9911796707
TMI Blog2021 (8) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... acts in confirming disallowance at Rs. 36070/- out of total disallowance made by learned A.O. at Rs. 108210/- being 30 percent of Business Promotion and Advertisement expenses claimed at Rs. 360707/-. 4. Ld. C.I.T.(A) has erred in confirming depreciation of Rs. 20475/- claimed at the rate of 60 percent on addition of Apple LED Cinema amounting to Rs. 45500/- classified as computer including computer software. 5. Ld. C.I.T.(A) has erred in law and on facts that Rs. 297000/- being payment of rent to Smt. Maya Sachdeva and Sh Rahul Sachdeva being related parties within the meaning of Section 40A(2)(b) of The Act amounting of Rs. 180000/- each i.e. Rs. 360000/-. It is contented that rent so paid is neither excessive nor unreasonable. Similar rent have been paid in earlier years and have been allowed. 6. Ld. C.I.T.(A) has erred in facts in confirming the disallowance of director's medical expenses claimed at Rs. 29506/-. It is contended that director of the company are also employee of the assessee company and expenses is allowable as per past history of the case. 7. Ld. C.I.T.(A) has erred in facts and circumstances in confirming disallowance of Rs. 194350/- being 10 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed from that party. The learned assessing officer was of the view that though the provisions of Section 92BA relating to the related party domestic transactions are effective only from 1 April 2013 but he looked into the reasons for making hundred percent purchases from a related party and whether the transactions are at arm's-length or not and unreasonable profit has not been transferred to the other related party. This was also for the reason that assessee has very low gross profit and net profit margins. Therefore the assessee was asked to prove the prices paid for goods and services to the related party whether they are at arm's-length price supported by documentary evidences and the prices charged was not excessive and was comparable unreasonable. The assessee was also asked to show the profit and loss account and balance-sheet of the related party. Assessee submitted that assessee is engaged in the marketing of the fabric whereas the related parties engaged in manufacturing activities of the fabric the related party manufactures, sales those product to the assessee and then assessee sales those products in the market this practice is followed since long. Assessee als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is actually in conformity with the provisions of Section 40A (2) of the act. Now it is required to be seen whether the addition made by the learned assessing officer and partly confirmed by the learned CIT - AE is in accordance with that provisions of not. In fact the AO is right that the hundred percent purchases of the assessee are from the related parties. However the hundred percent sales of the related party is not to the assessee. The turnover of the assessee is Rs. 52.99 crores whereas the turnover of the sister concern is Rs. 69.95 crores. Further assessee has stated that the sister concern is the manufacturing unit of the group whereas the assessee is a marketing unit of the group. Therefore comparison of the gross profit and net profit of a manufacturing unit with a marketing unit is not proper. If the revenue wanted to apply the provisions of Section 40A (2) of the act it has to prove that purchase price paid by the assessee are unreasonable and excessive looking to the market rate of such goods and further the needs of the business of the assessee. No such exercise has been carried out by the learned AO. In fact this exercise could have been carried out by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal is allowed and the disallowance is directed to be deleted. 8. Ground No. 4 is with respect to the depreciation on Apple LCD monitor on which assessee claimed depreciation @ 60% stating it to be computer and the Assessing Officer and CIT (Appeals) allowed it @ 15% holding it to be not a computer but general plant and machinery. The assessee has purchased Apple LED DIS which is in fact a monitor for Rs. 45,500/- which is required for display at the time of conferences and presentation and is required to be attached to a CPU. In fact, it is a computer Monitor. Therefore, we hold that it is a computer entitled to 60% of the depreciation, as it is a monitor attached to the computers. Thus, ground No. 4 is allowed. 9. Ground No. 5 is disallowance of rent to the related parties of Rs. 2,97,000/-. The Assessing Officer found that assessee has paid rent to specified persons under Section 40A (2) (b) of the Act. The fact shows that assessee is paying rent of Rs. 3,60,000/- to the related party in respect of premises E-434, Greater Kailash-II, New Delhi, where the family of the Directors are residing. Though the Directors have disclosed the perquisite value of rent-free accommoda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is dismissed. 12. Ground No. 7 is with respect to the confirmation of the disallowance of 10% of various expenditure such as Staff welfare, Repair, Telephone, Travelling, Vehicle running etc. The assessee has incurred total of these expenditure amounting to Rs. 19,43,521/-. The ld. Assessing Officer has disallowed 10% of such expenditure stating that the disallowance is in order to check leakage of profit under the guise of personal expenses debited under these heads. He disallowed 10% of this expenditure. The ld. CIT (Appeals) held that the above disallowance is reasonable for the reason that appellant is a private company run by its Directors and naturally certain expenditure have to be of personal nature. We find that before the Assessing Officer assessee has submitted the complete details of this expenditure. It is also submitted before us in Paper Book No. 2. We note that the assessee before us is a Pvt. Ltd. company and a company cannot have personal expenditure. It is not the case of the Revenue that disallowance is made as expenses are not incurred wholly and exclusively for the purposes of the business. No such instances despite submission of the details by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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