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of <h1>Appellate Tribunal allows partial appeal on interest expenses & cash disallowance, overturns car-related expenses.</h1> <h3>Shri Mayank Ratibhai Patel, Versus. I.T.O, Ward-5 (2) (3), Ahmedabad</h3> Shri Mayank Ratibhai Patel, Versus. I.T.O, Ward-5 (2) (3), Ahmedabad - TMI Issues Involved:1. Disallowance of interest expenses.2. Addition on account of unexplained cash expenses.3. Addition of interest expenses on the car loan and depreciation on the car.Analysis:Issue 1: Disallowance of Interest ExpensesThe Assessing Officer (AO) disallowed interest expenses amounting to Rs. 9,59,093/- as he found that the borrowed funds were diverted for non-business purposes. The Commissioner of Income Tax (Appeals) partly confirmed this disallowance. However, the Appellate Tribunal noted that interest expenses related to investments in lands and interest-free loans lacked a direct nexus with interest income, hence disallowance was upheld only for these specific expenses. The Tribunal directed the AO to calculate and disallow the interest proportionately for these specific investments.Issue 2: Addition on Account of Unexplained Cash ExpensesThe AO added Rs. 7,22,272/- as unexplained cash expenses for stamp duty and registration charges. The CIT (A) upheld this addition, stating that the source of these expenses was not substantiated. However, the Appellate Tribunal found that all cash expenses were duly recorded in the books of accounts, and the source of cash was evident from the cash book provided by the assessee. Consequently, the Tribunal directed the AO to delete this addition.Issue 3: Addition of Interest Expenses on the Car Loan and Depreciation on the CarThe AO disallowed interest paid on the car loan and depreciation on the car, stating they were personal expenses. The CIT (A) confirmed this disallowance, claiming the expenses were not admissible against the share income from the partnership firm. The Tribunal disagreed, noting that the assessee, a partner in multiple firms, had business income chargeable under the head 'business and profession.' As such, the interest on the car loan and depreciation were allowed as deductions. The Tribunal directed the AO to delete this addition.In conclusion, the appeal filed by the assessee was partly allowed by the Appellate Tribunal after detailed analysis and consideration of the issues raised regarding interest expenses, unexplained cash expenses, and car-related expenses.
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