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TMI Blog2012 (3) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... n deleting the addition of ₹ 4,91,072/- made u/s 40A( ia) of the Act . 4. That on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition made on account of disallowance of ₹ 1,20,000/- as the assessee failed to charge interest on interest free advances given. 5. The appellant craves to add or amend any ground any grounds of appeal before the appeal is heard or disposed off . 6. It is prayed that the order of the ld. CIT(A) be cancelled and that of the AO may be restored. 3. In its appeal the assessee has raised the following grounds: 1 The ld. CIT(A) is wrong in confirming the addition of ₹ 2,38,633/- made by the AO by ignoring the explanation and specific content ion of the assessee that the addition on account of disallowance of higher depreciation on Tempo/Truck will only result in increase of exempted income which was otherwise eligible u/s 80IC of the income-tax Act , 1961. 2. The ld. CIT(A) is wrong in confirming the addition of ₹ 37,500/- made by the AO by ignoring the explanation and specific content ion of the assessee that the addition on account of disallowance of Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussion, the issue raised in this ground is squarely covered by the decision of the Tribunal in assessee s own case whereby the appeal of the revenue was dismissed on this ground. Having regard to the issue involved in the present appeal and the decision of the Tribunal in assessee s own case which covers the issue squarely and the ground of appeal of the revenue is dismissed. 8. Ground No. 2 the revenue contended that the ld. CIT(A) erred in deleting the addition of ₹ 34050/- u/s 2(24)(x) of the Act . This ground of appeal is covered against the revenue by the decision of the Hon'ble jurisdictional High Court as quoted by the ld. CIT(A) in para 15. The ld. CIT(A) followed the decision of CIT v. M/s Nuchem Ltd in ITA No. 323 of 2009 following the decision of the Hon'ble Apex Court in the case of CIT V. Alom Extrusions Ltd (2009) 227 CTR 417. During the AY under consideration, the AO observed that certain payments representing ESI , PF and ESI amounting to ₹ 34050/- were made after the due date and hence the same were disallowed u/s 36(a)(va) / 2(24) (x). The ld. CIT(A) deleted the impugned addition by following the above decisions. We are in complete agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Supreme Court in the case of Munjal Sales Corporation and f ind that the facts of the case are covered by the decision in the case of Abhishek Inds (supra) therefore, the ld. CIT(A) is justified in deleting the impugned addition. This ground of revenue is allowed. 15 However, as contended by the ld 'AR' , for the assessee in the course of appellate proceedings, the impugned addition made by the AO would increase the business profits of the assessee derived from industrial under taking in quest ion. Therefore, the assessee is entitling for deduct ion u/s 80IC of the Act . As the assessee is eligible for deduct ion u/s 80IC, any addition made to the eligible prof it of the assessee would enhance the eligible amount of deduct ion of the assessee. As the assessee has earned income from manufacturing activity from the said unit , therefore, the AO is directed to give benefit to the assessee of such addition u/s 80IC of the Act . 16 The appeal of the revenue is partly allowed in terms stated above. Appeal of the Assessee ITA No. 755/Chd/2011 17. In ground No. 1, the assessee contended that the ld. CIT(A) erred in confirming the addition of ₹ 2,38,633 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 12,50,639/- in the total business income is not the determinative factor for deciding whether t rucks were used by the assessee during the relevant year in a business of running them on hi re. In or view, the ld. CIT(A) had erred in relying upon the accrual of income as a determinative factor for coming to the conclusion that trucks were used in a business of running them on hi re. 8. What is relevant for consideration under sub-item 2(i i) of I tem I I I of Appendix I to the IT Rules, 1962 is whether the assessee was in the business of hiring out his trucks in addition to his business of trading in timber. The order of assessment clearly indicates that the assessee was only in the business of trading in timber. We do not have the returns f i led by the assessee before us. WE do not have the constitution of the assessee company before us. There is no evidence to indicate that the assessee was in the business of hi ring out motor lorries for running them to earn business income. The entire inference is drawn by ld. CIT(A) only on the footing that the AO had treated ₹ 12,59,639/ - as part of total business income which is not determinative of the above test v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buses and being in the transport business if fully qualified for a higher deduct ion. The relevant extract is given below: We have gone through the record and after considering the matter , we are of the opinion that the view taken by the AO appears to be justified. The quest ion for consideration in this case is as what is the business of the assessee. The assessee is doing transport business of transporting passengers from one place to the other. Therefore, the business of the assessee is transport business and as all the vehicles are employed in that business, he is entitled to depreciation to the extent of 50 per cent . 11. Another relevant judgment that I came across is that of the CIT v. Gupta Global Exim (P) Ltd. 305 ITR 132 (S.C) which fully supports the stand taken by the AO. The relevant extract of the judgment is given below: The AO took the view that the assessee was, during the relevant assessment year, in the business of timber trading and it is only occasionally that the trucks owned by the assessee were given out on hi re to outside parties and, therefore, the assessee was not in the business of running the trucks on hire and, therefore, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de to a professional for audit of accounts, which falls within the ambit of sect ion 40(a)( ia) and rightly disallowed by the AO. 22. Having regard to the rival submissions on the issue, we do not find any infirmity in the order of ld. CIT(A) and hence the impugned addition of ₹ 37,500/- is upheld. 23. In ground No. 3 the assessee contended that the ld. CIT(A) was not right in confirming the addition of ₹ 11,11,733/- made by the AO by ignoring the explanations and specified content ions of the assessee that the addition on account of disallowance of commission and paid on purchases made from Silver Line, Chandigarh one of the sister concern will only result in increase of exempt ion u/s 80IC of the Act . 24. We have carefully perused the rival submissions, facts of the case and relevant records. The AO in the course of assessment proceedings, disallowed the excessive or un- reasonable commission paid to the sister concern by the assessee u/s 40A(2) (b) of the Act . The AO found that on purchase from Silver Line, Chandigarh the assessee made commission payment of ₹ 11,11,733/-. The rate of commission on purchase worked out to 7.1%. Accordingly, the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given case, if any one condition is shown to be satisfied the provision can be invoked and applied, if the facts so warrant . Whether the AO had held a part of the expenditure to be excessive having regard to the legitimate needs of the business and for recording such a finding cogent reasons were assigned by the AO, the condition of assessee that the fair market value having not been ascertained by the AO no disallowance could have been made had no merit . 31. In the case under appeal, nothing has been brought by the appellant to establish that the commission paid to its sister concern was not on the higher side or equivalent to the prevalent market rates. Further there is nothing to establish that the commission at the same rate to procure orders was given to any unrelated party. Legitimate need of the business vis- -vis the commission paid has also not been clear ly established. As clearly mentioned in the case of Coronation Flour Mills (supra), it is not as much for the AO as it is for the assessee to establish through cogent evidence the legi t imacy of the expenditure incur red. In the absence of any such evidence, the commission of 7.1% to procure purchase orders being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the amount of rebate and discount given to them which was furnished by the assessee. On checking the details filed by the assessee, it was not iced that amount of ₹ 24,81,356/- which is debited in the prof it and loss account on account of rebate and discount is the amount of sales which are not recovered during the year and not the rebate and discount . The same is not an allowable expenditure. Hence the same is disallowance. 31 The factual findings given by the AO reveals that the impugned amount of ₹ 24,81,356/ - which is debited in the prof it and loss account under the head rebate and discount is the amount of sale which are not recovered during the year and does not represent the rebate and discount . Accordingly the AO disallowed the same. 32. On careful perusal of the assessment order as well as the order passed by the CIT(A), the content ions made by the ld 'AR' , for the assessee before the CIT(A), i t emerges that the revenue authorities have disallowed the impugned expenses treating the same as rebate and discount whereas the assessee had claimed such amount representing the irrecoverable bad debts. 33. The ld. CIT(A) after discussi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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