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TMI Blog2015 (1) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 40A(3) to the payment of retrenchment compensation amounting to Rs. 33,48,640/- on account of payment exceeding Rs. 2,00,000/- in cash and thereby disallowing Rs. 6,69,7787/- being 20% thereof under this section. 2. That the ld. CIT(A) is wrong and has erred in law in confirming disallowance of interest payment of Rs. 1,49,625/- on account of advance to M/s. D.R. Polymers (P) Ltd., New Delhi and M/s. Neel Kanth Corporation, Jaipur .'' 2.2 The Revenue has raised the following grounds in its appeal. ''1. Whether on the facts and circumstances of the case the CIT (A) (Central), Jaipur has erred in law and on facts in deleting the disallowance of Rs. 45,13,340/- made by the AO on account of application of the provisions of Section 35D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese fresh evidence based on which the ld. CIT(A) had allowed the assessee's appeal. 5. Whether on the facts and circumstances of the case the CIT (A) (Central), Jaipur has erred in law and on facts in allowing relief on the basis of additional evidences filed before him without allowing opportunity to the AO comment upon the same in terms of provisions of Rule 46A(3) and also admitting the same without recording specific finding in terms of provisions of Rule 46A(2) of the I.T. Rules, 1962. 2.3 Now we take up the ground No. 1 of the assessee as well as Ground Nos. 1 to 5 of the Revenue as mentioned above. The brief facts of the case are that the assessee company is manufacturer of cable wires the assessee is also dealing in trading o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,628/-. Since these payments were made to the workers in cash as claimed by the assessee therefore, these workers were not interested to accept the cheques. Finally, the allowed the claim of the assessee on the basis of the return for the assessment year 2004-05 after reducing the cash payment u/s 40A3) of the Act at Rs. 45,13,340/- @ 1/5th i.e. Rs. 9,02,668/- 2.4 Being aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who partly allowed the appeal of the assessee by observing that these payments are not covered u/s 35DDA of the Act and he fully allowed the expenses claimed by the assessee at Rs. 45,13,340/-. 2.5 Now the assessee is in appeal against confirming the disallowance u/s 40A(3) on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,13,340/- u/s 35DDA of the Act. The ld. CIT(A) held that these expenses are not covered u/s 35DDA of the Act. As per Section 35DDA, the only expenses are allowed to be proportionate basis i.e. 15th expenditure in connection with voluntary retirement. Therefore, in this case, there was no voluntary retirement in assessee case. The payments were related to Gratuity, Retrenchment and Notice Pay. The ld. CIT(A) has rightly decided the case. Further, the ld. CIT(A) has not accepted any additional evidence during the appellate proceedings. Therefore, the ground no. 5 raised by the Revenue is not emerged from the order of the ld. CIT(A). Thus grounds nos. 1 to 5 of the Revenue are dismissed and Ground No. 1 of the assessee is allowed in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce has been given to M/s. Neelkanth Corporation, it is evident that money borrowed to that extent is not used for the purpose of business. The case laws cited by the A.R. are distinguishable from the instant case of appellant. Accordingly, disallowance of interest so made by the AO amounting to Rs. 1,49,625/- relatable to the interest free advance given, is upheld.'' 3.4 Now the assessee is before us. The ld. AR of the assessee submitted that as regards to the debit in the account of M/s. D.R. Polymers (P) Ltd., the amount was deposited on 26-09-2002 by cheque against share application money which was lying in the said company as it is. There was no stipulation to charge interest as the same was towards share application money . In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5 At the outset, the ld. DR supported the order of the ld. CIT(A) and argued that the assessee has not discharged its burden to prove that there was share application money in the case of M/s. D.R. Polymers (P) Ltd. New Delhi and weak financial position in the case of M/s. NeelKanth Corporation, Jaipur. 3.6 We have heard the rival contentions and perused the materials available on record. The ld. AR has not brought any evidence to substantiate its claim except the arguments that these payments were made either in the form of share application money or weak financial position of the company, before us as well as the lower authorities. As such, before AO, no reply was filed by the assessee. Therefore, in the interest of justice, we set asid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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