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TMI Blog2012 (7) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... bert Ltd. to OMPCL as the entire job work was assigned to OMCPL - assessee has not earned any penny from this sub-contract and the entire payment was debited to OMCPL – Held that:- Lower authorities erred in estimating the profit rate on the receipt which has never given any profit to assessee - addition deleted Depreciation allowance - assessee has purchased a new car on 22.03.2002 and it was used for six months, the admissible depreciation was only 50% of the WDV as on 31.03.2002 - According to AO the assessee’s calculations are not correct but he has not given any basis for the – matter remanded to AO - assessee is allowed for statistical purposes. Addition of profit on sale of old car – Held that:- Assessee has purchased a new car and also sold this car and the excess of WDV has been invested in purchase of new car - no gain will be charged to tax as Short Term Capital gain or profit of the business Addition of advances received from customers - assessee could not compute interest on the above advances from customers and could not obtain confirmations, the AO disallowed the liability holding the same as bogus – Held that:- Assessee has filed complete details before AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 3. That the learned CIT(A) erred in law in confirming addition of Rs.95,610/- received by cheque during the year from M/s. ARC Infotech (P) Ltd. 4. That the learned CIT(A) erred in law in holding that the liability of Rs.54,918/- representing commission payable to Shri Narendra Kumar Duggar since financial year 1997-98 ceased during the year. 4. We have heard the rival contentions and gone through facts and circumstances of the case. We find that assessee has disclosed sundry creditors to the extent of Rs.15,34,818/- as on 31.03.2002. The AO required assessee to file complete name and addresses and on the given address notice issued by AO u/s 133(6) of the Act returned unserved. According to AO, as assessee is unable to prove the liability he added a sum of Rs.2,78,261/- as bogus liability on account of cessation of liability without mentioning provision of section 41(1) of the Act. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO. Aggrieved, now assessee is in appeal before us. We find that it is not the case of revenue that it is a case of existing liability and assessee has not made any write off of all liabilities in its books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is liability is outstanding and it pertains to financial year 1997-98 relevant to A.Yr.1998-99 and this liability does not pertain to the relevant assessment year 2002-03. The facts are exactly identical to the facts of the first issue of sundry creditors. Hence taking a consistent view, we delete this addition. 7. The next issue in this appeal is against the confirmation of disallowance of salary paid to Shri Siddhartha Jalan by invoking the provision of section 40A(2) of the Act at Rs.36,000/- out of total salary of Rs.96,000/-. 8. We have heard the rival contentions and gone through facts and circumstances of the case. We find that AO admitted that Shri Siddhartha Jalan, son of one of the directors Shri O.P.Jalan who is holding 25% shares in assessee company. He also admitted that salaries paid on account of employment of Shri Siddhartha Jalan who is doing consultancy work, accounts and used to visit customers for marketing of assessee. AO noted that apart that he could not explain any more of day to day working of the assessee company. He admitted that the gross monthly salary was credited in the books of accounts @Rs.8,000/- per month. We find that AO has recorded that f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to AO the assessee s calculations are not correct but he has not given any basis for the same. The CIT(A) simply narrated the auditors report. According to assessee, it had claimed deprecation of Rs.67,656/- whether it is within the permissible limits of 50% of the WDV on car as the car was purchased as on 21.03.2002. The same should have been allowed as per rules. Hence for verification of the facts we set aside this issue to the file of AO to decide after getting the facts correct. This issue of assessee is allowed for statistical purposes. 13. The next issue in this appeal of assessee is against the order of CIT(A) confirming the addition of profit on sale of old car at Rs.45,506/-. 14. We have heard the rival contentions and gone through facts and circumstances of the case. We find that the assessee sold its old car for a sum of Rs.45,506/- before buying a new car and credited the same to Profit and Loss account. Subsequently it had purchased the new car and credited the same as on that date. The ld. Counsel for assessee before us relied on Circular No.469 dated 23.09.1986 whereby the introduction of Section 50C has been explained. He particularly referred to Section A and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the new acquired during the previous year 2,50,000 8,02,500 (iii)Less : Sale proceeds in respect of the assets sold 2,00,000 WDV of the block for the assessment year 1988-89 6,02,000 Depreciation for the assessment year 1988-89 at 33-1/3% of Rs.6,02,000/- 2,00,667 WDV for the assessment year 1989-90 4,01,333 Similar are the facts here that assessee has purchased a new car as narrated by AO as well as CIT(A) and also sold this car and the excess of WDV has been invested in purchase of new car. Once this is the case we find that the Circular issued by the Board has clarified the position and no gain will be charged to tax as Short Term Capital gain or profit of the business. Hence we delete this issue of the assessee. 16. The next issue in this appeal of assessee is against the order of CIT(A) confirming the addition of advances received from customers at Rs.8,02,061/-. 17. We have heard the rival contentions and gone through facts and circumstances of the case. We find that AO has made addition of sundry advances received by assessee at Rs.8,04,933/- as bogus. As the assessee could not compute interest on the above advances from customers and could not obtain confir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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