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TMI Blog2011 (8) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... 30,09,044/- @ 5.27% as against 6.01% in the immediately preceding year. The AO framed the assessment on 31.12.2007 under section 143(3) wherein he made an addition of ₹ 38,93,055/- on the following grounds: (i) The assessee has shown oil gain of only 0.31% which is very low as compared to other similar type of units. (ii) The assessee has shown wastage of quantity of 40776.858 Kg. i.e. 1.68% on total consumption of yard which is on higher side. (iii) On being asked to explain the oil gain and wastage, the assessee has submitted that it has utilized low quality of yarn wherein the wastage is high. The assessee has tried to compare the rates with the party from whom 0.16% of yarn were purchased and they are having old texturising machines which resulted in higher wastage. The explanations of the assessee are of general in nature and could not be considered as a sole reason for higher wastage. (iv) Similar types of units find claimed at 0.45% to 0.47% wastage (as mentioned in order of assessment in Para-7) whereas the assessee has claimed 1.67% wastage which is three times more. (v) As per the ratio laid down by the Hon'ble ITAT, Ahmedabad in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted the order of the ld. CIT(A). the Counsel of the assessee pointed out that looking to the oil consumption, the oil gain of 0.31% is fair and reasonable. With regard to wastage, the counsel of the assessee pointed out that wastage as high as 1.33% for the assessment year 1996-97 and 2.88% for the assessment year 1994-95 was accepted whereas in the assessment year under appeal, the wastage is 1.68%. He accordingly contended that no formula can be laid down for measuring the reasonable wastage without considering the other materials on record. In the case of the assessee, the fall in G.P. is about ₹ 31,44305/- whereas the increase in power and fuel expenses on proportionate basis is more than ₹ 84.64 lakhs. In the assessment order, the AO has not brought any materials on record against the claim of power and fuel expenses. He accordingly contended that the view taken by the ld. CIT(A) deleting the addition of ₹ 38,93,055/- on account of alleged suppression of oil gain and wastage be deleted. 8. Having heard both the sides, we have carefully gone through the orders of the authorities below. It is pertinent to note that in case of Marmo Texturisers Pvt. Ltd., th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the addition of ₹ 38,93,055/- and keeping in view the peculiar facts of the assessee, is fair and reasonable. We, therefore, incline to uphold the order of the ld. CIT(A). Thus, this ground of appeal is rejected. 9. Ground no.2 of the Revenue s appeal is as under: 2. On the facts and circumstances of the case and in law, the learned CIT(A)- I, Surat has erred in deleting the disallowance made by the A.O. of ₹ 10,15,014/- on account of interest on account of TUF Loan holding that Sanction Order for subsidy was passed after the end of the accounting year and thereby the subsidy interest was not accrued to the assessee during the accounting year. 10. Briefly stated, the facts are that the assessee is a company engaged in the business of textile manufacturing, grey cloth, yarns, electricity generation, etc. The AO framed the assessment on 31.12.2007 under section 143(3) wherein he made disallowance of interest of ₹ 10,15,014/- being interest on TUF loan on the following grounds: (i) The details furnished with regard to the interest on TUF Loan shows that the assessee has not accounted for the interest subsidy accrued to the assessee on 31.03.2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2008 and TUF limit has sanctioned with effect from 02.09.2005. Therefore, as per sanction order, a subsidy has been given w.e.f. 02.09.2005 which pertains to assessment year 2006-07 and it does not pertain to the current year 2005-06. He accordingly contended that the view taken by the ld. CIT(A) be upheld. 14. Rival submissions were considered. The reasons given by the ld. CIT(A) for deleting the addition of ₹ 10,15,014/- made by the AO is contained in para 3.3, which reads as under: 3.3 I have considered the submission made by the appellant and the observation of the A.O. The sanction order for interest subsidy is effect from 02.09.2005 and, therefore, there is no question of showing interest before this date. Hence, no question of charging interest before this date. Further, there is no question of disallowance out of interest expenditure because that liability has not accrued on the term loan. There is no finding that this term loan was not for the purpose of business. Once the loan is for the purpose of business the interest has to be allowed as per the provisions of Section 36(i)(iii) as per various Supreme Court decisions in this regard. In view of above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll of ₹ 2.60 crore and L.C. limit for working capital of ₹ 1 Crore. 19. The ld. D.R. pointed out that the view taken by the ld. CIT(A) deleting the addition of ₹ 7,87,008/- made by the A.O. is not acceptable because the ld. CIT(A) has not appreciated that Section 35(2)(b) of the Act enlist the legal charges which covers the loan processing charges. The Ld. CIT (A) has also not appreciated that the loan processing charges are charges for drafting of agreement and other formalities incurred in this connection like verification of asset and ownership against which loans were obtained. The ld. D.R. also stated that the Ld. CIT (A) has not appreciated that the expenses in respect of which deduction under section 35D were claimed were of the nature of expansion of the business of the assessee and the Ld. CIT(A) has not specifically pointed out the reasons for deleting such addition. 20. On the other hand, the Counsel of the assessee vehemently supported the order of the ld. CIT(A). 21. Having heard both the sides, we have carefully gone through the orders of the authorities below and the materials available on record. It is pertinent to note that in para 17 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impounded file but has not recorded by the assessee in its 'regular books of accounts . 24. On appeal, in the impugned order, the ld. CIT(A) deleted the disallowance made by the A.O. of ₹ 12,22,800/- on the following grounds: (i) The transaction recorded on Page No. 45 of impounded file are seems to be dumb paper having no description at all against the figure either in respective year or in respect of an amount of money or quantity for anything. (ii) The impounded paper does not bear the name of the assessee or any other party. (iii) The addition is totally based on conjecture and surmise. 25. At the time of hearing, the ld. D.R. pointed out that the view taken by the ld. CIT(A) deleting the addition of ₹ 12,22,800/- made by the A.O. is not acceptable because the ld. CIT(A) has not appreciated that the assessee themselves have claimed that the impounded papers (Page No.45) belongs to Shri Chithrabhai who had collected wastage/scrap from the assessee-company and the assessee had, on being specifically requested for by the A.O., not produced him personally or had not filed any confirmatory/explanatory letters from him with regard to the af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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