The brief facts of the case are that assessee had debited a sum of Rs. 2,42,21,667 under various heads of expenses. Learned Assessing Officer disallowed 10% of such expenses by recording a brief finding which reads as under:
“8. The assessee has claimed expenses to the tune of Rs. 2,42,21,667 debited in the P & L account. The assessee failed to produce complete books of account with supporting vouchers which has been discussed in details vide para 3 above the genuineness of the expenses incurred, therefore, could not verified. I, therefore, disallow 10% of the expenses incurred being not verifiable. ADDITION: Rs. 24,22,167/-
Learned counsel for the assessee placed on record the details of expenses debited by the assessee in a tabular form. He pointed out that out of the certain items, there could not be any dis allowance, otherwise in principle, he did not dispute the dis allowance made by the Assessing Officer. This list has been given to the Learned DR also. It contains 36 items, out of these 36 items, learned counsel for the assessee pointed out that item No.14; is a difference in foreign exchange Rs.25,78,359; item No.26 bank charges Rs.5,97,199; insurance charges Rs.5,99,694; interest on term loan Rs.49,81,807 and depreciation of Rs.116,21,599. He pointed out that out of these expenses, there cannot be any dis allowance because assessee cannot inflate these expenses or it cannot be said that they are not for business purpose, because learned Assessing Officer himself allowed 90% of expenses. On the other hand, Learned DR relied upon the order of Learned CIT(Appeals).
We have duly considered the rival contentions and gone through the record carefully. Since the assessee failed to submit the requisite details at the time of assessment proceedings, therefore, learned Assessing Officer has rightly made ad hoc dis allowance out of expenses on the ground that genuineness of such expenses could not be verified. But we agree with the submissions made by the learned counsel for the assessee that out of certain expenses, there cannot be any dis allowance. The nature of the expenses is such that no doubt on their quantification can be raised. Now, as far as difference in foreign exchange is concerned, it is to be computed based on straight formula. Similarly, depreciation could also be verified from details available on the record. Considering all these aspects, we set aside this issue to the file of the Assessing Officer for re adjudication. The observations made by us will not impair or injure the case of the Assessing Officer and would not cause any prejudice to the defence/explanation of the assessee. Learned Assessing Officer shall verify the details of expenses and provide due opportunity of hearing to the assessee before exclusion of certain items from the total expenses out of which dis allowance at 10% can be made.
INCOME TAX APPELLATE TRIBUNAL, DELHI
ITA No. 4561/Del/2009 – Assessment Year: 2002- 03
ITA No. 4393/Del/2009 – Assessment Year: 2002- 03
Income-tax Officer Vs. Maharishi Solar Technology Pvt. Ltd.
ORDER
PER RAJPAL YADAV: JUDICIAL MEMBER
The revenue and the assessee are in cross-appeal against the order of Learned CIT(Appeals) dated 25.09.2009 passed for assessment year 2002- 03. First, we take the appeal of the revenue. In ground No.1, revenue has pleaded that the order of the Learned CIT(Appeals) is erroneous, contrary to facts and law. No specific arguments were addressed by the parties on this ground. It is just a general ground of appeal and does not call for recording of any specific finding. Hence, this ground of appeal is rejected.
2. In ground NO.2 and 2.1, revenue has pleaded that Learned CIT(Appeals) has erred in deleting he addition of Rs. 13,52,000 made under sec. 92CA(i) of the Act.
3. The brief facts of the case are that assessee during the year was engaged in the business of solar photo-voltaic wafers, cells, modules and systems etc. It has filed its return of income on 30th October, 2002 declaring loss of Rs. 7,47,14,276. The case of the assessee was selected for scrutiny assessment and a notice under sec. 143(2) of the Income-tax Act, 1961 was issued and served upon the assessee. On an analysis of the record, it reveled to the Assessing Officer that assessee had entered into an international transaction with M/s. Maharishi Technology Corporation BV, The Netherlands which is an associate enterprises of the assessee. It took a loan of Rs.12,95,000 US dollars, based on certain guidelines of External Commercial Borrowings (ECB), during the accounting year. The assessee has claimed an amount of Rs.32,19,503 payable towards interest as on 31.3.2002. Learned Assessing Officer made a reference under sec. 92CA(i) of the Income-tax Act, 1961 to the Learned Transfer Pricing Officer for determining whether the interest shown by the assessee as payable to the associate enterprises is at arm’s length or not. Learned TPO after giving an opportunity to the assessee recording a finding that assessee paid interest @ 8.5% whereas as per the comparable instances, the interest ought to have been paid @ 4.934%. He worked out a dis allowance of Rs. 13,52,191. On the basis of the recommendation of the learned TPO, learned Assessing Officer has made the dis allowance.
4. Dissatisfied with the dis allowances, assessee carried the matter in appeal before the learned CIT(Appeals). It pointed out that assessee company had entered into a loan agreement with its associate enterprise on 21.12.2007 for a loan of US $ 2 millions. This amount was for a fixed period of seven years at a fixed rate of interest at 8.5% and carried a moratorium of two years. This agreement was subject to approval by the RBI and other government agencies. The assessee has actually drawn a sum of US $ at 1.295 millions. The assessee had paid interest @ 8.5%. Learned TPO has selected five comparables and collected their datas in order to compare the rates which read as under:
