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of <h1>Successful appeal grants assessee relief on interest & expenses disallowance. Assessing Officer directed to delete disallowances.</h1> The appeal was successful as the Tribunal ruled in favor of the assessee. The disallowance of interest on unsecured loans was overturned as the advances ... Disallowance of interest on unsecured loans - AO found that the assessee has extended a sum on which no interest was charged and further found that sum of ₹ 32.30 lacs was shown as advance in supplier - proportionate interest disallowance seeked by AO - Held that:- As find from the balance sheet of 31.03.2013 advance to suppliers was of ₹ 29 lacs. The same is ₹ 32.30 lacs on 31.03.2014. In my considered opinion advances to suppliers are given in the normal course of business and therefore not to be considered interest free loans and advances. To this extent find no reason for disallowing proportionate interest. Further find that assessee own capital is ₹ 31.17 lacs therefore, loan of ₹ 2.03 lacs can be safely concluded to be coming out of interest free funds available with the assessee. Therefore, direct the Assessing Officer to delete the disallowance of ₹ 44,45346/- the ground is allowed. While making ad-hoc disallowance the AO has not pointed out any specific defect in any bills/ vouchers submitted by the assessee. In my considered opinion without pointing out any defect in the books of account, the Assessing Officer cannot make ad-hoc disallowance accordingly direct the Assessing Officer to delete the addition of ₹ 349600/- and ₹ 30827/- this ground is also allowed. - decided in favour of assessee. Issues: Disallowance of interest on unsecured loans, Ad-hoc disallowance of expenses under travelling & conveyanceDisallowance of Interest on Unsecured Loans:The appeal was against the CIT(A)'s order regarding the disallowance of interest on unsecured loans for A.Y. 2014-15. The Assessing Officer disallowed a portion of the interest expenses claimed by the assessee, considering certain amounts as interest-free loans. The assessee argued that advances to suppliers were not interest-free loans and advances, as they were from earlier years and paid from interest-free funds. The Tribunal found that advances to suppliers were in the normal course of business and not to be treated as interest-free loans. It also noted that the loan amount of Rs. 2.03 lacs was from interest-free funds available with the assessee. Consequently, the Tribunal directed the Assessing Officer to delete the disallowance of Rs. 4,46,346.Ad-hoc Disallowance of Travelling & Conveyance Expenses:The Assessing Officer had made an ad-hoc disallowance of 20% of Rs. 30,827 under the head of travelling & conveyance without specifying any defects in the expenses supported by bills and vouchers. The Tribunal held that without identifying any specific defects in the accounts, an ad-hoc disallowance could not be justified. Therefore, the Tribunal directed the Assessing Officer to delete the addition of Rs. 3,49,600 and Rs. 30,827 under this head. Consequently, the appeal by the assessee was allowed, and the orders of the authorities below were set aside.
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