ITAT Raipur: Revenue's Appeal Partially Allowed on Interest Disallowance

The ITAT Raipur partially allowed the Revenue's appeal for statistical purposes regarding the disallowance of interest paid to NBFCs under section 40(a)(ia) of the Income Tax Act. However, the appeal concerning the disallowance of car running & maintenance, office telephone, and traveling expenses, as well as mess expenses, was dismissed.

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Issues:
1. Disallowance of interest paid to NBFCs under section 40(a)(ia) of the Income Tax Act
2. Disallowance of car running & maintenance, office telephone, and traveling expenses
3. Disallowance of mess expenses

Issue 1: Disallowance of interest paid to NBFCs under section 40(a)(ia) of the Income Tax Act:
The Revenue appealed against the CIT(A)'s order deleting the addition of Rs. 33,35,974 made by the AO for disallowance of interest paid to NBFCs under section 40(a)(ia) of the IT Act for the assessment year 2011-12. The ITAT Raipur considered the retrospective application of the Finance Act, 2012 amendments to sections 201(1) and 40(a)(ia), requiring verification if the payee included the interest income in their business income. Citing relevant case laws, the Tribunal directed the AO to verify if the NBFC payees included the interest paid in their income tax returns, allowing the appeal for statistical purposes.

Issue 2: Disallowance of car running & maintenance, office telephone, and traveling expenses:
The AO disallowed Rs. 1,44,666 for expenses related to car running & maintenance, office telephone, and traveling, citing lack of verifiability and potential personal use. Additionally, a lump sum of Rs. 50,000 for mess expenses was disallowed due to similar reasons. The CIT(A) overturned these disallowances based on the increase in gross receipts and expenditure compared to the previous year, indicating no need for ad hoc disallowances. The ITAT upheld the CIT(A)'s decision, dismissing the Revenue's appeal against the disallowances.

In conclusion, the ITAT Raipur partially allowed the Revenue's appeal for statistical purposes regarding the disallowance of interest paid to NBFCs under section 40(a)(ia) while dismissing the appeal concerning the disallowance of car running & maintenance, office telephone, and traveling expenses, as well as mess expenses.

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