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TMI Blog2019 (6) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and perused the material available on record. The CIT(A) has rightly allowed the expenses of 22,963/- and upheld the disallowance of 3,73,469/- as the assessee failed to furnish the requisite information in respect of payment made to 5 parties . Therefore, there is no need to interfere with the findings of the CIT(A). Addition of excess claim of depreciation on electrical fitting - plant and machinery v/s furniture and fixtures - HELD THAT:- The depreciation on electrical fittings has rightly been claimed by the assessee at 15% by treating it as part of plant and machinery and not as furniture and fixtures. It is necessary to have electrical fittings for the power supply to the machineries and plant without electrical fittings and power supply, there is no use of plant and machinery. Therefore, Ground No. 2 of assessee s appeal is allowed. Addition on interest free advances - notional interest on interest free advances - CIT(A) upheld the said disallowance made by the AO - HELD THAT:- No addition can be made assessee has its own funds which amount to 22.54 crores as on 31/3/2011 and 23.84 crores as on 31/03/2010. Therefore, advances were given out of its own funds only. Thus, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se interest free advances has no business nexus and if they had not been made the appellant had to pay lower interest on his interest carrying borrowings. The Ld. Commissioner (Appeal) erred in overlooking the following facts:- (a) these advance are made in the earlier years mostly much prior to the A.Y. 2010-11 and no notional interest was assessed. (b) the fact that these allegedly interest free advances were made out of interest carrying borrowed funds has not been denied by the A.O. (c) the appellants own interest free funds lying in interest free current accounts of the parties alone amounted to ₹ 22.55 crores at the being of the year and ₹ 22.22 crores at the end of year against the interest free advances of ₹ 25,97,038/- at the being of the year and ₹ 17,85,158/- at the end of the year. The same position prevailed during the earlier years. (d) that it was well settled that unless there was a direct nexus between the borrowed funds and the net interest free advances which were from common pool of funds and the interest free funds available with the assessee far exceeding the assesses own interest free advances, no disallowance of interest on ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines for the production and plant and machinery of the appellant. The authorities below failed to appreciate that this items were not in the category of normal "furniture/fittings including electrical fittings" Ground of Appeal No. 3 That on the facts of the case the Id. CIT (Appeals) has erred in conforming the addition of ₹ 1, 91, 465/- been the notional interest of interest free advances aggregating to ₹ 15, 97, 038/-. She failed to appreciate that:- (a) As the appellant had its own interest free funds far exceeding the sum of ₹ 15, 97, 038/-:- (b) No disallowance had been made in the earlier years with reference to these advances:- (c) There was no direct nexus between these advances and borrowed funds." I.T.A. No. 6036/DEL/2016 (A.Y 2012-13) "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 79,88,239/- made on account of disallowance of commission paid to non residents without properly appreciating explanation 2 to sec. 9(l)(vii) and explanation 2 to sec. 195 of the IT Act, 1961 while deciding the TDS provision u/s 195, that it is not applicable to non- reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled for. The Assessing Officer observed that there is decline in the GP rate as compared to immediate preceding year. The assessee was specifically asked to furnish the reasons for declining in the GP rate. The assessee vide submission dated 3/1/2014 submitted a note on comparative gross profit chart. The assessee also furnished books of accounts which were examined by the Assessing Officer during the assessment proceedings. The Assessing Officer made addition in respect of foreign commission expenses amounting to ₹ 61,31,446/-. The Assessing Officer also made addition in respect of polishing charges amounting to ₹ 45,845/- thereby taking into account rate of depreciation at 10% per annum. The Assessing Officer also made disallowance of interest amounting to ₹ 1, 91,645/-. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT (A). The CIT (A) partly allowed the appeal of the assessee. 5. As regards Ground No. 1 & 2 of Revenue's appeal relating to disallowance of commission paid to non-residence the Ld. DR submitted that the source from which the assessee derived income was within India from the activity carried in Indian. But the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer by holding that the commission written by the non-residents agents did not arise on account of 'business connection' of the commission agents in India and, therefore, cannot be deem to accrue or arise in India u/s 9(1)(i) of the Act. The Ld. AR relied upon the decision of the Banglore Tribunal in case of Exotic Fruits Pvt. Ltd.. Vs. ITO being ITA No. 1008 to 1013/Bang/2012 as well as Welspring Universal Vs. JCIT being ITA No. 4761/Del/2014 dated 12/1/2015 wherein this issue of allowability of deduction u/s 40 a (ia) of the Act has been dealt. The Ld. AR further submitted that CIT(A) rightly deleted the disallowance made by the Assessing Officer on account of foreign commission expenses for which the Ld. AR relied upon the Hon'ble Delhi High Court decisions in case of CIT(A) vs Eon Technology Pvt. Ltd. 343 ITR 366. The Ld. AR also relied upon the withdrawal of earlier Circular No. 23 dated 23/7/1969 and Circular No. 786 dated 7/2/2000 by CBDT. 7. We have heard both the parties and perused the material available on record. The CIT(A) has rightly deleted this addition as the commission paid to non-resident cannot be treated as assessee's income from other sources as the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2009-10 restricted the disallowance to 5%. The Ld. AR further submitted that the company has been regularly maintaining books of account and the same are duly audited. These books of account were examined by the Assessing Officer during the assessment proceedings and there is no adverse finding of the Assessing Officer in relation to these documents. The Ld. AR submitted that it is a well settled law that the ad-hoc additions cannot be made. The Ld. AR relied upon the decision of the Tribunal in case of ACIT Vs. Modi Rubber Ltd. (ITA NO. 1952/Del/2014 order dated 15/5/2018). The Ld. AR also relied upon the following decisions:- * Nitin Sales Corporation Vs. ITO (Delhi High Court) ITA NO. 1809/2005 order dated 11/7/2008. * Shri Devendra Kumar Vs. ITO ITA No. 3239/del/2014 order dated 30/08/2016 (ITAT, Delhi). * ACIT Vs Amtek Auto Ltd. 2006 112 TTJ 455 (ITAT, Delhi). * Shri Gagan Goyal Vs. JCIT ITA No. 1514/Del/2015 order dated 2/8/2016 (ITAT, Delhi). 10. We have heard both the parties and perused the material available on record. The CIT(A) has righty allowed the expenses of ₹ 22,963/- and upheld the disallowance of ₹ 3,73,469/-. Therefore, there is no need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower supply, there is no use of plant and machinery. Therefore, Ground No. 2 of assessee's appeal is allowed. 14. As regards Ground No. 3 of assessee's appeal, the Ld. AR submitted that during the year under consideration, the assessee has given interest free advances aggregating to ₹ 15,97,038/-. The Assessing Officer has made disallowance of ₹ 1,91,645/- notional interest at 12% on interest free advances of ₹ 15,97,38/- holding that assessee has paid interest free advances and has nothing to do with the business of the assessee. The CIT(A) upheld the said disallowance made by the Assessing Officer. The Ld. AR submitted that assessee has its own funds which amount to ₹ 22.54 crores as on 31/3/2011 and ₹ 23.84 crores as on 31/3/2010. Therefore, advances were given out of the own funds only and thus no addition on account of notional interest should have been made by the Assessing Officer. The Ld. AR submitted that it is well settled law that the assessee is free to use its own fund the way it wants and the revenue cannot compel the assessee to do or perform or use its fund in a particular manner. It is also settled law that when own funds are more tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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