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TMI Blog2012 (10) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses are deducted, the loss from manufacturing division would be much more. However, he noted that, in absence of relevant books of accounts and vouchers produced by the assessee, such claim in respect of the said division cannot be accepted. He further noted that the assessee had not been able to explain the reasons for such huge loss in respect of the manufacturing activity. With these observations and while stating that the expenses claimed by the assessee in respect of the manufacturing division are inflated, he disallowed a sum of Rs. 5,00,000/- out of the same towards unproved expenditure. 4. On appeal, before the CIT(A) the assessee submitted that the AO was not justified in making such disallowance on ground of heavy expenditure claimed in the return. It was stated that the AO erred in making such disallowance, as in the assessment proceedings, the assessee had produced cash book, journal and ledger before him. He, therefore, requested that the expenditure claimed by the assessee are genuine and the disallowance may be deleted. The CIT(A) after considering the submissions of the assessee and following the case laws, namely, i) CIT Vs. Imperial Chemical Industries India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or this proposition, he relied upon the decision of Hon'ble Supreme Court in the case of SA Builders Ltd. Vs. CIT(A), 288 ITR 1. The CIT(A) held that since there was no business purpose and moreover, there was no business expediency in giving such loans/advances, interest-free to the group concerns, proportionate amount of interest attributable to such advances/loans, has to be disallowed from the claim of interest made by the assessee. The CIT(A) further held that when there was disproportionate increase in the interest expenditure claimed by the assessee for the assessment year, the AO was justified in making the said disallowance out of interest in this case. Aggrieved, the assessee is in appeal before us. 9. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the authorities. We restore this issue to the file of the Assessing Officer to decide the same in the light of the decision of the ITAT, Mumbai Bench in the case of H.P. Shah of H.P. Shah & co in ITA No. 3694/M/06 order dated 15.01.09 wherein it was held that if the own capital is sufficient to cover up the interest free advances, no disallowance is warranted. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a legal fiction by virtue of which even genuine and admissible expenses can be disallowed for want of TDS. A legal fiction has to be limited to the area for which it is created. Consequently, s. 40(a)(ia) can apply only to expenditure which is "payable" as of 31st March and does not apply to expenditure which has been already paid during the year." Therefore, we restore this issue to the file of the Assessing Officer to decide the same in the light of the said decision in the case of Merlyn Shipping Transport & Others (supra). Thus, this ground is allowed for statistical purposes. 12. Ground No. 4 is pertaining to disallowance of expenditure of Rs. 5,00,000/-. The Assessing Officer noted that the assessee had claimed huge expenditure incurred in cash towards freight inward and for factory expenses. Since the assessee had not produced any voucher in respect of such expenses, he disallowed a sum of Rs. 5,00,000/- out of the same towards unverifiable expenditure. On appeal, the CIT(A) confirmed the action of the Assessing Officer holding that when the assessee has failed to produce any voucher in respect of such expenses during the assessment proceedings, the Assessing Officer was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had not deducted tax at source on such payment as per the provisions of section 194C of the Act, the disallowed the said amount of Rs. 1,01,400/- u/s 40(a)(ia) of the Act. The CIT(A) following the decision of the ITAT in the case of M/s Parnika Construction Pvt. Ltd. confirmed the disallowance made by the Assessing Officer. Aggrieved, the assessee is in appeal before us. 17. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the authorities below. We find that this issue is squarely covered by the special bench decision of ITAT, Vizag in the case of M/s Merlyn Shipping Transport & Others, 136 ITD 23(SB)(Vizag). Therefore, we restore this issue to the file of the AO to decide the same following the said special bench decision. Accordingly, this ground is allowed for statistical purposes. 18. Ground No. 7 is pertaining to the disallowance on account of employee contribution u/s 36(i) rws 2(24)(assessee) of Rs. 19,720/-. The Assessing Officer disallowed the said amount on the ground that the assessee had not remitted the said amount representing the employers contribution of provident fund within the due date. O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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