Successful appeal grants assessee relief on interest & expenses disallowance. Assessing Officer directed to delete disallowances.

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 to suppliers were deemed to be in the normal course of business and not interest-free loans. Additionally, the ad-hoc disallowance of travelling & conveyance expenses was also rejected since the Assessing Officer failed to specify any defects in the expenses. As a result, the Tribunal directed the Assessing Officer to delete the disallowances, totaling Rs. 4,76,173, and allowed the appeal, setting aside the lower authorities' orders.

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Issues: Disallowance of interest on unsecured loans, Ad-hoc disallowance of expenses under travelling & conveyance

Disallowance 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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