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2019 (1) TMI 1913 - ITAT AHMEDABADLiability for damaged goods under the head other expenses - HELD THAT:- Issue decided in favour of assessee in its own case [2016 (7) TMI 1465 - GUJARAT HIGH COURT] provision is a liability which can be measured only by using a substantial degree of estimation and that a provision is recognized when (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation and (c ) reliable estimate can be made of the amount of the obligation - if these conditions are not met, no provision can be recognized. Therefore, we are of the view that the CIT(A) and the Tribunal have rightly disallowed the addition made by the Assessing Officer. We do not find any error in the same. Depreciation on account of non-compete territory rights i.e. goodwill @ 25% - HELD THAT:- As decided in own case [2013 (5) TMI 610 - ITAT AHMEDABAD] issue decided in favour of assessee. Written off advances in its P & L a/c related to advances to suppliers for purchase of material, staff advances, security deposit etc. - AO observed that only bad debt incurred due to sale of produce were allowable as an expense and in the instant case of the assessee the nature of expenses do not fall within the purview of section 36(1)(Viii), therefore, he has disallowed these expenses and added to the total income of the assessee - HELD THAT:- As observed that as per the ledger account of the assessee in the case of M/s Sellora Enterptise it had purchased finish goods on principle to principal basis and also paid to the supplier on their behalf. The assessee was purchasing the goods since April 2006 from the said party and also paid to the supplier on their behalf, however, the balance turned to debit which was not paid by the said party therefore it was written off in the books. In respect of staff loan the assessee has advanced loan during the period of services of the employees and monthly recovery of loan was also made from the salary paid but the company could not recovered final settlement amount against due to resignation of its employees. Therefore, the company has written off of the unrecovered amount. The assessee has also given security deposit relating to the house for the staff which could not be recovered as the employees have not paid the maintenance and electricity therefore security deposit were forfeited which was written off by the assessee. After considering the detailed findings of the Ld. CIT(A) we observed that the impugned advances made in the ordinary course of business were written off when these were irrecoverable . In the light of the above facts and after considering the detailed finding of the learned CIT elaborated with judicial findings we do not find any error in the decision of ld. CIT(A) on this issue. Accordingly, this ground of the revenue is also dismissed. Addition u/s 41(1) - Outstanding sundry creditors - HELD THAT:- After considering the decision of on the Hon’ble jurisdictional High Court of Gujarat in the case of Commissioner of income tax -3 versus Bhogilal Ramjibhai Atara [2014 (2) TMI 794 - GUJARAT HIGH COURT] it is noticed that there was nothing on record to suggest that there was a remission or cessation of liability that too during the previous year relevant to the assessment year in the case of the assessee. In the light of the above facts, material on record and detailed finding of the learned CIT appeal we considered that outstanding were disputed liability was not ceased to exist, therefore, we do not find any infirmity in the decision of the Ld. CIT(A) therefore the appeal of the revenue is dismissed. Disallowance u/s 14A r.w.r. 8D - as per assessee interest free funds of the company including reserves were utilized towards purchase of investment yielding tax free dividend, therefore, the question of entire disallowance of interest etc. did not arise - HELD THAT:- With the assistance of the learned consul we have gone through the material on record and have noticed that assessee had submitted comparative statement of tax-free income and taxfree investment and the learned CIT appeal afters taking into consideration such undisputed information has rightly directed the assessing officer to recalculate the disallowance u/s. 14A r.w. Rule 8D correctly after taking into consideration the correct figure submitted by the assessee. In the light of the above facts and circumstances we do not find any infirmity in the decision of learned CIT appeal therefore this ground of appeal of the revenue is dismissed. Disallowance on account of administrative expenses incurred towards earning exempt income - HELD THAT:- As noticed that assessee was having sufficient interest free fund as against the investment made on which exempt income was earned. We have gone through working of disallowance made u/s. 14A r.w. Rule 8D of the I.T. Rule and it is noticed that major part of the disallowance was made by the assessing officer to the amount of ₹ 20,57,946/- being 0.5% of the average investment for administrative expenditure. After considering the nature of investment made in the form of Bonds & securities we are of the view that it will be appropriate to restrict the disallowance on account of administrative expenses incurred towards earning exempt income.
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