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TMI Blog2015 (5) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... on purchases of grit from M/s MRB Builders Pvt. Ltd. Thus, both the lower authorities were not justified in their action. We find that the bifurcation of total purchases of ₹ 14,45,366/- as to how much for metal and how much was for grit has not been brought on record by either of the lower authorities and by either of the parties before us. We, therefore, set aside the orders of the lower authorities, and restore the matter to the file of the AO with direction to restrict the disallowance under section 40A(2) (b) to the extent of 27% in respect of purchases of metal from M/s MRB Builders Pvt. Ltd. and at the rate of 10.42% in respect of purchases of grit from M/s MRB Builders Pvt. Ltd - Decided partly in favour of revenue for statistical purpose. Disallowance of gratuity payment, legal & professional fees and misc. expenses - CIT(A) deleted the addition - Held that:- in order to make sustainable disallowance, it must be shown on the basis of some material on record that the claim made by the assessee was incorrect or fraudulent. Accounts of the assessee are audited and the auditor has certified the correctness of the claim of the expenses. Hence, without any material, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment stood extinguished due to expiry of the limitation period of three years and, therefore, he made addition of ₹ 39,17,182/- to the total income of the assessee by invoking provisions of section 41(1) of the Act. 5. Before the CIT(A) the assessee argued that these amounts were outstanding for more than one year and assessee continued to show the same in its books of account and, therefore, it acknowledged the liability to make the payment, hence section 41(1) of the Act was not applicable. The assessee had not received any benefit by way of remission or cessation of liability. CIT(A) observed that Section 18 of the Limitation Act, 1963, provides that where a debt is acknowledged in writing before the expiry of limitation period, this would amount to sufficient acknowledgement and fresh limitation shall be computed from the time when such acknowledgement is made . It was held that the liabilities were not barred by limitation and, therefore, held that the CIT(A) was not justified in adding the same under section 41(1) of the Act. 6. Departmental Representative has relied on the order of the A.O. 7. Before us, the Authorised Representative of the assessee supported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the order of CIT(A) in deleting the addition of ₹ 2,39,642/- on account of excessive payments made for purchase of metal from the person specified under section 40A(2)(b) of the Act. 11. The brief facts are that the assessee is engaged in the business of construction of roads. The A.O. found that the assessee has purchased metal from M/s MRB Builders Pvt. Ltd. at an average price of ₹ 120/- per MT and grit @ ₹ 120/- per MT. He observed that M/s MRB Builders Pvt. Ltd. was the person specified under section 40(a)(2)(b) of the Act. He also observed that metal was purchased by the assessee from M/s Amar Mining Company who was not a related party at the average price of ₹ 107.50 per MT and grit at ₹ 87.50 per MT. In reply to the show cause, the assessee submitted that the purchases made from M/s MRB Builders Pvt. Ltd. and Amar Mining Company were at the rates charged by those parties even from other purchasers. There was no inflation of purchase price. It was also submitted that both M/s MRB Builders Pvt. Ltd. and Amar Mining Company were paying tax at the same rate as the assessee. However, the explanation of the assessee was not accepted by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se price paid to relatives. 16. On appeal, the CIT(A) restricted the disallowances at the rate of 10.42% of total purchases which worked out to ₹ 1,50,607/-. 17. According to us, the lower authorities should have disallowed at the rate of 27% of purchase of metal from M/s MRB Builders Pvt. Ltd. and at the rate of 10.42% on purchases of grit from M/s MRB Builders Pvt. Ltd. Thus, both the lower authorities were not justified in their action. We find that the bifurcation of total purchases of ₹ 14,45,366/- as to how much for metal and how much was for grit has not been brought on record by either of the lower authorities and by either of the parties before us. We, therefore, set aside the orders of the lower authorities, and restore the matter to the file of the AO with direction to restrict the disallowance under section 40A(2) (b) to the extent of 27% in respect of purchases of metal from M/s MRB Builders Pvt. Ltd. and at the rate of 10.42% in respect of purchases of grit from M/s MRB Builders Pvt. Ltd. Thus, this ground of appeal of the Revenue is partly allowed for statistical purpose. 18. In ground no.3, the grievance of the Revenue is that the CIT(A) erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O. to accept the claim. In the absence of any material defects in the claim, in his opinion, the A.O. was not justified in making the disallowance of ₹ 8,55,313/- and, therefore, he deleted the same. 23. The DR merely supported the order of the AO and could not point out any specific error in the findings of the CIT(A). We find that disallowance made by the AO for the reasons stated in the assessment order cannot be sustained. We, therefore, do not find any good and justifiable reason to interfere with the order of the CIT(A), which is hereby confirmed and the ground of appeal of the Revenue is dismissed. Assessee s appeal 24. In assessee s appeal ground nos.1 to 3 are directed against the order of CIT(A) holding that retention money of ₹ 27,81,076/- accrued to the assessee company during the previous year to A.Y. 2009-10. 25. The brief facts of the case are that the A.O. observed that the assessee company while computing its income from business deducted an amount of ₹ 27,81,076/- from the net profit arrived at as per Profit Loss Account. This amount represented retention money/security deposits returned by persons for whom the assessee had u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cution of contract by assessee, retention money was to be taxed in assessment year relevant to previous year in which it became payable to assessee as per terms of contract i.e., after defect liability was over and after engineer-in-charge certified that no liability was attached to assessee 30. Respectfully following the decision of Hon ble Gujarat High Court (supra), we delete the addition of ₹ 27,81,076/- and allow these grounds of appeal. 31. In ground no.4 of the appeal the grievance of the assessee is that the CIT(A) erred in confirming the disallowance of ₹ 10,000/-. 32. The brief facts of the case are that the assessee claimed deduction of ₹ 10,000/- under the head voluntary retirement expenses. According to the assessee, the expenses were payable to the employees on retirement/resignation. He observed that the expenses are not covered under section 35DDA and same had been disallowed in preceding years. There was no scheme for voluntary retirement with the company for which assessee s expenditure was allowable under section 35DDA. Therefore, the same was disallowed by the A.O. and was confirmed in appeal by the CIT(A). 33. At the time of hea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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