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TMI Blog2024 (7) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... ng this disallowance as held AO made the disallowance even without mentioning the name of the sister concern to whom advance was allegedly made by the assessee. The loans obtained by the assessee from Citi Bank and ICICI Bank were utilized for working capital of the assessee and from the balance sheet and details of loans and advances it is obvious that no loan or advance was made to any relative or sister concern. In the absence of any instance of utilization of borrowed fund for purposes other than business brought on record by the Ld. AO, the Ld. CIT(A) correctly deleted the impugned addition. Salary received from Ozone Pharmaceuticals Ltd.- disallowance was made stating that in the absence of any details filed by the assessee the salary received by the assessee is calculated on the basis of earlier year - CIT(Appeals) deleted this disallowance for the reason that the assessee has not received any salary during the year and the claim for TDS was only a mistake and the TDS return was also revised - HELD THAT:- As Revenue could not controvert the findings of the Ld. CIT(A) and, therefore, the same is sustained. Ground no.3 of Revenue s appeal is rejected. Deduction u/s 80IB/80IC - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re and failed to show the purposes for which the expenditure were incurred. 2. i. On the facts and in the circumstances of the case and in law, the Ld. CST(A) has erred in deleting the disallowance of Rs. 16,21,955/- made by the Assessing Officer on account of interest paid to banks ignoring the fact that assessee's own funds reflected in balance sheet stand deployed in certain assets and cannot be said that assets and funds were available with the assessee for making advances to the sister concerns. ii. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the interest bearing loans were raised and interest free loans were advanced to sister concerns as established by the Assessing Officer in the assessment order. 3. i. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 10,86,000/- without any basis and material facts on record. ii. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 10,86,000/- without following the mandatory procedure under Rule 46A referring the issue back to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es promotion (ii) marketing (iii) general expenses (iv) repair and maintenance and (v) vehicle repair and maintenance aggregating to Rs. 10,00,000/- for the reason that the assessee has not produced complete books of account; that it was not proved that expenses incurred were wholly and exclusively for the purpose of business and that these were not supported by bills. 12.5 On appeal, the Ld. CIT(A) noted that similar disallowance was made in preceding last five years which were deleted by the Ld. CIT(A) as the additions were made on ad-hoc basis and nothing adverse was brought on record by the Ld.AO. In AY 2009-10 also similar disallowance has been made by the Ld. AO without bringing on record any specific adverse material which cannot be sustained. He deleted the impugned disallowance. 12.6 We are of the considered view that ad-hoc disallowance without bringing on record any adverse material is not sustainable. We observe that the Ld. AO required the assessee to produce the vouchers for the month of March, 2009. The assessee complied and the Ld. AO verified the same on test check basis but no defect was found. Therefore the impugned disallowance is not justified and hence has rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd AY 2006-07 and for the reasons recorded in our order of date, we have concurred with the findings of the Ld. CIT(A). Since the facts are similar, following our order for the AY 2004-05 and AY 2006-07, we agree with the view of the Ld. CIT(A) and reject ground No. 7 and 8 of the Revenue. 8. Facts being identical. Following the said order, we sustain the order of the Ld.CIT(A) and reject ground no.2 of Revenue. 9. Ground no.3 is in respect of deletion of salary received from Ozone Pharmaceuticals Ltd. It is observed from the assessment order that this disallowance was made stating that in the absence of any details filed by the assessee the salary received by the assessee is calculated on the basis of earlier year. Ld. CIT(Appeals) deleted this disallowance for the reason that the assessee has not received any salary during the year and the claim for TDS was only a mistake and the TDS return was also revised, therefore, since no salary has been received by the assessee. The Ld.CIT(A) deleted the addition made by the AO. The Revenue could not controvert the findings of the Ld. CIT(A) and, therefore, the same is sustained. Ground no.3 of Revenue s appeal is rejected. 10. Coming to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed number of workers were not engaged in Guwahati unit, is erroneous and disallowance on this ground cannot be sustained. Although the number of workers being engaged is not a requirement, however, from the daily attendance register, Provident Fund, ESI contribution forms, it is observed that more than 100 workers were engaged in Guwahati Unit in the relevant previous year. It is also note worthy that the appellant by its submission dt. 30.11.2011 produced the wages register of the writs at Guwahati along with certificates of EPF and Inspector of factories as an evidence of workers engaged in the Guwahati Unit. 4.1.6 On the issue whether the industrial undertaking is engaged in production of any article or thing during the relevant previous year, AO called for evidence in respect of deduction claimed under chapter VIA as per questionnaire dt. 20.07.2011 and trading results of manufacturing unit and modus operandi as per order sheet recording dt. 01.12.2012. The assessee vide its submission dt. 30.11.2011, 09.12.2011 and 14.12.2011 furnished the details as called for. The assessee has also filed complete details of products manufactured and closing stock of finished goods unit wise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO for making disallowance of Rs. 5,08,43,220/- on account of selling distribution expenses u/s 37 of the Income Tax Act, 1961 and that too without appreciating facts and circumstances of the case and that too by recording incorrect facts and findings. 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the disallowance of Rs. 5,08,43,220/- out of Rs. 20,33,72,877/- made by Ld. AO on account of sales and distribution expenses is bad in law and against the facts and circumstances of the case. 14. At the outset, the Ld. Counsel for the assessee submits that ground no.1 2 are not pressed. In view of the submissions of the Ld. Counsel ground nos. 1 2 of grounds of appeal are dismissed as not pressed. 15. Ground no.3 4 of grounds of appeal is in respect of sustaining the disallowance of selling and distribution expenses. 16. Ld. Counsel for the assessee referring to page 1 of the assessment order submits that in the course of assessment proceedings the assessee s Authorized Representative attended the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnover of the assessee and the observation of the Assessing Officer is as under: 3.2 While exploring the reasons for loss from business activities of the assessee, apart from other reasons it is noted that the assessee has incurred Rs. 20,33,72,877/- on account of selling distribution expenses and claimed deductions u/s 37 of the Act. As per the provisions of section 37 of the I.T. Act for claiming a deduction under this section following conditions must be satisfied:- (a) Such expenditure should not be covered under the specific sections i.e. sections 30 to 36. (b) Expenditure should not be of capital nature. (c) The expenditure should have been incurred during the previous year. (d) The expenditure should not be of a personal nature. (e) The expenditure should have been incurred wholly or exclusively for the purpose of the business or profession. Since the expenses on this account are excessive in comparison to total turnover of the assessee, the AR was specifically asked to provide all relevant details i.e. ledger and bills voucher to substantiate his claim for such a huge expense and also provide justification and correlation with the business. In response to quarry raised, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 The adverb 'wholly' in the phrase 'laid out or expended .... For business' refers to the quantum of expenditure - The adverb 'exclusively has reference to the object or motive of the act behind the expenditure. Unless such motive is solely for promoting the business, the expenditure will not qualify for deduction. CIT Vs. T.S. Hajee Moosa Co. (Mad.) 153 ITR 422, Mysore Kirloskar Ltd. Vs. CIT (Kar) 166 ITR 836, Siddho Mai Sons Vs ITO (Del) 122 ITR 839. Burden on assessee to prove that expenses were laid out wholly and exclusively for purposes of business. Goodlas Nerolac Paints Ltd. Vs. CIT (Bom) 137 ITR 58, Assamm Pesticides Agro Chemicals Vs. CIT (Gau) 227 ITR 846 The mere fact that payment has been made under contract or agreement is not conclusive that the expenditure is incurred wholly and exclusively for the purpose of business. Jayshree Tax Industries Ltd. Vs. CIT (Cal) 272 ITR 193, CIT Vs. Premier Breweries Ltd. (Ker) 279 ITR 51. [Addition of Rs. 5,08,43,220/-] Having regard to the nature of addition made above, I am satisfied that the assessee has concealed the particulars of income and furnished inaccurate particulars of income within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue that why not disallowance be made as assessee has failed to substantiate its claim and failed to produce enough evidences. Case adjourned for 18/03/2015 for explanation as well we complete books of accounts, bills vouchers for support of its claim as only vouchers/bills produce partly. On 18/03/2015 again the appellant failed to produce complete books. The Assessing Officer in the order sheet recorded as under: - Sh. H.P.S. Gujral, CA/AR attended and filed reply on account of show cause, which found not acceptable. Further as the assessee failed to substantiate its claim and failed to produce enough evidence/documents the expenses on this head is disallowed upto 25% of total claim expenses of Rs. 22.33 crores. It is pointed to AR the assessee could not explain the said expenses are related to business. Further the complete books, bills/vouchers are also not produced. From the perusal of the recording of the Assessing Officer it is apparent that- the Assessing Officer gave enough opportunity as well as reason to the appellant to comply, as far as the claim of expenses on a/c of salary and distribution expenses were concerned. During the appellate proceedings, the Ld AR was ask ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There could be an argument with regard to the quantum of disallowance but there should not be any hesitation in holding that such estimation was justified. In the light of discussion above, I find no reason to interfere with the order of the Assessing Officer and the same stands confirmed. 22. It could be seen from the above, the Ld.CIT(A) sustained the addition taking note of the order sheet noting, where the AO noted that the complete books, bills, vouchers are not produced the bills, vouchers, ledger related to these expenses, bill book found not properly maintained, some found unsigned, some found not documented properly, un-vouched. It is also the observation of the Ld.CIT(A) that the assessee could not prepare the complete list of parties with whom the transaction of Rs. 1 lakh or more had taken place with their addresses. Ld.CIT(Appeals) also took note of the letter furnished by the assessee dated 19.06.2017, wherein the assessee has stated that since the expenses relates to payment made to persons/parties running into thousands it is time taking to prepare a list incorporating the addresses of all the parties and, therefore, to mark identity of the parties entries so that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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