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of <h1>Tribunal rulings on interest, expenses, exemptions, and capital gains</h1> <h3>Kirloskar Oil Engines Ltd. Versus Dy. Commissioner of Income-tax</h3> Kirloskar Oil Engines Ltd. Versus Dy. Commissioner of Income-tax - TMI Issues Involved:1. Disallowance of interest claimed u/s 36(1)(iii).2. Disallowance of commission expenses u/s 37(1).3. Disallowance of vehicle maintenance expenses.4. Disallowance of telephone expenses.5. Disallowance of foreign travel expenses.6. Disallowance of miscellaneous expenses.7. Disallowance of aircraft expenses.8. Claim for exemptions u/s 54EA and 54EB.9. Computation of capital gains on sale of bonus shares.10. Disallowance of legal and professional expenses.Summary:1. Disallowance of Interest Claimed u/s 36(1)(iii):The Assessing Officer (AO) disallowed Rs. 7,89,06,865/- on the ground that borrowed funds were used for non-business purposes. The Commissioner of Income-tax (Appeals) [CIT(A)] restricted the disallowance to Rs. 68.58 lakhs. The Tribunal restored the issue back to the AO for fresh adjudication to ascertain whether the advances were made out of borrowed funds.2. Disallowance of Commission Expenses u/s 37(1):The AO disallowed 10% of the inland sales commission amounting to Rs. 6,38,067/- due to lack of evidence of services rendered. The CIT(A) upheld the disallowance. The Tribunal, following its earlier decision, directed the AO to delete the disallowance.3. Disallowance of Vehicle Maintenance Expenses:The AO disallowed 2% of vehicle expenses and corresponding depreciation, totaling Rs. 1,67,987/-, due to the absence of a logbook. The CIT(A) upheld the disallowance. The Tribunal directed the AO to delete the disallowance, following the precedent set by the Hon'ble Bombay High Court.4. Disallowance of Telephone Expenses:The AO disallowed Rs. 50,568/- out of telephone expenses. The Tribunal set aside the disallowance, directing the AO to delete it, following the precedent.5. Disallowance of Foreign Travel Expenses:The AO disallowed Rs. 68,410/- out of foreign travel expenses. The Tribunal directed the AO to delete the disallowance, following its earlier decisions.6. Disallowance of Miscellaneous Expenses:The AO made an ad hoc disallowance of Rs. 2,00,000/- out of miscellaneous expenses for lack of details. The CIT(A) upheld the disallowance. The Tribunal directed the AO to delete the ad hoc disallowance, following the precedent.7. Disallowance of Aircraft Expenses:The AO disallowed Rs. 4,65,367/- out of aircraft expenses. The Tribunal upheld the disallowance, following its earlier decisions against the assessee.8. Claim for Exemptions u/s 54EA and 54EB:The AO denied exemptions of Rs. 48.50 crores claimed u/s 54EA and 54EB, stating the investments were made out of borrowed funds. The CIT(A) allowed the exemptions. The Tribunal upheld the CIT(A)'s decision, citing that the source of investment need not be the same money received from the sale of the capital asset.9. Computation of Capital Gains on Sale of Bonus Shares:The AO computed capital gains at Rs. 1,09,39,24,646/- instead of Rs. 1,07,69,27,796/- claimed by the assessee. The CIT(A) directed the AO to recompute the gains as claimed by the assessee. The Tribunal upheld the CIT(A)'s decision, following its earlier decisions.10. Disallowance of Legal and Professional Expenses:The AO disallowed 5% of legal and professional expenses amounting to Rs. 10,36,184/- on an ad hoc basis. The CIT(A) deleted the disallowance. The Tribunal upheld the CIT(A)'s decision, following the precedent set by the Hon'ble Bombay High Court.Decision:The assessee's appeal is partly allowed, and the Revenue's appeal is partly allowed. Decision pronounced on 30th August 2011.
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