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TMI Blog2016 (8) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supplementary Partnership Deed. Ground No. 2 is accordingly treated as allowed for statistical purposes. Disallowance of interest - Held that:- As evident from the relevant balance-sheet of the assessee, which have remained undisputed or uncontroverted by the ld. D.R., are sufficient to show that there was no diversion of borrowed funds by the assessee for non-business purpose and the disallowance made by the Assessing Officer on account of interest was unsustainable. In that view of the matter, we uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of interest Disallowance of 20% out of the business promotion expenses - Held that:- As rightly observed by the ld. CIT(Appeals), no specific instance was pointed out by the Assessing Officer to show any unverifiable element involved in the expenses claimed by the assessee on business promotion and this position clearly evident from the order of the Assessing Officer is not disputed even by the ld. D.R. Therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the ad hoc disallowance of 20% made out of business promotion expenses without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and commission for effecting sates. The appellant had made payment of commission by account payee cheque to M/s. Rex Agro Pvt. Ltd. whereby the said payment has been accounted for by M/s. Rex Agro Pvt. Ltd. and shown in its income tax return. It is also noticed that tax has been deducted at source by the appellant on the payment made to M/s. Rex Agro Pvt. Ltd. From the comparative statement filed, it is seen that the percentage of commission on turnover during the year was 0.27% which has reduced from 0.78% in AY 2007- 08, the year in which assessment was done u/s 143(3) and payments of commission to M/s Rex Agro Pvt. Ltd. was allowed. Principle of consistency is to be followed unless there is any material change in the facts of the matter. The genuineness of the commission payment by the appellant is not in doubt and in the absence of any counter material for disallowing the same by the A.O., I do not find any justification in the action of the AO, mote so for the fact that it has been paid on regular basis since the past many years for arranging of sales as well as providing consultancy services to the appellant. Under the facts and circumstances, the addition made by the AO of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) was disallowed by the Assessing Officer on the ground that there was no mention or clause in the Partnership Deed allowing such remuneration. Before the ld. CIT(Appeals), the assessee, however, produced a supplementary deed made on 1st day of April, 2008 incorporating the clause for payment of salary to partners and relying on the same, the claim of the assessee for deduction on account of partners remuneration was disallowed by the ld. CIT(Appeals). 8. I have heard the arguments of both the sides and also perused the relevant material available on record. The limited contention raised by the ld. D.R. before me is that the Supplementary Partnership Deed filed by the assessee for the first time before the ld. CIT(Appeals) was relied upon by him to give relief to the assessee on this issue without giving any opportunity to the Assessing Officer to verify the same, which is in violation of Rule 46A of the Income Tax Rules. Although the ld. counsel for the assessee has not disputed the fact that the Supplementary Partnership Deed was filed before the ld. CIT(Appeals) for the first time, he has submitted that the Assessing Officer never asked any query on this issue during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer on account of interest was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the disallowance made by the Assessing Officer for the following reasons given in paragraph no. 6.2 to 6.4 of his impugned order:- 6.2 I have heard and considered the contentions raised by the AR and perused the details on record and the assessment order. The AO has made disallowance of the entire amount of interest of ₹ 29,16,399/- debited to the Profit Loss Account on the sole reason that the appellant had given interest free advances to sister concerns and made investment in shares of related parties. The AO has discussed the order the details of the companies to whom the advances were given for an aggregate amount of around ₹ 1.5 crores and investment in shares made to the extent of ₹ 2.42 crores. In doing so, the AO has relied upon decision of CIT vs. Abhishek Industries 286 ITR 1 wherein it has been held that payments made to sister concerns without bearing any interest against borrowed funds resulted in dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on CIT vs.- Winsome Textile Industries Limited, wherein decision of Abhishek Industries was distinguished as having no application, The appellant has submitted that the decision of Abhishek Industries Ltd. (Supra) even though not applicable due to the decision of the Calcutta High Court in the case of CIT vs. Britannia Industries Ltd is also distinguishable from the facts of the case, The appellant has made payment of interest on funds borrowed against security, In other words, the entire loan taken by the appellant are secured loans which are either secured against the stock or against book debts and packing credit loans. These loans are entirely used in the appellant s business for purchase of tea and sale of trea. A perusal of the accounts shows that the total purchases made by the assessee of ₹ 8.52 crores has been paid by the banks except for a liability of sundry creditors for goods of ₹ 8,71,467/-. The appellant is having sundry debtors of ₹ 75,65,330/- and stock in hand of ₹ 1.69 crores. The payments made against the purchases by the appellant are all against the secured loans which are directly or indirectly against such purchases which is ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue has challenged the action of the ld. CIT(Appeals) in deleting the addition of ₹ 1,16,084/- made by the Assessing Officer being disallowance of 20% out of the business promotion expenses claimed by the assessee. 14. During the course of assessment proceedings, the claim of the assessee for business promotion expenses amounting to ₹ 5,80,241/- was found to be not fully supported by proper bills/vouchers by the Assessing Officer. He, therefore, made a disallowance of 20% of such expenses. On appeal, the ld. CIT(Appeals) deleted the said disallowance made by the Assessing Officer on ad hoc basis on the ground that no specific defect whatsoever was pointed out by the Assessing Officer in respect of assessee s claim for business promotion expenses. 15. I have heard the arguments of both the sides and also perused the relevant material available on record. As rightly observed by the ld. CIT(Appeals), no specific instance was pointed out by the Assessing Officer to show any unverifiable element involved in the expenses claimed by the assessee on business promotion and this position clearly evident from the order of the Assessing Officer is not disputed even b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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