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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 ..... voluntary retirement in assessee case - the payments were related to Gratuity, Retrenchment and Notice Pay - CIT(A) has rightly decided the case – Decided in favour of assessee. Interest payment on advance paid disallowed – Held that:- AO rightly was of the view that the assessee has shown advance to both the parties i.e. M/s. D.R. Polymers (P) Ltd., New Delhi and M/s. Neel Kanth Corporation, Jaipur and opening balance as on 01-04-2003 was at ₹ 7.50 lacs and ₹ 7.00 lacs respectively and closing balance was at ₹ 5.25 lacs in the case of M/s. Neel Kanth - assessee has not charged any interest on these advances - dealing in the share is not the business of the assessee, hence money borrowed relatable to the advance to M/s. D.R. Polymer (P) Ltd. is not for the purpose of business - Similarly, as interest free advance 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 – assessee 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 AO, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents made on account of gratuity, retrenchment compensation and notice pay were not covered u/s 35DDA of the Act but the same was made under Rule 76B in terms of Section 26FFA of the Industrial Dispute Act. 4. 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 ₹ 45,13,340/- despite the fact that before the AO there was no submission of giving notice under Rule 76B in terms of Section 25FFA of the Industrial Disputes Act and Rajasthan Industrial Dispute Rule for closing down of factory. Therefore, the AO has no occasion to comment on these 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.5 Now the assessee is in appeal against confirming the disallowance u/s 40A(3) on account of payment exceeding ₹ 20,000/- in cash and addition made at ₹ 6,69,778/-. The assessee submitted that the expenditure claimed under the head Gratuity, Retrenchment and Notice Pay in assessment year 2003-04 was not allowed by the AO in the assessment. Therefore, they were claimed in the assessment year 2004-05. The AO allowed only 1/5th expenses after reducing the cash payment u/s 40A(3) of the Act. It is argued that that these payments were made to the employees in cash in connection with retirement/ retrenchment/ resignation or death of such employee on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or their heir does not exceed ₹ 50,000/- is covered under Rule 6DD(h) of the Income-tax Rules. Accordingly, the whole expenses claimed by the assessee is allowable. 2.6 At the outset, the ld. DR supported the order of the ld. CIT(A). 2.7 We have heard the rival contentions and perused the materials available on record. The ld. CIT(A) was not justified in confirming the addition u/s 40A(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord. The advance to M/s. D.R. Polymers (P) Ltd. is claimed to be as share application money. Dealing in the share is not the business of the appellant, hence money borrowed relatable to the advance to M/s. D.R. Polymer (P) Ltd. is not for the purpose of business. Similarly, as interest free advance 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 ₹ 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 these facts, no interest was charged from it. There is no material on record that the said amount was paid out of borrowing of the company. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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