity in the order of CIT (A) and hence deletion is confirmed Addition of foreign travel expenses - Held that:- The argument of the assessee that such foreign travel is to source new suppliers is not maintainable as the majority of purchases shown by the assessee is from Germany, China, UAE, South Korea and the foreign travel expenditures to such places have already been considered and allowed. As the assessee failed to file corroborative evidence to justify that such foreign travel is wholly and exclusively for the purpose of business, the AO disallowed the expenses of ₹ 7,34,610/- with regard to visit of Arbind M. Kapoor to Zurich and Kualalumpur and the visit of Adidtya Kapoor to Zurich and Hongkong. The CIT (A) also confirmed the disallowance of Foreign Travel Expenses exactly on identical reasons. Before us also, assessee could not controvert the finding of CIT(A) or the AO, hence we confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see preferred appeal before CIT(A). The CIT(A) deleted the addition and held the expenditure as Revenue in nature by observing as under: - 5. I find that the appellant company has incurred expenditure of ₹ 25,84,047/-for repairs of existing factory building at Vapi to strengthen the beam of the existing building. Similarly, ₹ 3,48,125/was spent on repair of the boundary wall at Nashik factory. It is also found that Rs. l6,32,302/- was spent on purchase of steel and cement sheets. These sheets were purchased to protect the existing building and support the existing structure. It is also seen that labour charges of ₹ 2.92,889/-was also paid. Replacement or repair of old walls cannot lead to a conclusion that new capital assets came into existence. I refer here to the decision in the case of New Shorroc Spg. Mfg. Co.Ltd. v. VIT so ITR 338 (Bom); Addl.CIT v. Desai Bros -.108 ITR 14 (Guj); CIT v. Chowgule C0. (P) Ltd. 81 Taxman 384/214 ITR 523(Bom); CIT v. Saravana Sp. Mills (P) Ltd. 163 Taxman 201215293 IT'R 201(SC); CIT v. Janakiram Mills Ltd. 275 ITR 403(Madras); CIT v. Madras Auto Service (P) Ltd. 99 Taxman 575 (SC); CIT v. Manohar Lal Him Ltd. 219 Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt u/s 10 (34) of the Act. The assessee suo moto worked out the expenditure relatable to such exempted income amounting to ₹ 11,11,265/- and made disallowance u/s 14A of the Act. AO was not convinced with the explanation of the assessee, and accordingly applied Rule 8D of the rules and disallowed sum of ₹ 17,5,700/- and thereby after considering the suo moto disallowance made by the assessee, he restricted the disallowance amounting to ₹ 5,94,435/-. Aggrieved assessee appeal before CIT (A), who after considering the submissions of assessee restricted the disallowance of ₹ 5,94,435/- by observing as under: - I find that the appellant company made a cash profit of ₹ 9.25 crore during the year. The net own funds as on the balance sheet date is ₹ 43.57 crore. Thus the entire investment of ₹ 25.39 crore is made out of own funds and profit and not out of borrowed funds. In CIT v. HDFC Bank Ltd. (2014) 366 ITR 505 (Born), it has been held in the context of disallowance u/s. 14A that if the assessee s capital, reserves, surplus and current account deposits are higher than the cost of tax free investments, it would have to be presumed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espite having consumed raw material amounting to ₹ 11,80,81,229/-. The assessee explained before the AO that its manufacturing process involves various materials to be blended together and blending process planned during the day and completed within that day and thereafter there is no work in progress at any point of time. The AO estimated the deployment of material for manufacturing of finished goods at 1% and estimated work in progress amounting to ₹ 11,80,812/-. Aggrieved assessee preferred appeal before CIT (A), who deleted the addition made by AO by observing as under: - I find that the manufacturing process of the appellant company Involves imported material to be blended. In the past assessment years also the appellant-company has never shown work in progress since It never had work in progress in its audited accounts. The AG has not brought any material on record to justify that the appellant company has not disclosed work in progress. The finding of the AO that not having any raw material/semi-finished goods in the machinery itself in the manufacturing process at any particular point of time cannot be ruled out is not based on any reasoning. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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