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2014 (6) TMI 985 - AT - Income TaxAddition on account of unaccounted receipt from National Dairy Development Board (NDDB) - Held that - We find that the assessee is able to explain by filing details of packaging charges received to the sum of 1, 20, 27, 912/- and why the difference kept in. The assessee has reconciled the figure of 7, 22, 171/- being the amount of packaging charges already booked in the Ay 1999-2000 and it has been verified by the AO as well as CIT(A). The second figure of 4, 62, 597/- being the amount received from NDDB was reflected under the head other incomes as is evident from the statement forming part of assessee s paper book appearing at pages 27 to 31. From the above reconciliation it is clear that the assessee is able to explain why difference between the receipts as noted in TDS certificate and receipt declared by assessee arose. Accordingly this amount of 12, 32, 996/- has rightly been deleted by CIT(A) and we confirm the same. This ground of appeal of revenue is dismissed. Disallowance of interest on borrowed money - Held that - We find that the assessee company contributed a sum of 2, 10, 48, 250/- by way of its shares in the joint venture. The assessee company under the name of Metro Dairy Ltd. produces milk in joint venture with WBSCMPFL and NDDB. The joint venture is a business enterprise and investment by assessee in the same is wholly and exclusively for the purpose of business. The assessee company filed copy of joint venture agreement amongst assessee WBSCMPFL and NDDB before the AO before CIT(A) and even now before us. Once the investment is made in a joint venture and all the monies borrowed were used wholly and exclusively for the purpose of business no interest can be disallowed. This issue is covered by the decision of Hon ble Calcutta High Court in the case of CIT Vs. Rajib Lochan Kanoria (1994 (2) TMI 42 - CALCUTTA High Court ). Even this issue is covered by the decision of Hon ble Bombay High Court in the case of CIT Vs. Reliance Utilities 19/- per tray of Frooti Mango drink containing 27 tetra packs of the said juice. The assessee submitted complete breakup of 49, 44, 199/- paid/payable to Parley Agro Pvt Ltd. It was claimed by the assessee that it was under compulsion to participate in the scheme as a prudent businessman and accordingly paid its share of expenses. It was the objection of the revenue that no services in exchange of payment to Parley Agro Pvt. Ltd. was received by the assessee company but it seems that the objection of the revenue is unjustified in view of the fact that the advertisement in the form of Scoobi Doo animation film was shown in Television and All India display of such film was intended for increase of the sale of Frooti . This being a promotional scheme assessee received huge success in business and this being a business itself assessee s expenses are also business expenses. We are of the view that the CIT(A) has rightly deleted the disallowance and we confirm the same Addition on account of increase in closing stock of stores 48, 19, 274/- to 48, 37, 047/- i.e. 17, 772/- was properly accounted by the assessee and in view of this CIT(A) has rightly deleted the addition and we confirm the same. Addition on unaccounted receipts from Dhara Vegetable Oil 87, 11, 115/- and not 87, 21, 394/- as noted by the AO in the assessment order. The assessee explained before us that the gross bill of 87, 11, 115/- it reversed the packaging charges of the earlier years attributable to under despatch packing material and added the packaging charges relating to under despatch packing material and the current year and there was discrepancy. We find that the assessee has determined the income chargeable under the head Profit and Gains of business in accordance with the method of accounting regularly employed by the assessee and also reconcile the discrepancy in the packaging charges vis- -vis closing stock. Once the assessee explained the same the addition cannot be made. Accordingly we confirm the order of CIT(A) deleting the addition Addition of amount received by assessee from Metro Dairy Ltd on account of TDS credit - Held that - AO failed to correctly appreciate the submissions made by assessee in regard to real nature of receipt of the assessee. It is a fact that assessee has received a sum of 4, 62, 911/- on account of reimbursement of expenses incurred by assessee on a joint venture project carried on with Metro Dairy Ltd. Since this amount represented reimbursement of expenses it was not in the nature of income in the hands of the assessee. CIT(A) has rightly deleted the same and we confirm the same. Addition on account of obsolete stores - Held that - From the details of closing stock as on 31.03.2003 has shown in the statement enclosed with the assessee s letter it is noticed that the total of the various items of closing stock of stores and spares was at 51, 32, 752/- from which obsolence amounting to 2, 5, 705/- was deducted. From the statement it is clear that this amount shown by the assessee as provision for obsolence rather it is a deduction claimed on account of obsolete stores and spares written off. This being an usual practice in the manufacturing industry to write off obsolete stores annually and therefore claim as deduction from the closing stock is fully justified. Addition on account of remission of sales tax - Held that - The sales tax remission given under West Bengal Incentive Scheme 1993 and 1999 was not for assisting the assessee in carrying out its business operation but incurred the promotion of industries in the State of West Bengal and consequently following the decision of Hon ble Supreme Court in the case of Sahaney Steel & Press Works Ltd. Vs. CIT 1997 (9) TMI 3 - SUPREME Court holding the sales tax remission as capital receipt.
Issues Involved:
1. Deletion of addition on account of unaccounted receipt from National Dairy Development Board (NDDB). 2. Deletion of addition on account of disallowance of interest on borrowed money. 3. Deletion of addition of Scooby Doo Promotion expenses. 4. Deletion of addition on account of increase in closing stock of stores and spares. 5. Deletion of addition on unaccounted receipts from Dhara Vegetable Oil & Food Co. Ltd. 6. Deletion of addition of amount received by assessee from Metro Dairy Ltd. 7. Deletion of addition on account of obsolete stores. 8. Deletion of addition on account of remission of sales tax. Detailed Analysis: 1. Unaccounted Receipt from NDDB: The revenue appealed against the deletion of Rs. 12,32,996/- added by the AO as unaccounted receipts from NDDB. The assessee explained that Rs. 7,22,107/- was already booked in the previous year and Rs. 4,62,597/- was reflected under other income. The CIT(A) found the explanation satisfactory and directed the deletion of the addition. The Tribunal confirmed the CIT(A)'s decision, noting that the assessee had successfully reconciled the figures and explained the discrepancy. 2. Disallowance of Interest on Borrowed Money: The AO disallowed Rs. 34,13,652/- as interest on borrowed money, arguing that the assessee's investment in Metro Dairy Ltd. was not for business purposes. The CIT(A) found that the investment was made as part of a joint venture agreement and was for business purposes. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had sufficient interest-free funds to cover the investment and that the investment was made for business purposes. 3. Scooby Doo Promotion Expenses: The AO disallowed Rs. 49,44,199/- incurred on Scooby Doo promotion expenses, claiming no services were received in exchange. The CIT(A) allowed the expense, noting that the promotional scheme was to boost sales of "Frooti" and the payment was made as per the scheme's terms. The Tribunal confirmed the CIT(A)'s decision, agreeing that the expenses were genuine and incurred for business purposes. 4. Increase in Closing Stock of Stores and Spares: The AO added Rs. 17,772/- for the increase in closing stock of stores and spares, claiming it was not reflected in the P&L account. The CIT(A) deleted the addition after the assessee provided a reconciliation statement. The Tribunal upheld the CIT(A)'s decision, finding the reconciliation satisfactory. 5. Unaccounted Receipts from Dhara Vegetable Oil & Food Co. Ltd.: The AO added Rs. 1,00,883/- as unaccounted receipts. The assessee explained the discrepancy was due to adjustments in opening and closing stock. The CIT(A) accepted the explanation and deleted the addition. The Tribunal confirmed the CIT(A)'s decision, noting the reconciliation provided by the assessee. 6. Amount Received from Metro Dairy Ltd.: The AO added Rs. 4,26,576/- received from Metro Dairy Ltd., arguing it was not properly accounted for. The CIT(A) deleted the addition, noting the amount was reimbursement for expenses incurred by the assessee on behalf of Metro Dairy Ltd. The Tribunal upheld the CIT(A)'s decision, agreeing that the amount was not income but reimbursement. 7. Obsolete Stores: The AO added Rs. 2,95,705/- for obsolete stores, claiming it reduced the income. The CIT(A) deleted the addition, stating that writing off obsolete stores is a regular practice in manufacturing and is an admissible business expenditure. The Tribunal confirmed the CIT(A)'s decision, agreeing with the reasoning. 8. Remission of Sales Tax: The AO added Rs. 31,32,665/- as remission of sales tax, treating it as a revenue receipt. The CIT(A) treated it as a capital receipt, noting that the remission was part of the West Bengal Incentive Scheme for promoting industries. The Tribunal upheld the CIT(A)'s decision, agreeing that the remission was a capital receipt as per the scheme's intent. Conclusion: The Tribunal dismissed all the appeals of the revenue, confirming the CIT(A)'s decisions on all issues. The Tribunal found that the CIT(A) had correctly interpreted the facts and applied the law, leading to the deletion of the various additions made by the AO.
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