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TMI Blog2021 (7) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... essee during the relevant previous year claimed lease money of Rs. 4,76,67,240/- against Gross royalty collection of Rs. 4,81,41,766/-. During the course of assessment proceedings, the assessee vide letter dated 10.03.2015 produced the copy of ledger account of Mining Engineer Jaipur. It was submitted that the AO observed that lease money of Rs. 4,76,67,240/- claimed in Profit & Loss Account, has been credited to Mining Engineer Jaipur in Equal Monthly installment of Rs. 39,72,270/-(39,72,270/-*12=4,76,67,240/-). It was also observed by the AO that payment to Mining Engineer has been made in lump sum amounts on different dates and the balance remaining payable at the end of the year has been C/F to next year. The AO asked the copy of ledger account of the assessee from the Mining Engineer Jaipur u/s 133(6) of IT Act 1961 and perused the same. The said ledger account provided by Mining Engineer was also made available for inspection of the assessee. It was further submitted that the assessee vide letter dated 16.03.2015 pointed out that there are certain pages which are missing in the account statement provided by Mining Engineer. It was also submitted that the monthly lease money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Mining Department, which has not been taken in to account by the AO while computing the actual payment during the relevant previous year. Therefore the actual payment of Rs. 4,82,16,045/- computed by the AO during the relevant previous year is erroneous and liable to be increased by Rs. 74,00,000/-towards payments made by the assessee during the period 16.11.2011 to 11.01.2012. Therefore the AO has no justification in making the relevant addition of Rs. 72,79,773/- which may kindly be deleted. 8. Per contra, the ld. DR has submitted that in order to verify the payment of royalty claimed by the assessee, information was sought by the Assessing Officer U/s 133(6) of the IT Act from Mining Engineer and as per the report sent by the Mining Department over the period of two years i.e. A.Y. 2011-12 and A.Y. 2012-13, the assessee has made total payment of Rs. 72,71,696/- as against the payment of Rs. 7,99,95,469/- claimed by the assessee over two assessment years, therefore difference of Rs. 72,79,773/- being the excess claimed towards royalty payment was disallowed by the Assessing Officer. It was further submitted that during the appellate proceedings the ld. CIT(A) has called f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent of Rs. 2,62,891/- on the ground that the addition in respect of the said parties namely M/s Krial Singh & Sons and M/s Raimant Craft has been made u/s 41(1) in preceding assessment year 2011-12. However the balance addition of Rs. 1,24,906/- was sustained. 12. In the above factual background, it was submitted that the old outstanding balance towards sundry creditors were shown in the books of accounts as acknowledged liability of the company to respective parties. The receptive creditors have not waived the liability and the assessee having included the same in its books of accounts has acknowledged the said liability. It was submitted that the said liability has neither been waived nor otherwise ceased during the relevant previous year and the assessee has not obtained any benefit by way of remission or cessation thereof. Therefore, the provisions of Section 41(1) of the Act has no application and the addition of Rs. 1,24,906/- sustained by the ld. CIT(A) may be deleted. 13. Per contra, the ld. DR relied on the findings of the lower authorities. It was submitted that during the course of assessment proceedings, the assessee could not show that any sum have been paid to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g year and there is no fresh loan/advance during the relevant previous year, therefore the same cannot be characterized as international transaction during the relevant previous year u/s 92CA(3) of the Act and therefore, the addition sustained by the ld. CIT(A) may kindly be deleted. 18. Per contra, the ld. DR relied on the findings of the lower authorities. It was submitted that the ld. CIT(A) has already restricted the ALP at 8.9% against 11.4% applied by the AO and therefore, given that the loan amount continues to remain outstanding and the transaction continues to qualify as an international transaction, the order of the ld. CIT(A) may be confirmed. 19. We have heard the rival contentions and perused the material available on record. The contention that the outstanding loan has been brought forward from preceding year and there is no fresh loan/advance during the relevant previous year, therefore the same cannot be characterized as international transaction during the relevant previous year u/s 92CA(3) of the Act is bereft of any merit. Once a transaction has been characterized as an international transaction and the same continue to remain outstanding during the relevant fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee during the relevant previous year was engaged in trading of fabric/cloth and has no activity relating to manufacturing of readymade garments, therefore the plant and machinery relating to manufacturing of readymade garments has not been put to use during the relevant previous year. As provided u/s 32 of IT Act, depreciation is allowable in respect of an assets which has been used for the purpose of the business. As the assessee during the relevant previous year as well as in the A.Y 2011- 12 has not used the above said plant and machinery for the purpose of the business, The assessee has moved from manufacturing of garments to trading in cloth and therefore depreciation in respect of the same as claimed by the assessee cannot be allowed. Thus depreciation of Rs. 1025961/- claimed on plant and machinery relating to manufacturing of readymade garments is hereby disallowed and added to returned income." 24. We have heard the rival contentions and perused the material available on record. We find that the AO has disallowed the depreciation on the plant and machinery as there was no activity towards manufacturing of readymade garments carried on by the assessee during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st-free loans to its various sister concerns as enlisted in the assessment order. The appellant had claimed interest expenditure of Rs. 46,02,681/- paid to bank towards borrowed funds. AO disallowed Rs. 145982/- on proportionate basis at 14%. In the present proceedings, it is stated that the loans are old and brought forward amounts. The AR could not prove the business expediency of these loans and availability of funds when the same were forwarded, hence the disallowance made by the AO is confirmed. Ground of appeal is dismissed." 28. We have heard the rival contentions and perused the material available on record. We find that all the contentions raised before us have been raised earlier before the ld CIT(A) and which have been duly considered by him. Though it is the claim of the assessee that loans/advances in the name of sister concerns in most of the cases have been brought forward from preceding years and have no nexus with interest bearing funds, however, there is nothing on record to substantiate the said contentions. Even where the loans and advances have been lent in earlier years, the onus still lies with the assessee to demonstrate that in the year when the funds were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected is not complete and certain pages or details are missing, it was also submitted that the claim of the assessee is fully verifiable from the ledger account of mining engineer Jaipur, as appearing in the books of accounts of the appellant. As per the remand report called, the entries have been verified by the AO, further the AR could not reconcile the difference between the 2 statements. In view of the same the disallowance made by the AO is confirmed, ground of appeal is dismissed." 32. We have heard the rival contentions and perused the material available on record. We find that all the contentions raised before us have been raised earlier before the ld CIT(A) and which have been duly considered by him. Merely passing a journal entry in the books of accounts is not determinative of the incurrence of the expenses and claim thereof for tax purposes. There is nothing on record in terms of any demand notice from the mining department or actual payment by the assessee towards such penalty. Though it is the claim of the assessee that the amount has been paid by account payee cheques, however, there is nothing on record to substantiate the said contentions. Therefore, we donot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the reasons cited by the AO, the disallowance is confirmed but restricted to 10% which shall be reasonable. The ground of appeal is partly allowed." 37. We have heard the rival contentions and perused the material available on record. We find that the disallowances have been made on the ground that the expenses have been claimed through self-made vouchers and possibility of personal expenses of directors cannot be ruled out. Unless the nature and quantum of expenses are specified, merely stating that expenses are supported by self-made vouchers cannot be a reason for disallowance. Further, as far as personal expenses of directors are concerned, only an apprehension has been raised and in any case, the assessee being a corporate entity, where any expenses of directors are incurred/borne by the assessee, what is relevant to examine is whether such expenses have been incurred pursuant to any arrangement or understanding between the two for the purposes of business or not. However, in absence of any specific finding by either of the authorities below, the disallowance so made and sustained is clearly adhoc in nature and the same is directed to be deleted. In the result, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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