2012 (10) TMI 395 - AT - Income Tax

Addition made on account of Credit note Weather credit notes are account for in books on accrual or received basis Held that - Even on accrual basis the amount can be accounted for only when credit note is received. The amount becomes debt to the dealers as and when the credit note is received in books of assessee. Therefore what they receive from Telecom Company as a credit note is for dealer. In such a situation nothing has been added in the hands of the assessee as the benefit was intended for dealers and not for him. Appeal decide in favor of assessee Disallowance of interest free loan Assessee has also taken & also provided interest free loan AO issue show cause notice to assessee to explain why interest liability should not be disallowed Assessee did not reply - Held that - As interest free amount ( capital plus loan) was in possession of assessee which is more than amount of loan given. Therefore it cannot be said that the money was lent from borrowed funds and not from interest free funds. Decision in favor of assessee Disallowance of expense u/s 37 Held that - As AO have a clear finding in respect of staff welfare expenses and travelling and local conveyances expenses use by assessee and his family. Treat it as personal expenditure and disallowed the same. No verification has been made in respect of the personal user of telephone and petrol expenses and these expenses are not fully vouched therefore allowed. Appeal partial allowed.

Issues:
1. Discrepancy in accounting of credit notes from Tata Tele Services Ltd.
2. Discrepancy in account balance with M/s. Johnson & Johnson Ltd.
3. Disallowance of interest liability on advances made to M/s. Shree Jee Sales.
4. Disallowance of various expenses like telephone, petrol, staff welfare, and traveling expenses.

Analysis:

1. Discrepancy in accounting of credit notes from Tata Tele Services Ltd.:
The primary issue revolved around the addition of Rs. 72,71,713/- by the Assessing Officer (AO) due to a discrepancy in the account of Tata Tele Services Ltd. The Appellate Tribunal noted that the assessee accounted for credit notes upon receipt and immediately passed on the benefits to dealers. The Tribunal upheld the decision of the Ld. CIT(A) that no income accrued to the assessee in respect of the credit notes, as they were intended for the dealers. The Tribunal dismissed the grounds raised by the revenue, emphasizing that the assessee's accounting method was appropriate and no error was found in the Ld. CIT(A)'s order.

2. Discrepancy in account balance with M/s. Johnson & Johnson Ltd.:
Regarding the credit balance of Rs. 95,710/- with M/s. Johnson & Johnson Ltd., the AO added this amount to the total income due to a reconciliation difference. However, the Ld. CIT(A) deleted the addition after considering evidence provided by the assessee, including the reconciliation statement and proof of payment. The Tribunal partially allowed this ground, stating that the assessee had paid Rs. 94,860/- against the liability, but no explanation was provided for the remaining difference of Rs. 850/-.

3. Disallowance of interest liability on advances made to M/s. Shree Jee Sales:
The AO disallowed Rs. 1,42,100/- as interest liability on advances made to M/s. Shree Jee Sales. The assessee explained that the advances were made from interest-free funds exceeding the loan amount, and therefore, no interest liability should be disallowed. The Tribunal agreed with the Ld. CIT(A) that since the assessee had interest-free funds exceeding the loan amount, no disallowance of interest liability was warranted.

4. Disallowance of various expenses:
The AO disallowed expenses amounting to Rs. 23,000/- for telephone, petrol, staff welfare, and traveling expenses, citing lack of proper vouchers and potential personal use. The Ld. CIT(A) had deleted these disallowances, considering them adhoc without specific deficiencies in the books or vouchers. The Tribunal reinstated some disallowances for staff welfare and traveling expenses due to lack of proper vouchers but upheld the deletion of disallowances for telephone and petrol expenses, where no specific reasons were provided in the assessment order.

In conclusion, the appeal was partly allowed, with certain grounds being dismissed or partially allowed based on the detailed analysis and evidence presented before the Appellate Tribunal.

← Previous Next →