9911796707
TMI Blog1989 (10) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... under. Ist period : Rs. 3,22,356 IInd Period : Rs. 3,22,563 The ITO noticed that assessee had advanced money to its sister concerns after raising loan from the pacing credit account held in Punjab National Bank and did not charge any interest from them According to the ITO, modus operandi adopted by the assessee was that after taking a loan from the packing credit account, the money was deposited in the current account of the assessee firm, where from cheques were issued by the assessee to the sister concerns as well as to the other parties with whom the assessee was having business dealings. He further noted that the assessee advanced money to the sister concerns viz. M/s Liberty Leathers, Gharaunda: M/s Liberty Enterprises, Karnal and M/s Life international Karnal andAgra. The ITO therefore, was of the view that the funds borrowed from the bank on which interest was paid were not utilised for business purposes of the assessee, but were diverted to the sister concerns without charging any interest He therefore, disallowed interest of Rs. 51,499 for the first period and Rs. 33,136 for the second period as not admissible before the CIT (A) it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as controlled by the Reserve Bank ofIndiaand no amount out of this account could be diverted except admissible under that account. he, therefore, urged that there was no question of diverting any account. He also submitted that the assessee had business connection with the sister concerns and therefore if at all some advances have been given to the sister concerns those were for business consideration and no part of interest could be disallowed. 4. In our opinion no interference with the order of the CIT(A) on this account is called for packing credit account is maintained against export sales. Under the terms and conditions of operation of this account no part of the funds of this account can be diverted to other parties. The assessee had produced before the CIT(A) the evidence to show that no funds from this account were diverted to the sister concerns. Nothing has been brought before us on behalf of the Revenue to show that such funds were diverted to the sister concerns out of this account. That being so we are inclined to uphold the orders of the learned CIT(A). The learned CIT(A) has also brought on record the business transactions with the sister concerns. Even on this acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s duty and duty draw backs claim, etc, in respect of imported zips supplied to them shall be received by the assessee firm. Necessary details of draw backs and refunds received by the assessee firm in respect of the zips supplied to M/s Lifo International,Agrawere filed during the course of assessment proceedings which explained the reasons for supplying zips at cost price but not less than the same in any case. It was, therefore, urged that the learned ITO was not justified in making any addition on this account. The above sub mission found favour with the learned CIT(A) who has deleted the addition. 6. The learned Departmental Representative has reiterated the facts as have been mentioned by the ITO in his order and submitted that sales to M/s Lifo International, Agra, sister concern of the assessee fir, were understated and therefore the CIT(A) was not justified in deleting the addition The learned counsel for the assessee on the other hand has supported of the CIT (A). 7. After giving carefully consideration to the rival submissions of the parties we find no justification to interfere with the order of the CIT(A). The main plank of the argument by the learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits on export of their goods through the assessee, should belong to them. In view of this position the earlier agreement was modified on 3rd April, 1980 Under this agreement such benefit was to be passed on to M/s Lifo International. It was, therefore, urged that under the terms of the modified agreement these incentives had rightly been passed on to M/s Lifo International, and, therefore, were not assessable in the hands of the assessee The ITO relying on clause 7 of the agreement dt.1st Nov., 1978included these incentives in the hands of the assessee. The CIT(A) however, relying on the agreement dt.3rd April, 1980which governed the period during the relevant account period ending31st March, 1981relevant to the asst. yr. 1981-82 deleted the addition. 9. After hearing the rival submissions of the parties we have no reason to disagree with the order of the learned CIT(A) The agreement dt.3rd April, 1980was placed before their to who summarily rejected the same and relied upon the agreement dt.1st Nov., 1978It was pleaded that such incentives as a matter of fact go to manufacturers. It is a matter of contract between the parties as to who should get the incentives. Since under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim was also not admissible under r. 6AA (c) as this rule was not applicable for the assessment year under consideration. 12. The learned counsel for the assessee, on the other hand reiterated his submissions as were made before the lower authorities. He further contended that since clauses (ii) (iii) (v) (iv) and (viii) of s. 35B (1) (B) were omitted by the Finance (No. 2) Act 1980 w.e.f. 1st April, 1981 was applicable retrospectively from 1st April, 1980. He therefore supported the order of the CIT (A). 13. After careful consideration of the rival submissions, we are inclined to hold that the CIT(A) has wrongly allowed the claim of the assessed Departmental Representative laid emphasis on the fact that sub (ix) of cl. (b) of sub s. (1) of s. 35B is on the statute book right from 1st April, 1962 it was not brought in the statute book by the Finance (No. 2) Act, 1980 this sub. clause provides for the deduction of weighted deduction for the expenditure for the promotion of the sale outsideIndiaof goods services or facilities as may be prescribed. The sub clause, as such does not entitle the assessee to claim deduction It is applicable only for such expenditure as is prescribed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e out on foreign agents commission without appreciating the facts available on record to the effect that since no sales were effected by the assessee to or through the said party there was no question of any commission being paid to it. The assessee paid commission of Rs. 13,180 M/s Toni Bandhak ofLondon. The ITO noticed that no sales had been effected toLondonby the assessee. The ITO also noticed that the assessee had entered into contract with theLondonparty to give 5% commission on FOB value of the export made on the order of that party. Since no sales were found to have been effected to the above party, but sales were effected by M/s Lifo International through the export house of the assessee, the ITO came to the conclusion that the sales had not been effected by the assessee itself but by third party and the commission, if any, was to be paid by that party The ITO, however, came to the conclusion that the commission had been paid by the assessee on behalf of the M/s Lifo International, which was not admissible in the hands of the assessee. He, therefore, disallowed the claim. 17. It was stated before the CIT (A) that the commission had been paid by the assessee toLondonparty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g as referred to in s. 145 is not applicable to the computation of income under the head income from house property Income from house property is assessed on the basis of A.L.V. It refers to the same value for which the property might reasonably be expected to let from year to year or where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum for which the property might reasonably be expected to let from year to year, the amount so received or receivable In the present of case the property has been let out the rent is in dispute In such circumstances, the ITO was justified in including in the income the rent receivable for the whole of the year. We, therefore, reverse the order of CIT(A) on this account and restore that of the ITO. 22. Eleventh ground of appeal is that the CIT(A) has also erred in allowing depreciation on TV set which as per record is not installed for the benefit of the labour in the factory but was meant for the domestic use. The ITO has observed that the assessee has claimed the depreciation on television set. He further observed that the television set was not used for business purpose and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control and fee of export inspection agent The claim of the assessee was that weighted deduction is admissible on these expenses in view of the provisions contained in r. 6AA (c) of IT Rules, 1962 We have already considered the applicability of this rule in earlier part of this order and while disposing of the appeals by the Revenue we for have held that rule is prospective. Therefore, the assessee is not entitled to weighted deduction for these items under s. 35B even if read with r. 6AA(c) For the detailed reasons given there in we do not find any merit in this cross objection by the assessee. 27. The assessee has raised additional ground to the following effect: That the learned ITO and CIT(A) have erred in not allowing due legal claiming owing to the fact that Cash Compensatory support amounting to Rs. 51,32,599 Rs. 30,29,565 I period ending 31st Oct., 1980 and Rs. 21,03,034 II period ending 31st March, 1981) received by the appellant was in the nature capital receipt and was not taxable And the respondent had appended a note to the Computation of his total income, whole claiming deduction allowable under the law." The submission was that in the case of M/S Gadoer Tools ..... X X X X Extracts X X X X X X X X Extracts X X X X
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