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TMI Blog2022 (5) TMI 1465X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer that no evidence was produced before the AO - HELD THAT:- The assessee incurred these expenses which are customary practice and the same was allowed in earlier assessment years by the Revenue. These expenses are incurred to maintain cordial and long-lasting relationship with the customers as well as within the business co-ordinator/partners for the benefit of the business. The same are allowable under Section 37 - The said amount is 0.20% compared to assessee s turnover - Thus, the CIT(A) rightly deleted this addition and there is no need to interfere with the findings of the CIT(A). Ground no.2 of Revenue s appeal is dismissed. Nature of expenses - land restoration expenses - revenue or capital expenditure - HELD THAT:- The issue is identical in the present assessment year to that of A.Y. 2007-08 wherein the Tribunal has observed that if corresponding income has been offered for tax then corresponding expenses should also be allowed. To that extent the findings of the CIT(A) in assessee s favour for A.Y. 2008-09 is correct. Hence, ground no.3 of Revenue s appeal is dismissed. Employees contribution to PF - HELD THAT:- It is pertinent to note that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proportionate interest on specific formula envisaged by the CIT(A) in the order. Therefore, there is no need to interfere with the findings of the CIT(A). Ground no.7 of Revenue s appeal is dismissed. Disallowance made in respect of losses on account of reacquisition of assets - A.R. submitted that the assessee sold certain assets in A.Y. 2007-08 declaring profit but the said transaction of sale was never materialised and, therefore, the assessee in assessment year 2008- 09 reversed the said transaction by booking loss of equipment amount - HELD THAT:- It is pertinent to note that the fact remains that the actual transaction of sales never took place in A.Y. 2007-08 and, therefore, the reversal was called by the assessee in A.Y. 2008-09 but the assessee has not given the details as to what caused the reversal of entries. Therefore, the said transaction of sale whether happened in A.Y. 2007-08 or in subsequent year that of 2008-09 was not proved by the assessee. CIT(A) has rightly confirmed this addition as such kind of reversal entry is not acceptable in respect of the transaction which has not been proved by the assessee before the Revenue Authorities. Hence, ground no.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edabad for the Assessment Year 2008-09. 2. The assessee in its appeal ITA No.926/Ahd/2012 for A.Y. 2008-09 has raised the following grounds of appeal : The appellant craves liberty to place on record concise grounds of appeal as follows in line with Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 : 1. The Ld. CIT(A) has erred both in law and on facts of the case, in confirming the disallowance of Rs.21,87,518/- made in respect of loss on account of reacquisition of assets. 2. The Ld. CIT(A) has erred, both in law and on facts of the case, in partly confirming disallowance in respect of land restoration expenses to the tune of Rs.1,07,375/- out of total land restoration expenses of Rs.43,70,892/-. 3. The Ld. CIT(A) has erred, both in law and on facts of the case, in directing the AO to verify assessee s claim that income corresponding to TDS credit has been offered to tax in other Assessment Years and allow TDS credit only to the extent of corresponding income disclosed in the year as well as to allow TDS credit in the year in which corresponding income has been offered. 4. The Ld. CIT(A) has erred, both in law and on facts of the case, in partly confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correctly incurred for business purpose and justified. Reliance is placed on 63 ITR 57 (SC), 73 ITR 634 (SC), 117 ITR 945 (BOM), 227 ITR 846 (Gau.) and 249 ITR 401 (Oris.). (3) The Id. CIT(A) erred in treating land restoration expenses to the extent of Rs.42,63,517/- as Revenue expenditure despite the same being capital expenditure. (4) The Id. CIT(A) erred in directing the AO to allow Rs.4,66,007/- being employee's contribute if it is paid before the due date, which is against the specific provisions of 36(1)(va) r.w. 2(24)(x) in this regard for the employees contribution vis-a-vis 'employees contribution' covered by u/s. 43B of the Act. (5) The Id. CIT(A) earned in confirming 25% of disallowance of total bogus expenditure (Rs.1,69,92,471/-) and deleting balance 75%, when he himself agreed fully with the AO that the assessee failed to discharge the once of proving the expenditure in para 8.3 of his order, which is against the provisions of sec.37 of the Act. (6) The Id. CIT(A) erred in allowing the expenditure under section 24 treating the rent income as house property income, when the assessee claimed expenses relevant to leased out property as business ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romotion of the business of the assessee. The Assessing Officer further made addition of Rs.43,70,892/- towards land restoration expenses. The Assessing officer also made addition of Rs.62,55,298/- towards reconciliation of the interest income and TDS claimed. The Assessing Officer made addition of Rs.4,66,007/- towards late payment of employees contribution to the PF which is not allowable under Section 36(1)(va) of the Act. The Assessing Officer made addition of Rs.1,69,92,471/- relating to booking of bogus expenses thereby observing that the assessee was not able to produce confirmation from parties and not supplied PAN of the said parties. Thus, on the ground that the assessee did not prove the identity, capacity and genuineness of the transactions of the creditors, the said addition was made. The Assessing Officer further made addition of Rs.19,41,340/- towards security deposit and retention money. The Assessing Officer made addition of Rs.41,54,372/- towards payment to Axis Pvt. Equity Limited for due diligence as well as Rs.6,23,810/- towards dead stock. The Assessing Officer disallowed claim under Section 14A of the Act and made addition of Rs.8,74,323/-. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary practice and the same was allowed in earlier assessment years by the Revenue. These expenses are incurred to maintain cordial and long-lasting relationship with the customers as well as within the business co-ordinator/partners for the benefit of the business. The same are allowable under Section 37 of the Act. The said amount is 0.20% compared to assessee s turnover which is Rs.1,22,74,52,184/-. Thus, the CIT(A) rightly deleted this addition and there is no need to interfere with the findings of the CIT(A). Ground no.2 of Revenue s appeal is dismissed. 12. As regards to ground no.3 of Revenue s appeal in respect of treating land restoration expenses to the tune of Rs.42,63,517/- as revenue in nature, the Ld. D.R. submitted that the CIT(A) has ignored the finding of the Assessing Officer. These expenses were disallowed in A.Y. 2007-08 as well. The then Assessing Officer has treated the same as capital expenditure. 13. The Ld. A.R. submitted that this issue is directly covered in favour of the assessee by the order of the Tribunal in assessee s own case for the A.Y. 2007-08 (ITA No.925 1086/Ahd/2012, order dated 20.12.2013 wherein it has been held that if corresponding i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahd/2016 as well as CIT vs. Gujarat Ambuja Export Limited - Tax Appeal 840 of 2013 as alternate plea if the said addition is not deleted, then the same should be restricted to 5% only. 20. We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the parties were not produced before the Assessing Officer as well as before the CIT(A), but the Assessing Officer also has not issued any notice to call for these parties. The fact also remains that the sales were never disputed and thus purchases were in consonance with the sales made by the assessee. Thus, the deletion of 75% of bogus purchases by the CIT(A) was correct and there is no need to interfere with the findings of the CIT(A). The decision relied by the Ld. A.R. that of Gujarat Ambuja (Export) Limited is factually distinguishable and hence not applicable in the present case. Ground no.5 of the Revenue s appeal is dismissed. 21. As regards to ground no.6 of Revenue s appeal regarding allowing standard deduction under Section 24(1), the Ld. D.R. submitted that treating the rent income as house property income when the assessee has claimed expenses relevant to lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - CIT vs. Reliance Utilities Power Limited 313 ITR 340 (Bom) - Munjal Sales Corporation vs. CIT 298 ITR 298 (SC) 26. We have heard both the parties and perused all the relevant materials available on record. It is not disputed by the Revenue that the interest-free funds are lesser than the interest-free advances. The CIT(A) has properly given part relief thereby directing the Assessing Officer to work out the proportionate interest on specific formula envisaged by the CIT(A) in the order. Therefore, there is no need to interfere with the findings of the CIT(A). Ground no.7 of Revenue s appeal is dismissed. 27. Now we are taking up assessee s appeal. As regards ground no.1 of assessee s appeal relating to confirming disallowance of Rs.21,87,518/- made in respect of losses on account of reacquisition of assets. The Ld. A.R. submitted that the assessee sold certain assets in A.Y. 2007-08 declaring profit of Rs.21,87,518/- but the said transaction of sale was never materialised and, therefore, the assessee in assessment year 2008- 09 reversed the said transaction by booking loss of equipment amount. The Ld. A.R. submitted that the reversal entry was passed in the year u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l bogus purchases. The said ground is in connection with ground no.5 of Revenue s appeal for which we have given detailed finding in hereinabove paragraphs. Thus, ground no.4 of assessee s appeal is dismissed. 33. As regards ground no.5 of assessee s appeal relating to confirming of disallowance of Rs.14,62,818/- being irrecoverable deposit written off in books, the Ld. A.R. submitted that staff loan, earnest money deposit, advances to staff and other deposit written off were given in the normal course of business of the assessee and the CIT(A) should have deleted this addition. When such sum becomes irrecoverable then the same are written off in the books of account and should be allowed as business loss under Section 28 or 37 of the Act. The Ld. A.R. relied upon the following decisions:- - CIT vs. Abdul Razak Co. (1982) 136 ITR 825 (Guj) - Badridas Daga vs. CIT (1958) 34 ITR 10 (SC) - CIT vs. Nainital Bank Limited (1965) 55 ITR 707 (SC) - ITO vs. M.V. Mathew (1994) 72 Taxman 89 (Cochin) (Mag) - Ramchandar Shivnarayan vs. CIT (1978) 111 ITR 263 (SC) - Devi Films (P) Ltd. vs. CIT (1970) 75 ITR 301 (Mad) - T.L. Lalvani vs. CIT (1970) 78 ITR 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 35D of the Act. Ground nos.8 9 are, therefore, partly allowed for statistical purposes. 40. As regards to ground no.10 of assessee s appeal relating to confirming disallowance of Rs.6,23,810/- made in respect of dead stock expenses, the Ld. A.R. submitted that the said issue is covered against the assessee in assessee s own case for A.Y. 2007-08 being ITA No.3076/Ahd/2010, order dated 25.10.2011. Therefore, ground no.10 is dismissed. 41. As regards to ground no.11 of the assessee s appeal regarding confirmation of disallowance of Rs.8,74,323/- under Section 14A of the Act, the Ld. A.R. submitted that the assessee has substantial interest-free funds against the investments which is almost 17.60% higher and, therefore, when the assessee has earned exempt income in the current year, no disallowance under Section 14A is called for. The Ld. A.R. relied upon the following decisions: - CIT vs. Reliance Industries Ltd (2019) 102 taxmann.com 52 (SC) - CIT vs. Torrent Power Limited 363 ITR 474 (Guj) - CIT vs. Suzlon Energy Limited 354 ITR 630 (Guj) - CIT vs. Gujarat Power Corporation Limited 352 ITR 583 (Guj) - CIT vs. Hitachi Home Life Solution ..... X X X X Extracts X X X X X X X X Extracts X X X X
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