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TMI Blog2013 (11) TMI 1710X X X X Extracts X X X X X X X X Extracts X X X X ..... de letter dated 3-11-2008 submitted as under :- "The commission of ₹ 17,91,334/- is unpaid to Mr Ashwin Pare/, as the said party has not performed the work as decided earlier. Later on, the payment could not be made because of liquidity crunch. We intend to make this payment in current year as soon as possible." Further from the details produced by the assessee it is seen that the liability is outstanding from F.Y. 2002-03 i.e. ₹ 1,71,267/- and F.Y. 2003-04 i.e. ₹ 16,20,067/-. This fact is also apparent from the records, wherein the outstanding liability is appearing in the balance sheet of the assessee from A.Y. 2004-05, though the assessee has debited these expenses in the P&L A/c. for the relevant years. 4.2. Here it is pertinent to go through the provision of the section 41(1) of the Act, relevant portion is which reproduced as under:- "Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the firstmentioned person) and subsequently during any previous year- " (a) the first mentioned person has obtained, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of jurisdiction High Court in the case of CIT vs. Nitin S. Garg Tax Appeal Nos. 2428 & 2431 of 2010 dated 11th April, 2012 [2012] 22 taxman.com 59 (Guj) wherein following was held. "It had not been established that the assessee had written off the outstanding liabilities in the books of account. The Tribunal was justified in taking the view that the assessee had continued to show the admitted liabilities in its balance sheet, the same could not be treated as cessation of liabilities. Merely because the liabilities were outstanding for last many years, it could not be inferred that the said liabilities has ceased to exist. The Tribunal had rightly observed that the Assessing Officer would have to prove that the assessee had obtained the benefits in respect of such trading liabilities by way of remission or cessation thereof. Merely because the assessee obtained benefit of reduction in the earlier years and balance was carried forward in the subsequent year, it would not prove that the trading liabilities of the assessee had become non-existent. [Para 15] In view of aforesaid, impugned order passed by the Tribunal was to be upheld." We feel no need to interfere with the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aikishan then the issue of the purchases will arrive. Therefore the claim of the assessee that debit notes constitute purchases is devoid of merits and it is dealt accordingly. Similarly the assessee has claimed D/Ns, on Brijesh Textiles, amounting ₹ 5,35,342/-. On verification of the TDS certificate field during the course of assessment the assessee has received substantial amount towards contract/job work from Brijesh Textiles. The details of TDS as given below:- Date of Certificate Name of the Party Amount Paid/Cr. TDS amount Remarks 15/10/2007 Brijesh Textiles, 1967588/- 44586/- Contract/Jobwork 10/ 11/2007 Brijesh Textiles. 758536/- 17189/- Contract/Jobwork 20/12/2007 Brijesh Textiles. 682520/- 15466/- Contract/Jobwork 01/03/2008 Brijesh Textiles. 71848/- 1628/- Contract/ Jobwork 13/03/2008 Brijesh Textiles. 34974/- 793/- Contract/Jobwork On going through the above TDS certificates, it is clear, that the assessee is making a claim which is not supported by an evidence. Thus the furnishing of D/Ns stated to have been issued by Brijesh Textiles by amount of ₹ 5,24,661/- is not but clear ply to increase the purchases or trying to show l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were bogus and the same has remained uncontroverted at the time of hearing before us we feel no need to interfere with the order passed by him and the same is hereby upheld. 11. Second ground relates to deleting the addition of ₹ 39,92,000/- made by AO by invoking the provisions of section 41(1) of the Act. 12. AO while making this addition has observed as under:- "3. Addition towards non moving creditors: During the course of hearing it is noticed that the assessee is showing 39,92,000/- in respect of the following concerns: NON MOVING ACCOUNT LAST THREE YEARS Sundry Creditor Name of the Party 2007-08 2006-07 2005-06 NGLfineChemLt d 330500 330500 330500 Nibin Pharmaceuticals 1242500 1242500 1242500 Pharmanza (India) 2419000 2419000 2419000 Total 3992000 3992000 3992000 The amount of ₹ 39,92,000/- is out standing of Sundry Creditors for Pharmaceuticals for more than 3 years as on 31/03/2008. As the assessee is a manufacture end export of Textiles and Fabrics, engaged in the Textile fine. However, for years together, he has been chiming/showing the same as outstanding creditors. During the course of assessment proceedings, the AR has stated, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest income from the following parties to whom an aggregate amount of ₹ 77,76,005/- is offered during the F.Y.2007-08. S/No. Name of the party Amount Rs. 1. Dilip Ratilal 2,97,417/- 2. Dina Hiren Kumar 1,00,000/- 3, Dinesh Ratilal 45,122/- 4. Greestar Texprint Pvt. Ltd. 39,000/- 5. Legend Marketing sharafi 50,000/- 6. Ulpa Ashwin Patel 2,29,000/- 7' Shree Satguru Industries 12,00,000/- 8. Ram's Pharma Corporation 57,34,466/- 9. Reshma D. Parik 1,00,000/- Total 77,86,005/- Thus the assessee has not following consistency and uniformity in offering interest income. During the course of hearing a show cause notice was issued on 19/11/2010 and the assessee was asked to furnish his objections for which the assessee has simply stated that they are interest free loans but not furnished any details or supporting. Since the assesses is a manufacturing concern and paying interest towards secured and unsecured loans and in the light of assessee's submission it is observed that interest is not charged from the parties or persons through mutual convenience and accommodation. In view of the above discussion, interest @12% is charged on Loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Disallowance of Claim of Depreciation: On perusal of the submitted details, it is noticed that the assessee has claimed depreciation on motor vehicles amounting of ₹ 2,93,169/- in the year under consideration, but during the course of assessment proceeding the assessee has produced bills and proof of purchase of the assets and it is seen from the details furnished by the assessee the vehicles are registered in the name of partners and it is used by the form even though the vehicles are at the disposal of the firm the legal ownership is with the partners only. Therefore the depreciation claimed by the assessee has to be disallowed considering the ownership not belonging to the assessee. During the course of hearing, the assessee has furnished a sales invoice of, for purchase of a Hundai Getz asking ₹ 4,51,900/- which is in the name of Paresh kumar Ratilal shah [partner of the firm]. The car was registered in the name of the partner of the firm and hence assessee cannot be considered as the legal owner of the vehicle. The "ownership" in the legal context means that the asset, under consideration, should be bought and registered in the name of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the rival submissions. Perusal of the balance sheet of the appellant reveals that all these cars are reflected in the schedule of fixed assets. The appellant had claimed depreciation on these cars. Some of those cars were purchased in the previous years and depreciation on these cars are regularly allowed. Perusal of balance sheet further reveals that the appellant raised loans from bank to purchase some of these cars. Secondly, the A.O. had accepted the running and maintenance expenses debited by the appellant in the P & L A/c. These facts makes it abundantly clear that these cars were purchased from the funds of the appellant firm and is being used for the purposes of business of the appellant firm. In such a case, in my considered view the appellant is entitled to claim depreciation on these cars. The appellant's case is fully covered by the decision of Hon'ble Supreme Court in the case of Mysore Minerals Ltd. vs CIT(1999) reported at 239 ITR 775 (S.C). In view of above facts, I am inclined to agree with the contentions of the appellant. The A.O. is directed to allow depreciation on motor cars of ₹ 2,93,169/-. This ground of appeal is allowed." Since Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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