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2021 (7) TMI 810 - AT - Income TaxDisallowance u/s 36(1)(iii) - addition of interest on the ground that the assessee has borrowed funds and paid interest AND assessee has given loans and advances on which no interest was received, thus, the assessee has advanced the money for non business purposes - HELD THAT - We note that the Ld. A.O has made this addition observing that the assessee had provided interest free advance to its staff and on the other hand interest was paid on the borrowings. CIT(A) deleted this addition against which the revenue is in appeal. We however find that the assessee has taken loan for purchase of vehicle which is used for business purposes and interest is the interest paid on the car loan taken from Bank of India. Leger account of interest expenses and ledger account of bank loan account filed by the assessee on 21.5.2020. Thus it remains undisputed fact that the alleged amount has been paid for car loan taken from bank and is an eligible business expenditure. Thus addition of disallowance was rightly deleted by Ld. CIT(A). Disallowance of registration expenses - HELD THAT - AO inadvertently considered the number of students as 41675 though there were 76931 students and therefore the appellant has rightly incurred the expenses of registration realisation of data processing. As regards the adhoc disallowance made by Ld. CIT(A) is concerned there is no evidence brought on record and the adhoc disallowance is purely based on the track record of assessment of the assessee in preceding years. All the records pertaining to collection of fees, its remittances of such collection to the university and receipts from the university acknowledging the receipt to the fees are on the record and have not been challenged or found to be incorrect at any stage. Thus such disallowance was uncalled for. Accordingly we are of the considered view that no addition was required to be made by the Ld. A.O. Disallowance of purchase made from sister concerns - HELD THAT - A.O came across such payments made to related parties or sister concerns. He need to first examine the information that whether such expenditure is excessive or unreasonable having regard to the fair market value of the books, for which payment is made or the purchase are made or the legitimate needs of the business of profession. Perusal of records shows that no such activity have been undertaken by the Ld. A.O before concluding that purchases from sister concerns are not genuine or they are made at an inflated price. Therefore making disallowance of purchase just because they are from sister concerns/ related parties, Memorandum of Undertaking not prepared and why the job was entrusted to sister concerns merely shows that the disallowance of purchase made by the Ld. A.O was on surmises and conjectures and without any support of any evidence. The disallowance sustained by Ld. CIT(A) at ₹ 9,12,873/- is merely based on the addition made during assessments of preceding years. Had it been a legal issue this would have been different but being a factual matter such disallowance on adhoc basis should be avoided unless and until supported by evidence and proper finding. No disallowance of purchase from the sister concern was called for - Decided in favour of assessee. Addition of training expenses - HELD THAT - The addition sustained by Ld. CIT(A) is again made on the basis of past assessments but no corroborative evidence is placed before us to show that any excessive expenditure was booked. We therefore held that the expenditure incurred towards training expenses are genuine and has been rightly incurred in the interest of business and thus no disallowance was called for.Thus the assessee has rightly claimed the deduction for training expenses. Bogus purchases - disallowance of purchase based on a statement given during the course of survey u/s 133A - HELD THAT - AO was not able to pin point any irregularity in the purchase made by the assessee during the year, providing or laying hand on any contrary material to those filed by the assessee, no new information was gathered which could indicate that the alleged suppliers are non genuine. Even while making addition no reference is given to the purchases made from different suppliers and the additions is made only for the amount of surrender made during the course of survey which in view of the settled judicial precedents was uncalled for. A.O also failed to take note of the fact that when the sales have been accepted then there has to be corresponding purchases. Hon ble Gujarat High Court in the case of CIT V/s President Industries 1999 (4) TMI 8 - GUJARAT HIGH COURT has held that amount of sales itself cannot represent the income of the assessee who has not disclosed sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales . So when the Ld. A.O had accepted the sales then he ought to have given the benefit of purchase against the sales. Without rejecting the book results and without finding anything contrary to the claim of the assessee and not referring to any incriminating material found during the course of survey the addition for income offered to tax during the course of survey at ₹ 23 crores but retracted soon, was thus uncalled for. We therefore in the given facts and circumstances of the case and respectfully following the judgments/decisions stated herein above fail to find any inconsistency in the finding of Ld. CIT(A) deleting the addition made by the Ld. A.O made purely on the basis of statement given u/s 133A of the Act. Accordingly Ground No.1 of revenue stands dismissed. Disallowance of interest expenses - HELD THAT - On perusal of records shows that this amount was paid on the car loan taken from Bank of India and is purely business expenses as the car is used for purpose of business. Giving of interest free loan/ advance to staff/sister concern needs to be examined on the facts of particular case and the commercial expediency of the transaction but it can no way lead to disallowance of genuine business expenditure. We thus find no infirmity in the finding of Ld. CIT(A) deleting the disallowance - Ground No.2 of the Revenue is dismissed. Adhoc disallowance of various expenses - HELD THAT - We observe that this disallowance was made for want of verification of various expenses incurred under the head Exhibition expenses, Repair Maintenance, Meeting expenses, Miscellaneous expenses and General expenses. Though opportunity was granted to the assessee to get these expenses verified but during the verification it was noticed that some of the expenses debited under the head are not verifiable, most of the vouchers are self made and payments incurred in cash. We therefore looking to the totality of facts we are of the view that Ld. CIT(A) has rightly confirmed the disallowance - Ground No.1 raised by the assessee is dismissed.
Issues Involved:
1. Disallowance of interest expenses. 2. Disallowance of registration expenses. 3. Disallowance of purchase of course material. 4. Disallowance of training expenses. 5. Addition based on retracted statement during survey. 6. Adhoc disallowance of various expenses. Detailed Analysis: 1. Disallowance of Interest Expenses: The Ld. A.O disallowed ?3,60,465/- as interest expenses, arguing that the assessee provided interest-free advances to staff while paying interest on borrowings. The Ld. CIT(A) deleted this addition, noting that the interest was paid on a car loan used for business purposes. The Tribunal upheld this, finding the interest expense legitimate and dismissing the Revenue's ground. 2. Disallowance of Registration Expenses: For the assessment year 2013-14, the Ld. A.O disallowed ?89,96,634/- based on the assumption that only 41,675 students were registered instead of 76,931. The Ld. CIT(A) found the actual number of students to be 76,931 and deleted ?82,20,019/- of the disallowance but maintained an adhoc disallowance of ?7,76,615/-. The Tribunal found no evidence supporting the adhoc disallowance and deleted the entire disallowance, allowing the assessee's ground and dismissing the Revenue's ground. 3. Disallowance of Purchase of Course Material: The Ld. A.O disallowed ?3,04,29,100/- for purchases from sister concerns, doubting the genuineness due to lack of agreements and other justifications. The Ld. CIT(A) reduced this to an adhoc disallowance of ?9,12,873/-, based on past assessments. The Tribunal found the purchases genuine, noting that sales corresponding to these purchases were not disputed and deleted the entire disallowance, allowing the assessee's ground and dismissing the Revenue's ground. 4. Disallowance of Training Expenses: The Ld. A.O disallowed ?8,14,42,700/- paid to sister concerns for training expenses, questioning the details and genuineness. The Ld. CIT(A) reduced this to an adhoc disallowance of ?40,72,135/-. The Tribunal noted that the training expenses were genuine, supported by detailed records and payments through banking channels, and deleted the entire disallowance, allowing the assessee's ground and dismissing the Revenue's ground. 5. Addition Based on Retracted Statement During Survey: During a survey, the Chairman of the assessee company offered ?23 crores as additional income, later retracted. The Ld. A.O made an addition based on this statement. The Ld. CIT(A) deleted the addition, finding no corroborative evidence supporting the statement. The Tribunal upheld this, noting that additions cannot be based solely on statements made during surveys without supporting evidence, dismissing the Revenue's ground. 6. Adhoc Disallowance of Various Expenses: For the assessment year 2015-16, the Ld. A.O made an adhoc disallowance of ?3,34,204/- for various expenses due to lack of verification. The Ld. CIT(A) confirmed this disallowance. The Tribunal upheld this, noting that many expenses were not verifiable and payments were made in cash, dismissing the assessee's ground. Conclusion: - Assessment Year 2013-14: Assessee's appeal allowed, Revenue's appeal dismissed. - Assessment Year 2015-16: Both assessee's and Revenue's appeals dismissed.
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