TMI Blog2019 (6) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee failed to furnish the requisite information in respect of payment made to 5 parties . Therefore, there is no need to interfere with the findings of the CIT(A). Addition of excess claim of depreciation on electrical fitting - plant and machinery v/s furniture and fixtures - HELD THAT:- The depreciation on electrical fittings has rightly been claimed by the assessee at 15% by treating it as part of plant and machinery and not as furniture and fixtures. It is necessary to have electrical fittings for the power supply to the machineries and plant without electrical fittings and power supply, there is no use of plant and machinery. Therefore, Ground No. 2 of assessee s appeal is allowed. Addition on interest free advances - notional interest on interest free advances - CIT(A) upheld the said disallowance made by the AO - HELD THAT:- No addition can be made assessee has its own funds which amount to ₹ 22.54 crores as on 31/3/2011 and ₹ 23.84 crores as on 31/03/2010. Therefore, advances were given out of its own funds only. Thus, in light of the decision of M/S RELIANCE INDUSTRIES LTD [ 2019 (1) TMI 757 - SUPREME COURT] , no addition on account of notional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and in law, the id. Commissioner (Appeal) has erred in confirming on addition of ₹ 2,14,220/- an account on notional interest on interest free advances to eight parties aggregating to ₹ 17,85,158/- on the ground that these interest free advances has no business nexus and if they had not been made the appellant had to pay lower interest on his interest carrying borrowings. The Ld. Commissioner (Appeal) erred in overlooking the following facts:- (a) these advance are made in the earlier years mostly much prior to the A.Y. 2010-11 and no notional interest was assessed. (b) the fact that these allegedly interest free advances were made out of interest carrying borrowed funds has not been denied by the A.O. (c) the appellants own interest free funds lying in interest free current accounts of the parties alone amounted to ₹ 22.55 crores at the being of the year and ₹ 22.22 crores at the end of year against the interest free advances of ₹ 25,97,038/- at the being of the year and ₹ 17,85,158/- at the end of the year. The same position prevailed during the earlier years. (d) that it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with the general practice of the appellant, the payments were made to them by means of account payee cheques. Ground of Appeal No. 2 That the Id. CIT (Appeals) has erred in conforming the allowance of deprecation @ 10% instead of 15% on the W.D.V. of installed electrical panels, switch boards, pvc wire and conductors and also some payments made to the electricity department for lying transmition lines for the production and plant and machinery of the appellant. The authorities below failed to appreciate that this items were not in the category of normal furniture/fittings including electrical fittings Ground of Appeal No. 3 That on the facts of the case the Id. CIT (Appeals) has erred in conforming the addition of ₹ 1, 91, 465/- been the notional interest of interest free advances aggregating to ₹ 15, 97, 038/-. She failed to appreciate that:- (a) As the appellant had its own interest free funds far exceeding the sum of ₹ 15, 97, 038/-:- (b) No disallowance had been made in the earlier years with reference to these advances:- (c) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a GP rate of 17.41% as compared to immediate preceding years GP rate of 20.47% against the total sales of ₹ 40,52,75,216/- . Return of income declaring an income of ₹ 1,65,86,630/- was filed by the assessee on 30/09/2011. The case was selected for scrutiny and notice u/s 143(2) was issued on 9/8/2012 and was duly served upon the assessee. Subsequently notice u/s 142(1) along with questionnaire were also issued to the assessee. In response to the above notices CA and Accounts Manager duly authorized by the assessee in the case appeared from time to time and filed requisite details as called for. The Assessing Officer observed that there is decline in the GP rate as compared to immediate preceding year. The assessee was specifically asked to furnish the reasons for declining in the GP rate. The assessee vide submission dated 3/1/2014 submitted a note on comparative gross profit chart. The assessee also furnished books of accounts which were examined by the Assessing Officer during the assessment proceedings. The Assessing Officer made addition in respect of foreign commission expenses amounting to ₹ 61,31,446/-. The Assessing Officer also made addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax is mandatory u/s 95 on export commission paid to non resident agent. The Assessing Officer held that since, commission is due to accrue or arise in India, the sources from which the assessee had earned income were, therefore, inside India as the income earning activity that the payments for technical consultancy has been made outside India. The Ld. AR further submitted that payment to non-resident have been made for provision of consultancy services for earning income from the ultimate source in India and hence, even under DTAAs, these payments would be taxable in India. The Ld. AR further submitted that the CIT(A) deleted the disallowance made by the Assessing Officer by holding that the commission written by the non-residents agents did not arise on account of business connection of the commission agents in India and, therefore, cannot be deem to accrue or arise in India u/s 9(1)(i) of the Act. The Ld. AR relied upon the decision of the Banglore Tribunal in case of Exotic Fruits Pvt. Ltd.. Vs. ITO being ITA No. 1008 to 1013/Bang/2012 as well as Welspring Universal Vs. JCIT being ITA No. 4761/Del/2014 dated 12/1/2015 wherein this issue of allowability of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing charges at ₹ 1,71,62,877/-. The Ld. AR further submitted that the CIT(A) has deleted the addition of ₹ 22,00,963/- on the basis that assessee has established the claim of ₹ 1,67,89, 408/- in respect of polishing charges as the Assessing Officer did not state anything in case of remaining 12 parties. The Ld. AR further submitted that the Assessing Officer has alleged that the assessee failed to furnish the requisite information in respect of payment made to 5 parties amounting to ₹ 3,73,469/- without appreciating the fact that during assessment proceedings assessee duly furnish the copies of bills in respect of claim of ₹ 3,73,469/-. The Ld. AR further submitted that the Tribunal in assessee s own case for Assessment Year 2009-10 restricted the disallowance to 5%. The Ld. AR further submitted that the company has been regularly maintaining books of account and the same are duly audited. These books of account were examined by the Assessing Officer during the assessment proceedings and there is no adverse finding of the Assessing Officer in relation to these documents. The Ld. AR submitted that it is a well settled law that the ad-hoc additions canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Limited ITA No. 4559/Del/2010 order dated 9/8/2016. Thus, the Ld. AR submitted that the depreciation on electrical fittings has been rightly claimed by the assessee at 15% by treating it as part of plant and machinery, and not as furniture and fixtures. Thus, the Ld. AR submitted that the addition made by the Assessing Officer as well as CIT(A) amounting of excess claim of depreciation is not justified. 12. The Ld. DR relied upon the order of the Assessing Officer and the order of the CIT(A). 13. We have heard both the parties and perused the material available on record. The depreciation on electrical fittings has rightly been claimed by the assessee at 15% by treating it as part of plant and machinery and not as furniture and fixtures. It is necessary to have electrical fittings for the power supply to the machineries and plant without electrical fittings and power supply, there is no use of plant and machinery. Therefore, Ground No. 2 of assessee s appeal is allowed. 14. As regards Ground No. 3 of assessee s appeal, the Ld. AR submitted that during the year under consideration, the assessee has given interest free advances aggregati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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