TMI Blog1998 (2) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... on the presumption that there was excess consumption of packing material i.e. Ceka cartons and pouch papers and that the automatic and semiautomatic packing machines produce uniformly 42 packets per minute. The CIT(A) has deleted the addition following his order in asst. yr. 1986-87. Since the facts and the reasonings of both the parties are identical to those discussed by us in our order of date relating to the asst. yr. 1986-87 we uphold the finding of the learned CIT(A). The ground raised by the Revenue accordingly fails and is dismissed. 3. Ground No. 2 reads as under: "The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 6,56,255 made for excessive consumption shown by the assessee." The relevant facts leading to the above addition are that according to the learned AO Areez P. Khambhatta is said to have made a statement on oath that there were certain bogus purchases to the extent of Rs. 25 lakhs. The extract from the statement is set out in para 14.2 of the assessment order. On the basis of the above statement the learned AO thought it fit to make verification of purchases and consumption of raw materials. He found that out of total raw ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re purchases to some extent during the period of one and a half years prior to the date of search. But the accounting year of the assessee for asst. yr. 1987-88 ended on 28th April, 1986 and, therefore, this statement does not include any part of that accounting year. The learned CIT(A) has also agreed with the submission of the learned counsel of the assessee that since necessary correction had been made with reference to the lesser physical stock found on the date of search on 20th Nov., 1987, by working backward and then working upward to find the probable stock on 28th April, 1987, and a disclosure had been made to the tune of Rs. 50 lakhs being the stock shortage on that day, the effect of bogus purchases was nullified fully and sufficiently. The CIT(A) further noted that though the assessee had not maintained statutory register for recording the imported raw materials and consumption thereof on day-to-day basis, the imports had been duly recorded and consumption had been shown in the books of account maintained by the assessee. He accordingly deleted the addition. 5. Surendra Pal, the learned Departmental Representative strongly supported the order of the AO. He submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar year. We further find that no such addition was made in the preceding year and the consumption of raw material at 5.37 Kg. was treated as reasonable. In our view the nominal increase in the case of raw material by 0.10 Kg. per case is attributable to the fact that part of the raw material is prepared manually which would result in unavoidable shortage/wastage. We agree with the learned CIT(A) that the addition has been made on an estimated basis without any cogent reasons and accordingly we decline to interfere. This ground fails and is accordingly dismissed. 8. Ground No. 3 reads as under: "The learned CIT(A) erred in law and on facts in deleting the addition of Rs. 3,78,782 for interest paid to 14 BOIs." During the year under appeal the assessee-trust paid interest of Rs. 3,78,882 to 14 BOIs comprising of 5 individual beneficiaries of the assessee discretionary trust namely, Areez P. Khambhatta, Persis A. Khambhatta (wife), Pirus A. Khambatta (son), Delna A. Khambhatta (daughter), Ruzan A. Khambhatta (daughter). Purportedly acting under cl. 9 of the trust deed the trustees distributed a part of the corpus of the trust fund jointly to seven groups of beneficiaries foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same time held that it was the income and not the corpus that was distributed to the individual beneficiaries, and also to the groups of beneficiaries as joint payments. He accordingly held that it was not interest paid to self but paid to 14 BOIs which are real and live entities and the rate of interest i.e., 4.5 per cent per annum was fair and reasonable. According to the learned CIT(A) it was not a colourable device and hence the ratio laid down by the Hon'ble Supreme Court in the case of McDowell Co. cited supra was not applicable. 10. Surendra Pal, the learned Departmental Representative submitted that this was the distribution of income of the trust earned during the year and not distribution of corpus. If that is so it was not possible for the trustees to distribute the money to different BOIs. S.N. Soparkar, the learned counsel maintained that what is distributed is corpus and not income. He drew our attention to a resolution passed by the trustees which according to him shows that the distribution is of corpus. That apart once profit is accumulated at the end of the year, the same forms part of corpus and if any amount is distributed out of the said amount, it may no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corpus which was distributed amongst the 14 BOIs as per the trust deed and as per the resolutions passed by the trustees as referred to supra. 11. Surendra Pal, the learned Departmental Representative further submitted that between the trust and beneficiaries there was no borrowing and, therefore, the claim of interest could not be allowed under s. 36(1)(iii) of the Act. We do not find any merit in this contention of the learned Departmental Representative in view of the decision of Gujarat High Court in the case of CIT vs. Tanvi Sajni Trust (1994) 118 CTR (Guj) 341 : (1994) 209 ITR 497 (Guj) as also by the decision of the Ahmedabad Tribunal in the case of Neo Trust vs. ITO (1992) 41 ITD 412 (Ahd). 12. The major argument of the learned Departmental Representative centered around the applicability of the judgment of Supreme Court in the case of McDowell Co. It was submitted by the learned Departmental Representative that in view of the said decision which has been followed by different Benches of the Tribunal Ahmedabad such a 'device' is not required to be approved. Soparkar, the learned counsel for the assessee submitted that the said decision of McDowell Co. is required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). In view of the submissions of the learned counsel discussed supra the entire income of the trust consisting of profits from the business and other interest has been determined as per the decision and resolution of the trustees and was transferred to the corpus account and corresponding entries were made in the books of account. Since the corpus was distributed and credited to the accounts of the different beneficiaries interest has to be allowed under s. 36(1)(iii) of the Act in view of the judgment of the Hon'ble Gujarat High Court in the case of Tanvi Sajni Trust and the decision of the Ahmedabad Bench of the Tribunal in the case of Neo Trust. In our opinion distribution of corpus by the trustees amongst the group of beneficiaries was not a device to save tax but as purely a social planning. In our opinion it was not a device with a view to enjoy unintended tax benefit but it has been done with the sole purpose of looking after and supervise the security of such large amount and preserve the corpus in the hands of the beneficiary that may be available to the beneficiaries which included minors and out of these three two were daughters. Accordingly we hold that the ratio la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT(A) erred in law and on facts in holding that the additions /disallowances under s. 43B could not be regarded as assessee's real income for the purpose of interest under s. 215 of the Act." The facts, the arguments of both the sides are identical to those discussed by us in our order of date in appeal No. 3903/Ahd/1990 for the asst. yr. 1986-87. As such our aforesaid decision will apply mutatis mutandis to the facts of the present case. For the detailed reasons given therein we decline to interfere and dismiss this ground. 15. Ground No. 5 reads as under: "The learned CIT(A) erred in law and on facts in directing the AO to treat the interest income and Kasar as part of the business income for the purpose of deductions under ss. 80HH and 80-I." As far as interest income qualifying as part of the business income for the purpose of deductions under ss. 80HH and 80-I of the Act the facts and the arguments of both the sides are identical to those discussed by us in detail in our aforesaid order relating to the asst. yr. 1986-87. As such our aforesaid decision will apply mutatis mutandis to the facts of the present case. We accordingly decline to interfere. 16. The n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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