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TMI Blog2015 (12) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer , which was essentially an adhoc disallowance bereft of any factual support. Thus, on this aspect we affirm the order of CIT(A) and Revenue fails. - Decided in favour of assessee. Disallowance on account of interest expenditure under section 36(1)(iii) - CIT(A) allowed claim - Held that:- The Annual Financial statements of the assessee, clearly bring out the nature of the advances to the sister concerns, being trade advances. The assessee company had pointed out before the CIT(A) that the amount advanced to M/s. Premier Knit Processors Pvt. Ltd. was for purchasing yarn of requisite quality and getting garments manufactured at various factories at Tirupur for supplying to the assessee. It was also pointed out that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Member And Shri Ram Lal Negi, Judicial Member For the Appellant : Shri A. K. Kardam For the Respondent : Ms. Aarti Vissanji ORDER Per G. S. Pannu, AM The captioned appeal by the assessee is directed against the order of the CIT(A)-5, Mumbai dated 13/01/2012, pertaining to the Assessment Year 2005-06, which in turn has arisen from an order passed by the Assessing Officer dated 28/07/2012 under section 143(3)of the Income Tax Act, 1961 (in short the Act ) . 2. In this appeal the Revenue has raised the following two Grounds of appeal:- 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in disallowing the addition made on account of sampling expenses by holding it that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ours, etc., which are sent to the customers, who are situated in various parts of the world for approval. The requisite details were also furnished, however, the Assessing Officer was not satisfied. It was observed by the Assessing Officer that though assessee had furnished details of expenditure but no evidence or detail in respect of the despatch of the samples or names of the parties were given and it was not explained whether the parties to whom samples were given, purchased any goods from the assessee. Accordingly, the Assessing Officer restricted the expenses to 2.58% of the total sales (which was the ratio of sampling expenses in the immediately preceding year) and accordingly, a sum of ₹ 35,04,272/- was disallowed. 4. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred for the last 10 years to point out that the ratio of sampling expenses over turnover cannot be static and it varies, having regard to assessee s nature of business. In any case, it is argued that there is no material to doubt the sample expenses claimed by the assessee. 7. We have carefully considered the rival submissions. The incurrence of sampling expenses in the course of assessee s business is not the subject matter of dispute because the Assessing Officer has not made wholesale disallowance but has made only a partial disallowance. The Assessing Officer was not convinced with the level of sampling expense incurred vis-a-vis the amount incurred in the preceding assessment year. In our considered opinion, the variation in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to the interest free advances made to the sister concerns, the CIT(A) has upheld assessee s assertion that the same were trade advances and, therefore, no interest could be disallowed as such advances involved commercial expediency. In coming to such conclusion the CIT(A) has relied upon the judgment of Hon ble Supreme Court in the case of S.A. Builders vs. CIT, 288 ITR 1(SC). Further, CIT(A) also noted that assessee had sufficient own interest free funds to cover the impugned advances and, therefore, no disallowance was called for having regard to the judgment of the Hon ble Bombay High Court in the case of CIT vs. Reliance Utilities Power Ltd., 313 ITR 340(Bom). Against such decision of the CIT(A), the Revenue is in appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorities below and also the written submissions made by the assessee to the CIT(A), it is quite clear that the factual findings of the CIT(A) are borne out of record. The Annual Financial statements of the assessee, a copy of which has been placed at Pages 1 to 35 of the Paper Book, clearly bring out the nature of the advances to the sister concerns, being trade advances. The assessee company had pointed out before the CIT(A) that the amount advanced to M/s. Premier Knit Processors Pvt. Ltd. was for purchasing yarn of requisite quality and getting garments manufactured at various factories at Tirupur for supplying to the assessee. It was also pointed out that the said concern was providing dyeing services to the assessee. It was pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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