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TMI Blog2010 (7) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... - in cases like the instant one, where the finding of fact is arrived at that the money which was borrowed from the bank is utilized by the assessee for its own business purposes and that the money has not been given to the relatives of the partners, this condition stands satisfied and in such an eventuality the question of establishing the nexus or the business expediency does not arise at all. – Deduction allowed The fact of the matter is that incentive credits received by the assessee were duly account for in the books of account of the assessee the basis of which annual income statement has been prepared. An income chargeable to tax cannot be generated for the reason only that in the opinion of the assessing authorities, certain entries should have been found place in the books of account under another head. Regarding discounts and commission - As pointed out by the assessing officer, the assessee had made claims for the aforesaid discounts and commissions of marginally low amounts for the period of 11 months, i.e., April, 1999 to February, 2000. It is only in March, 2000 that a whopping claim is made. No explanation is coming forward as to why such a claim of huge amount was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vance also relates to the claim of petrol expenses. 3. In so far as the storage charges are concerned, the case of the assessee was that it is dealing with auto-rickshaws manufactured by M/s. Bajaj Auto Ltd. As a dealer it was having number of autorickshaws which require parking space. This parking space was arranged by taking the area from M/s. Gautam Motors Pvt. Ltd. (GMPL) at Village Bijwasan. 4. The Assessing Officer did not accept the aforesaid claim on the ground that the Assessee could not satisfactorily prove that the area at Village Bijwasan, Delhi, was taken by the assessee to store its autorickshaws. We may mention here that the Assessing Officer accompanied by Inspector Sh. S.K Chopra and authorized representative of the assessee had visited village Bijwasan on 27th February, 2003 to conduct on the spot enquiries about the godowns at the two places at Bijwasan, particulars whereof were furnished by the assessee. However, AO found no such godowns as on that date at any of the spots. She even conducted enquiries from the co-owners of the two co-owners of the adjacent plots, Sh. Habir Singh and Sh. Jagat Singh, who stated that the said plots were never let out to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance on two short grounds, viz., (1) M/s. Gautam Auto Limited had no locus standi in the matter; and (2) and disallowance could be made under the provisions of section 40A(2)(b) as being excessive or unreasonable. We do not see much force in the first contention inasmuch as it is not in dispute that the assessee did utilize the plots in question for parking its auto rickshaws. The contention of the ld. Assessing Officer is that every month the number of auto rickshaws purchased and sold being more or less equal, the assessee did not require much space to park its auto rickshaws. She has herself in the assessment order admitted that the opening stock of the assessee was 288 auto rickshaws. Such a large number of auto rickshaws had to be parked somewhere or the other and must have required considerable space. Thus, the fact that the assessee did use Bijwasan plots for the purpose of its business cannot be denied. It is also not denied that the assessee made payments to M/s. Gautam Auto Limited. As far as the assessee was concerned, he was allowed to use the plot of land on making payment to M/s. Gautam Auto Limited. It was, therefore, not the assessee‟s concern as to in wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assessee incurred heavy petrol expenses. It is also observed by the Assessing Officer that normally the initial petrol which is put into any vehicle is also charged from the buyer and further that the payments for petrol has been made to sister concern as per the audit report. Apart from this, it is not at all stated as to whether the claim of the assessee was otherwise bogus. Before the CIT (A), the assessee had submitted that it is filling petrol in the tank of the vehicles before delivery to the customers as per the assessee's sale policy. This practice was prevalent in the line of the business of the assessee firm. In the competitive business, the assessee had to adopt various practices so as to increase its sales. Besides, petrol was being consumed in the process of cleaning of the vehicles before delivery to the customers. This explanation has found favour with the ITAT. It is a pure finding of fact and no substantial question of law arises. 7. Interest free advances to relatives of the partners : - The assessee had also claimed a sum of Rs.14,21,099/- on account of bank charges and interest. These charges and interest were paid by the assessee on certain loans a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Commissioner of Income-Tax, Bombay City II vs. Bombay Samachar Ltd., Bombay [1969] 74 ITR 723 that the fact that an assessee had ample resources at its disposal and need not have borrowed is not a relevant matter for consideration. The relevant observations from the said judgment may be reproduced: "The view that if the assessee had collected the outstandings which were due to from others, it would have been able to reduce its indebtedness and thus save a part of the interest which it had to pay on its own borrowings, that the assessee would not be justified in allowing its outstandings to remain without charging any interest thereon while it was paying interest on the amounts borrowed by it, and that to the extent to which it would have been in a position to collect interest on the outstandings due to it from others, it could not be permitted to claim as an allowance interest paid by it, is not correct." 9. It would be pertinent to point out that this judgment has been taken note of by the Supreme Court in the case of Madhav Prasad Jatia (supra) and the aforesaid principle tacitly stood approved. Even this court has followed the aforesaid principle laid down by the Bombay H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given. Again, the contention that the correct amount of debit balance to the account of the partners should be taken as Rs.1,73,643 instead of Rs.1,93,049 as calculated by the Income-tax Officer is again a figure arrived at as a matter of law." 10. Once the three conditions pointed out by the Supreme Court in the aforesaid judgment are satisfied, the assessee would be entitled to deductions in respect of the interest and charges paid on those loans. The matter would be different only in a case where after borrowing the funds from the bank, the assessee utilizes those very funds by giving interest free loans to others. In those circumstances, namely, where interest on money borrowed from bank is lent to a sister concern without charging interest, in order to decide as to whether it is "for the purposes of the business", the assessee has to prove the business expediency and has to establish a nexus between the expenditure and the purposes of the business. This is so held by the Supreme Court in the case of S.A. Builders Ltd. vs. Commissioner of Income-Tax (Appeals) and Anr. [2007] 288 ITR 1 (SC) in the following manner: - "The assessee preferred an appeal to the Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me by the assessee. He, therefore, added these amounts to the income of the assessee for the year in question. 15. Before the CIT(A), the assessee submitted that these amounts were either credited to the P&L account or reduced from the purchases and the relevant documents were filed in support of this contention. The CIT(A) referred the matter to the Assessing Officer to verify the correctness of the reconciliation statements and other papers with reference to the books of accounts. The AO conducted inquiries under Section 250(4) of the Act and submitted his report dated 25.09.2003. In his remand order, the AO allowed relief of Rs.41,600 and Rs.12.42 lacs in the following manner: "It is observed that a sum of Rs.12,42,000/- which was initially credited to the assessee"s account by "BAL" by way of incentive credit note No.60203, was reversed by "BAL" on 31.01.2000, and by assessee on 31.03.2000, which is evidenced by copy of account of assessee in the books of "BAL" received in response to the notice u/s 133(6) sent to that party. Thus the CIT(A) may consider giving benefit of Rs.41,600.00 (credited by the assessee in its books) and Rs.12,42,000.00 (entry reversed by BAL) out of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the point. The fact of the matter is that incentive credits received by the assessee were duly account for in the books of account of the assessee the basis of which annual income statement has been prepared. An income chargeable to tax cannot be generated for the reason only that in the opinion of the assessing authorities, certain entries should have been found place in the books of account under another head. When the assessee duly explained during the course of proceedings before the ld. CIT(A) every credit note received from M/s Bajaj Auto Limited, Maharashtra Scooters Ltd. and that was examined by the ld. CIT(A), no defect or discrepancy worth the name was found by the ld. CIT(A) as well as ld. Assessing Officer. On these facts, we do not see any justification to uphold the addition of Rs.20,80,000/- sustained by the ld. CIT(A). The same is directed to the deleted." 18. We are in agreement with the reasoning of the Tribunal and are of the opinion that no question of law arises on this aspect. 19. Another question of law which is sought to be raised by the department in this appeal relates to disallowance of Rs.24,39,800/- on account of discount and commission expenses. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicles, whereas, afterwards, it was sought to contend that the amount was paid to commission agents. There was no documentary evidence furnished by the assessee in respect of services rendered by the alleged commission agents. Taking note of these facts, the assessing officer rejected the contention of the assessee with the following observations:- "18. The above table would make it evident that there is no link between the number of vehicles sold by the assessee and the expenditure on discount & commission claimed by it. Subsequently another set of information was filed by the assessee on 13/1/03 as per which a total of Rs.13,67,743/- have been paid to commission agents by the assessee. Thus the assessee has filed contradictory sets of information on different dates. In the absence of documentary evidence of the services rendered by the alleged commission agents, the agreements of the assessee with them, their assessment particular and confirmations, the claim of commission is being held to be purely fictitious and bogus. The very fact that the assessee has filed two sets of explanation for this expenditure goes to prove that it is cooked up intentionally to defraud the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed substantial time, which was not allowed to the assessee by the assessing officer, the CIT (Appeals) should have accepted the additional evidence furnished by assessee. Thereafter, the Income-tax Appellate Tribunal straightaway allowed the appeal and deleted the disallowance as made by the assessing officer. 23. We are not in agreement with the aforesaid approach of the Tribunal. Even if it is accepted that the CIT (Appeals) should have permitted the assessee to lead an additional evidence and taken on record the statement showing the details of discount allowed by the assessee to various customers, the matter involved some other important and material aspects which are totally lost over by the Tribunal. In the first place, after holding that CIT (Appeals) should have permitted the additional documents filed by the assessee, the Tribunal treated the said evidence to be correct, without any verification or directing the CIT (Appeals)/Assessing Officer to verify the veracity of the statement showing the details. Secondary, in any case, such an exercise is not necessary. As pointed out by the assessing officer, the assessee had made claims for the aforesaid discounts and commission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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