9911796707
TMI Blog2016 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... same as expenditure for getting a benefit of enduring nature - CIT(A) allowed claim - Held that:- An amount of ₹ 4,40,000/- has been incurred by the assessee towards the environmental study which was undertaken for converting its existing mercury plant into a technological better membrane cell plant. There is nothing on record to confirm that the assessee has actually converted the existing plant into the new plant and whereby the said cost should go and be added to the cost of the new plant. The expenditure therefore is clearly in connection with conducting a study to make the plant technological better plant. In our view, the said expenditure towards carrying out only the consultancy study cannot be characterized as a capital expenditure. Further the decision in case of Majestic Auto Ltd. [2009 (1) TMI 57 - PUNJAB AND HARYANA HIGH COURT ] quoted by the ld. AR support the said position. In light of above, we do not see any necessity to interfere to the findings of the ld. CIT(A) Addition in respect of collection of benevolent fund u/s 2(24)(x) - CIT(A) allowed claim - Held that:- The liability of the assessee towards its share of contribution to the benevolent fund for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position in law that in case of corporate entities, no disallowance can be made for personal use as corporate entities are distinct from directors and any payments/expenditure incurred for Directors are governed by their terms of appointment. In the instant case, therefore no disallowance can be made holding that expenditure has been incurred for the personal purposes. Secondly, the liability for ₹ 1,20,000/- has crystallized during the year and following the mercantile system of accounting, the same cannot be disallowed. In the result, we delete the disallowance ₹ 1,20,000/- towards vehicle disallowance made by the AO. In the result, the ground of the revenue is dismissed and the ground of the assessee is allowed. Addition made of difference in MODVAT value available in valuation of closing stock of raw material - Held that:- The appellant has submitted that as against Excise Duty of ₹ 3,64,438/- in respect of closing stock of raw material, the appellant had a MODVAT credit available in its books of accounts amounting to ₹ 2,98,099/- and further the balance amount of the Excise duty has been paid before the due date of filing of the return. The AO is ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Industries Pvt. Ltd.(1993 (9) TMI 318 - BOMBAY High Court ) was brought to the notice of Bench in support of the contention that the expenditure on foreign travel of Managing Director to examine the suitability of machinery for a running business is not capital in nature where no machinery was purchased. In light of above, we set-aside the matter to the file of the AO to examine where any new capital assets were purchased by the assesse pursuant to foreign visits made during the year under consideration. Whether it is found that no new capital assets have been purchased by the assessee, the AO is directed to allow the foreign travel expenditure as a revenue expenditure Addition of publicity expenses - Held that:- It is not in dispute that the amount of ₹ 1 lacs has been paid to Equestrian Federation of India and other amounts have been paid to Shri Jawahar Jain education Institute and Puja Samiti and other trust to support their educational and social activities. The ld. AR has submitted its inability to submit the supporting documentation in view of the fact that the assessee has become a sick company and the matter is pretty old. Given that the genuineness of the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue s appeal:- 1. That the ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting the addition/disallowance ₹ 40,76,485/- made out of stores and spare expenses. 2. That the ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting the disallowance of ₹ 4,40,000/- made out of legal and professional charges provisions booked for bills not received, treating the same expended for getting a benefit of enduring nature. 3. That the Id. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting the addition of ₹ 90,400/- made in respect of collection of Benevolent fund u/s 2(24)(x) of the I.T. Act not deposited in bank. 4. That the Id. CIT(A) has erred in law as well as on the facts and circumstances of the case in restricting the entertainment expenditure of ₹ 37,500/- out of total disallowance of ₹ 1,47,341/- made by the A.O. 5. That the Id. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting the addition/disallowance of ₹ 3,41,550/- made in respect of guest house expenses. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w in confirming disallowance of ₹ 12,38,418/- out of foreign travelling expenses. 5. The Ld. Commissioner of Income tax (Appeals) has erred in fact and in law in confirming disallowance of ₹ 1,04,108/- out of legal expenses. 6. The Ld. Commissioner of Income tax (Appeals) has erred in fact and in law in confirming disallowance of ₹ 2,00,000/- out of the publicity expenses. 7. The Ld. Commissioner of Income tax (Appeals) has erred in fact and in law in confirming disallowance of ₹ 1,20,000/- out of the vehicle expenses. 8. The Ld. Commissioner of Income tax (Appeals) has erred in fact and in law in confirming disallowance of ₹ 21,96,755/- out of the interest payment. 9. The Ld. Commissioner of Income tax (Appeals) has erred in fact and in law in confirming disallowance of ₹ 3,45,600/- out of interest expenses. 10. The Ld. Commissioner of Income tax (Appeals) has erred in fact and in law in confirming addition of ₹ 82,67,790/- u/s 40A(3). He has further erred in not considering the applicability of Rule 6DD(j) as was existing till 25-07-1995. 11. The Ld. Commissioner of Income tax (Appeals) has erred in fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce. In A.Y. 98-99, insurance claim of ₹ 32,76,485/- was received the scrap value of old turbo charger was booked as miscellaneous income therefore the expenditure claimed on turbo charger is allowable as revenue expenditure. The AO observed that expenditure incurred is on current repair but the same should be allowed to the extent of procurement of new spare part minus insurance receivable minus amount receivable on sale of old part. Accordingly, after estimating the sale of old spare parts at ₹ 8 lacs, he allowed the claim of expenditure at ₹ 12,23,138/- (Rs.52,99,623 - ₹ 32,76,485 - ₹ 8,00,000) disallowed the balance amount of ₹ 40,76,485/-. 4. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had deleted the disallowance of ₹ 40,76,485/- by giving the following findings:- I have perused the assessment order as well as submission of the assessee. The assessee has shown insurance claim of ₹ 32,76,485/- and realization from the sale of scrap of damaged turbo charger on receipt basis in F.Y. 97-98 relevant to A.Y. 98-99. Therefore, this addition is not justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofessional charges treating the same as expenditure for getting a benefit of enduring nature. The ld Assessing Officer observed that the assessee claimed expenditure of ₹ 4,40,000/- under the head legal professional charges. The amount was paid to M/s Jaishree Techno Craft, Jaipur towards the environmental study undertaken for converting the existing mercury plant into a better technological membrane cell plant. The AO observed that the expenditure incurred was to get a benefit of enduring nature, the copy of report obtained was not filed, invoice issued by the party is dated 26.07.1995 whereas the order is dated 25.12.1995. He accordingly, disallowed the expenditure of ₹ 4,40,000/-. 9. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had deleted the disallowance by holding that the expenditure was incurred on the environmental impact study for mercury MCP plant wholly and exclusively for the business purposes as it was a continuous process of the company to follow the environmental policy. Accordingly, the assessee company took the technical advice and incurred the expenditure as revenue and it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure therefore is clearly in connection with conducting a study to make the plant technological better plant. In our view, the said expenditure towards carrying out only the consultancy study cannot be characterized as a capital expenditure. Further the decision of Punjab Haryana High court in case of Majestic Auto Ltd. and other Co- ordinate Bench decisions quoted by the ld. AR support the said position. In light of above, we do not see any necessity to interfere to the findings of the ld. CIT(A). Hence ground No.2 of the Revenue is dismissed. 13. The 3rd ground of the revenue s appeal is against deleting the addition of ₹ 90,400/- made in respect of collection of benevolent fund u/s 2(24)(x) of the I.T. Act not deposited in the bank. The ld Assessing Officer observed that a benevolent fund was constituted for the welfare of employees contribution was being made by the employees the assessee. The assessee created a liability of ₹ 90,400/- towards its contribution to this fund. The AO disallowed the assessee s claim for the reason that the sum is not deposited in the bank and it will be allowed in the year in which the same is deposited in the bank. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. The AO observed that expenses under the head employees welfare and canteen expenses includes expenses on tea, coffee, cold drinks etc. for visitors. Accordingly, he estimated ₹ 75,000/- in the nature of entertainment expenditure. He further observed that expenditure of ₹ 2,19,682/- under the head repair maintenance expenses on boarding lodging of engineers is also in the nature of entertainment. Accordingly, he made disallowance of ₹ 1,47,341/- being 50% of ₹ 75,000 and ₹ 2,19,682/- u/s 37(2A) of the Act. 19. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had deleted the disallowance of ₹ 1,09,841/- by holding that the expenditure incurred on technical persons called for attending the repairs of faults in the appellants plant cannot be considered as entertainment expenditure. However, he confirmed the disallowance of ₹ 37,500/- by upholding the action of the AO in assuming that an amount of ₹ 75,000/- out of expenditure on employees welfare and canteen expenses are of entertainment in nature. 20. Now the revenue is in appeal before us. The ld CIT DR h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the canteen expenses which is meant for the employees where occasionally the visitors also take meals/coffee cannot be said to be entertainment in nature. Reliance in this connection is placed on following cases:- (i) CIT Vs. Premier Vegetable Products Ltd. (2014) 97 DTR 230 (Raj.) (HC) (ii) Associated Stone Industries (Kotah) Ltd. Vs. CIT (2002) 123 Taxman 643 (Raj.) (HC) (iii) Rajasthan Cotton Mills Vs. CIT (1987) 32 Taxman 365 (Raj.) (HC) In view of above, the disallowance ₹ 37,500/- confirmed by the CIT(A) be deleted. 22. We have heard the rival contentions of both the parties and perused the material available on the record. The amount of ₹ 2,19,682/- has been incurred on boarding and lodging of Engineers who have been called upon to carry out repair of faults in the appellant s plant. Further ₹ 75,000/- has been estimated by the AO towards entertainment expenditure which has been incurred on expenses of tea, coffee, cold drinks etc. for the visitors who have visited the office and factory premises of the assessee. In our view these are routine business expenditure which has been incurred to provide basic hospitality to the technici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accordingly confirm the order of the ld. CIT(A) and the ground of the revenue is dismissed. 25. The 6th ground of the revenue s appeal is against deleting the addition of ₹ 2,35,000/- made on account of payment to clubs. The AO observed that the assessee has made payments for the club membership of its Chairman, MD Senior Executives. Accordingly, by holding that the club payments are not exclusively for the purpose of business, he made disallowance of ₹ 2,35,000/-. The Ld. CIT(A) deleted the disallowance by holding that the expenditure incurred on club is for the purpose of business as held by various courts. The ld CIT DR has relied on the order of the ld lower authorities. At the outset, the ld AR of the assessee has submitted that it may be noted that the payment made to club towards corporate membership is allowable as business expenditure. Apart from the cases relied before the CIT(A), reliance is further placed on the following cases:- (i) CIT Vs. Groz Beckert Asia Ltd. (2013) 351 ITR 196 (P H)(HC)(FB) (ii) CIT vs. Infosys Technologies Ltd. (2012) 349 ITR 606 (Kar.)(HC) (iii) CIT vs. Modi Xerox Ltd. (2012) 344 ITR 411 (All.) (HC) (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ): (iii) Banco Products (India) Ltd. vs Dy. CIT 63 ITD 370(Ahd.): (iv) ITO vs Ashoka Betelnut Co. (P.) Ltd. 21 TTJ (Mad.) 465. He further submitted that the CIT(A) has confirmed the disallowance of ₹ 1,20,000/- as liability for this amount was provided at the year end. It may be noted that this is a crystallized liability which is paid in the next year as accepted by the CIT(A). No specific expenditure incurred for non business purpose has been pointed out. Therefore, the disallowance confirmed by CIT(A) be deleted. Without prejudice, it may be pointed out that the CIT(A) in the first round has only confirmed the disallowance of ₹ 1,00,000/-. Therefore, disallowance of ₹ 1,20,000/- confirmed by CIT(A) is otherwise not justified. In view of above, the disallowance confirmed by CIT(A) be deleted by dismissing the ground of the department. 28. We have heard the rival contentions of both the parties and perused the material available on the record. The vehicle expenses have been disallowed on two accounts. Firstly on a/c of non-business use of the expenses and secondly, on a/c of provisions of ₹ 1,20,000. It is a settled position in law that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. CIT(A) directed the AO to verify from the Excise Department exact position of appeal and collect the appeal order. It further directed the AO to verify the claim of payment of ₹ 60 lacs on account of excise duty before the due date of return. 31. Now both are in appeal before us. The ld CIT DR has supported the order of the lower authorities and the ld AR of the assessee has submitted that matter regarding alleged premium charged from customers on sale of liquid chloride and its quantification is still pending before CESTAT. Hence, the addition made by AO be set aside to him to decide the same as per law after the finalization of appeal by CESTAT. CIT(A) has also given the similar direction but still the AO has not given effect to the same. Hence, the AO be specifically be directed to exclude this addition while giving the effect to the Appellate order and to consider the addition as per law as an when the appeal under the Excise law is finally decided. As far as allowability of excise duty of ₹ 60 lacs deposited by assessee before due date of filing of return u/s 43B is concerned, there is no error in the direction given by CIT(A) and therefore his order be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before due date of filing of return, the same is allowable u/s 43B. This is also accepted by AO in order u/s 143(3)/148 dt. 28.11.03 (copy enclosed). In these circumstances no addition is called for and therefore the entire addition needs to be deleted. Without prejudice to above there is no basis to estimate the amount of excise duty on raw material at ₹ 4 lacs as against actual amount of ₹ 3,64,438/-. The difference between excise duty and MODVAT credit is only ₹ 66,249/- which was confirmed by the predecessor CIT(A) against which no appeal is filed by the department to the tribunal. Thus, the addition made by the AO is otherwise incorrect. In view of above the entire addition made by AO needs to be deleted by dismissing the ground of the department. 34. We have heard the rival contentions of both the parties and perused the material available on the record. The appellant has submitted that as against Excise Duty of ₹ 3,64,438/- in respect of closing stock of raw material, the appellant had a MODVAT credit available in its books of accounts amounting to ₹ 2,98,099/- and further the balance amount of the Excise duty has been paid before the due dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier while disposing off ground No.7 in respect of vehicle running expenses, applying the same analogy, the disallowance of ₹ 3,00,000/- out of vehicle repair expenses is hereby deleted. Further the AO observed that out of total expenses of ₹ 79.19 lacs details of ₹ 3,02,000/- was not filed which he disallowed on a/c of non-availability of details. No specific reason or explanation has been provided by the assessee as to why it could not supply the details of ₹ 3,02,000/- of the vehicle running expenses. At the same time it is noted that the AO has not challenged the veracity of the claim or the incurrence of the expenditure for the purpose of the business. In light of that we hereby delete the disallowance of ₹ 3,02,000/-. In the result the revenue s appeal is dismissed and the assessee s appeal is allowed. 37. The ground No. 11 of the revenue s appeal is against deleting the addition of ₹ 10 lacs on account of valuation of closing stock. The AO observed that closing stock has not been valued properly. He therefore made a lump sum addition of ₹ 10 lacs after revoking section 145(2). The Ld. CIT(A) deleted the disallowance by hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT Vs. Satish Estate Pvt. Ltd. (2014) 226 Taxman 11 where addition of ₹ 75 lakhs was made on account of undervaluation of closing stock of the land but the closing stock of land shown by the assessee is accepted by AO as opening stock for the subsequent year in the assessment made u/s 143(3) for the subsequent year deleted the addition made by the AO as no loss to the revenue has been caused. In the present case also for subsequent AY 1997-98 AO has accepted the closing stock declared by the assessee as opening stock and also accepted the closing stock declared in that year. Therefore, also the addition made by him is legally not tenable. Hence, the order of the CIT(A) be upheld by dismissing the ground of the department. 38. We have heard the rival contentions of both the parties and perused the material available on the record. The ld. CIT(A) has given a finding of fact that the assessee is regularly following the consistent basis for the valuation of its closing stock and there is no deviation in the valuation method during the year. Further the ld. AR has submitted that for subsequent A.Y 1997-98 the AO has accepted the closing stock declared by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued it as penalty for infringement of any law. Even no enquiry is made from RSEB to ascertain the nature of payment. It is a settled law that the whether certain deduction from the receipt are permissible in law or not, question has to be decided according to the principles of law and not in accordance with the accounting entries made in the books of accounts as held by the Supreme Court in case of Tuticorin Alkali Chemicals Fertilizers Ltd. Vs. CIT 227 ITR 172. In view of above, disallowance confirmed by CIT(A) be directed to be deleted. The ld CIT DR has supported the order of the lower authorities. 40. We have heard the rival contentions of both the parties and perused the material available on record. The assessee has submitted that an amount of ₹ 3,01,883/- has been paid to RSEB towards drawing excess power over and above the sanction capacity. It is therefore, a matter which falls within the realm of contractual relationship between the assessee and the RSEB and it is clearly in the nature of contractual payment rather than infringement of any law of the land. In light of that, we delete the disallowance of ₹ 3,01,883/- paid to RSEB. 41. The 3rd ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has highlighted specific expenses amounting to ₹ 2,11,997/- incurred towards repair and maintenance of the guest house at 15 Friends colony, New Delhi. It is also noted that the assessee has already disallowed an amount of ₹ 1,68,707/- u/s 37(4) while filing its return of income. In light of that, we do not see any justification in AO making an estimation and disallowance at ₹ 19,00,000/-. We accordingly direct the AO to restrict the disallowance to ₹ 2,11,997/-. Given that the assessee has already disallowed ₹ 1,68,707/-, the balance disallowance of ₹ 43,290/- should be made in the hands of the assessee. Hence this ground of the assessee is partly allowed. 43. The 4th ground of the assessee s appeal is against confirming disallowance of ₹ 12,38,418/- out of Foreign Travel. The ld AO made disallowance of ₹ 12,38,418/- out of the foreign travelling expenses of ₹ 23,23,444/- in respect of following visits. The CIT(A) confirmed the disallowance by upholding the findings of the AO. Name of Person Place Amount Purpose Reasons for disallowance b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in course of the running business to have discussions regarding acquiring of capital asset, raising funds and attend conference for the expansion of the business. The Bombay High Court in case of Bralco Metal Industries Pvt. Ltd. Vs. CIT 206 ITR 477 has held that expenditure on foreign tour of managing director to examine the suitability of machinery for a running business is not capital in nature where no machinery was purchased. In the present case also no new capital asset has been purchased. The AO has also not pointed out that any particular visit is correlated with purchase of any specific asset. Thus, the disallowance made by lower authorities is uncalled for. Further discussion for raising of funds is otherwise not a capital expenditure. All these expenditures were for the purpose of existing business not for setting up or establishment of new business. Hence, the entire foreign travel expenditure is allowable as revenue expenditure u/s 37. Reliance is also placed on the following case:- (i) CIT Vs. Shah Theatres Pvt. Ltd. 169 ITR 499 (Raj.) The CIT(A) in its order without distinguishing the case held that the case law relied by the assessee is not applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered this claim as related to A.Y. 97-98 accordingly made the disallowance. The Ld. CIT(A) confirmed the disallowance holding that purpose of this expenses was AY 1997-98 and the liability has been crystallized in AY 1997-98. The ld AR of the assessee has submitted that it is not in dispute that invoice was raised on 29.02.96 i.e. in the year under consideration. The assessee thus has a present obligation arising from the past event, settlement of which is expected to result in an out flow from the enterprise of resources. The payment is also made in June 96. Hence, provision made for such liability is allowable expenditure as per AS 29. Simply because it is for the year 31.03.97 would not make it expenditure relevant to A.Y. 97-98. It can be noted that even the provision for audit fees is allowed in a particular year even though the services are rendered in the subsequent year. In next year the AO has not allowed this expenditure and therefore if it is not allowed in the year under consideration it would never be allowed. Supreme Court in case of CIT Vs. Excel Industries Ltd. 93 DTR 457 has held that when the rate of tax remained the same in present A.Y. as well as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by cheque. The payment for sponsorship is not doubted by the lower authorities. Hence, the same cannot be disallowed. The other payment mentioned in the assessment order is for advertisement in the souvenir. These are normal socio welfare expenditure required to be incurred to maintain good cordial relationship. Only because the assessee could not produced the evidence of expenses that too after a lapse of 15 years particularly when the assessee has become a sick company and there was labour unrest, the expenditure cannot be disallowed more particularly when payment is made by cheque and the genuineness of the expenditure is not in doubt. Without prejudice to above, when the AO has specified the amount of such expenditure at ₹ 1,59,200/- after thorough verification there is no reason to make lump sum disallowance of ₹ 2 lacs. In view of above, the disallowance confirmed by CIT(A) be deleted. At the outset, the ld CIT DR has supported the order of the lower authorities. 48. We have heard the rival contentions of both the parties and perused the material available on the record. It is not in dispute that the amount of ₹ 1 lacs has been paid to Equestri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 12% or 15% charged from them. He has therefore calculated the notional income made disallowance of interest. There is no basis for the same. It is not the case of the AO that assessee has borrowed the funds at a higher rate then given the same at a lower rate. Infact AO himself has stated that assessee has raised inter corporate deposit @ 8.5% made investment in FDR yielding a rate of 9%. If in some cases assessee has charged rate of interest 18% or more on the inter corporate deposit given by it, the same cannot be a basis for holding that assessee must charge interest from all other parties at such higher rate. No nexus has been established by the AO before making the disallowance. It also ignored the fact that assessee has interest free funds by way of Share Capital Reserve Surplus to the extent of 68.35 crores which is much higher than the so called advances given at lower rate. Reliance in this connection is placed on the following cases:- (i) SA Builders 289 ITR 1 (SC) (ii) CIT Vs. Bharati Televenture Ltd. 51 DTR 98 (Del) (2011) (iii) CIT Vs. Motor Sales Ltd 304 ITR 123 (All). (iv) JCIT V/s ITC Ltd. (2008) 299 ITR 341 (Kolkata) (SB) (v) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and financial support was given on account of business responsibilities and to protect the goodwill in the market as these companies are under the same management. Regarding bank guarantee for Modi Cement, the Assessing officer noted that the assessee company arranged a bank guarantee for ₹ 5 crores in favour of IDBI by depositing ₹ 5 crores with the bank as FD and such arrangement was made as rehabilitation package of M/s Modi Cement. A further sum of ₹ 5 crores pledged with the bank in a non-lien fixed deposit a/c, out of the funds raised from the promoters. It was further noted that the inspection team of the companies department required assessee company as to why such funds to the extent of ₹ 10 crores are blocked to rehabilitate to M/s Modi Cement Ltd. It was submitted that Modi Cement Ltd. is group company and on account of moral responsibility, the company extended all possible support for rehabilitation. However, the explanation given by the assessee company was not found satisfactory by the AO. In this regard reference of the Bench was drawn to the recent decision of Hon ble Supreme Court in the case of Hero Cycles Pvt. Ltd. 94 CCH 0097 wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was given to the group concerns in view of the commercial expediency and therefore interest is allowable expenditure in view of the decision of Supreme Court in case of S.A Builders case (referred supra). In AY 1995-96, this decision was not available and therefore the decision of AO for that year cannot be applied in the year under consideration. In view of above, the disallowance confirmed by CIT(A) be deleted. The ld CIT DR supported the order of the lower authorities. 52. We have heard the rival contentions of both the parties and perused the material available on the record. Unlike the facts as narrated in respect of ground no. 8 above, the assessee has not been able to demonstrate how it satisfy the test of commercial expediency in respect of advances to GM Modi Hospital and Research Centre and Medical Science and to Modi ARE Limited. In light of same, we are unable to accede to the contentions of the assessee and confirm the order of ld CIT(A). Hence, ground no. 9 of the assessee is dismissed. 53. The 10th ground of the assessee s appeal is against confirming addition of ₹ 82,67,790 u/s 40A(3). He has further erred in not considering the applicability of Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions of both the parties and perused the material available on the record. It is noted that Rule 6DD(j) was substituted w.e.f. 25.07.1995. Prior to the amendment, Rule 6DD(j) provided an exception to applicability of section 40A(3) wherein it was provided where it was not practical to make payment by crossed cheque or would have caused genuine difficulty to payee having regard to the nature of transaction and the necessity for expeditious settlement thereof. The ld. CIT(A) has however applied the amended rule 6DD(j) while confirming the disallowance which states that where payments was required to be made on a date on which the banks were closed either on account of holiday or strike. It is therefore clear that for the period ending 25.07.1995, pre-amended Rule 6DD(j) will be applicable. The ld. AR has submitted that these payments are in the nature of freight and cartage payments which are required to be made to the drivers on the spot and it is not practical to make payments by crossed cheques. Further, in the tax audit report the auditors have given their remarks stating that the factory is situated in the backward area and the payments to the transporters have to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is not justified more particularly when the disallowance has already been made. Without prejudice to above, it may be pointed out that the CIT(A) in his order has stated that the assessee in AY 1995-96, has not press this issue for ₹ 1,05,439/-. Thus, even if past history of the case is considered, the disallowance so made is excessive. In view of above, the disallowance confirmed by CIT(A) be deleted. At the outset, the ld CIT DR has supported the order of the lower authorities. 56. We have heard the rival contentions of both the parties and perused the material available on the record. From the perusal of the records it is noted that the AO, relying on the preceding assessment year wherein the disallowance of ₹ 4 lacs was made in respect of telephone expenses on the guest house, has disallowed a sum of ₹ 1.5 lacs for the year under consideration. Given that the said disallowance is purely on estimate basis and also given the fact that the assessee has already disallowed an amount of ₹ 1,91,953/-, the adhoc disallowance of ₹ 1.5 lacs is hereby deleted. 57. The 12th ground of the assessee s appeal is against not allowing the claim of prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est may have a minor tax effect as held by the Hon ble Supreme court in case of Excel Industries Ltd. (supra) and in case of Rajasthan State Industrial Development investment Corporation Ltd.(supra). Given that there is no dispute that the expenses have been incurred for the purposes of business and the genuineness of the expenses are not under question, we hereby delete the disallowance of ₹ 9,60,175/-. 59. The 15th ground of the assessee s appeal is against confirming the addition of ₹ 4,73,264/- on account of loss in transit. The AO observed that there is loss of 45 MT of Caustic Soda Lye in transit. He accordingly disallowed this loss and made addition of ₹ 4,73,264/-. The Ld. CIT(A) confirmed the addition by holding that similar addition was made in AY 1995-96, the assessee did not file any evidence and justification, the transit loss depend on terms of the supplier company as well as insurance aspect which has not been brought on record. The ld AR of the assessee has submitted that no material has been brought on record to establish that claim of loss of 45 MT of Caustic Soda Lye was not genuine. Hence, the disallowance is uncalled for. The predec ..... 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