TaxTMI 
TaxTMI 
2014 (1) TMI 1436
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....fore us and has raised the following grounds. 1. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of Rs.2,691/- made by the Assessing Officer u/s 14A of the Income Tax Act, 1961. 2. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of Rs. 11,97,016/- made by the Assessing Officer being an amount of Rs.3,11,611/- out of Car depreciation and Rs.8,85,405/- out of Motor Car expenses as claimed by the appellant Co. 3. The Learned Commissioner of Income Tax (Appeals) has erred in confirming and directing the Assessing Officer to re-compute the disallowance of interest expenses for the period for which alleged interest free advances with Sun Insulators Pvt. Ltd. remained outstanding completely ignoring the evidences furnished which clearly established direct nexus of interest free loans & alleged interest free advance during the year. 4. The Learned Commissioner of Income Tax (Appeals) has erred in confirming and directing the Assessing Officer to re-compute the disallowance of interest expenses for the period for which alleged interest free advances wit....
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.... expenses of Rs. 8,85,405/-. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) upheld the order of A.O. by holding as under:- 4.3 I have considered the facts of the case; assessment order and appellant's written submission. The basic fact is that director of the company purchased motor car in his name and the bill for the said purchase is also in the name of director. Therefore appellant company is not the legal owner of the motor car. For claim of depreciation, the two conditions are to be fulfilled namely-appellant must be owner of the asset and it must be used for the purpose of appellant's business. In this case appellant is not the owner since the ownership vests with the director who is separate entity than the appellant company. As regards use of these cars for the purpose of business, the same were not furnished. Therefore use of car for the purpose of company's business is not established by the appellant. Although the onus to prove the user of asset was on the appellant, the same was not discharged either before the assessing officer or before the undersigned. Claim of an expense in the company accounts is not an evidence to pr....
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....t be allowed. The decisions of other high Courts have been considered. In all those decisions the user of asset namely transport buses etc were by the companies and the companies were disclosing the income from hiring those vehicles. The user of asset for the purpose of business was proved in all these cases beyond doubt. With the user of asset, dominion and control is also proved. Therefore claim of depreciation in these cases were allowed by various high Courts. However in the appellant's case, use for the purpose of business is not at all proved and the dominion and control also remained unproved therefore these decisions do not help the appellant. Considering the larger bench decision of apex court and the Delhi High Court decision in the case of MM Fisheries Private Ltd, the decision of jurisdictional ITAT is not followed which has not considered these decisions. It is therefore held that the depreciation claimed by the appellant is correctly disallowed by the assessing officer. In view of the findings in earlier para that motor car was not used for the purpose of appellant's business, the motor car expenses claimed by the appellant are not allowabl....
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....the Assessee. The Assessee is also directed to cooperate with the A.O. by furnishing all the necessary details required by him promptly, failing which the A.O. shall be free to decide the matter on the basis of material on record. Thus this ground of the Assessee is allowed for statistical purposes. Ground no. 3,4,5 & 6 are interconnected and are with respect to disallowance of interest expenses and therefore considered together. 8. During the course of assessment proceedings, A.O. noticed that Assessee has granted interest free loans and advances to following parties:- (i) Shree Ambika Geo Tax Pvt Ltd. Rs. 33,00,000/- (ii) Soham Integrated Textile Park P. Ltd. Rs. 1,55,80,000/- (iii) Sun Insulators Pvt. Ltd. Rs. 14,50,000/- Total Interest -free Advances Rs. 2,03,30,000/- 9. The Assessee was asked to explain as to why the interest expense not be disallowed to the extent of interest free advance granted. The Assessee interalia submitted that Assessee was having interest free funds in the form of share capital, interest free loans and reserves which were in excess of interest free advance and therefore no disallowance was called for. He also relied on certain ....
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....bsp; As regards appellant's argument that advances to Sun Insulators Private Ltd and Shree Ambica Geo Techs Private Ltd were given only for the part of the period during the year, I agree with the appellant that interest disallowance cannot be made for the whole year. The appellant's argument regarding immediate source not from interest-bearing borrowed funds is not found acceptable since appellant has borrowed substantial interest-bearing funds to the extent of RS 24.66 crores which is mixed with other business funds. When appellant is paying substantial interest on borrowed funds, there is go logic for diverting interest bearing funds to non-business advances. Considering this it is held that interest disallowance in respect of advances to Sun Insulators Private Ltd and Shree Ambica Geotech private Ltd is necessary and accordingly AO's action is confirmed. However the interest cannot be disallowed for the whole year when such advances were given only for the part of the period. Assessing officer is therefore directed to recompute the interest disallowance in respect of these two parties only for the period for which interest free advances were outstanding during the year. ....
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....d. 313 ITR 340 (Bom.) Torrent Financiers (2001) 73 TTJ 624 (Ahd.) submitted that when interest free funds available with the Assessee are far in excess of the interest free advances, no disallowance can be made. He thus submitted that the addition made by the A.O. be deleted. The ld. D.R. on the other hand supported the order of CIT(A). 11. We have heard the rival submissions and perused the material on record. Before us, the ld. A.R. has submitted that the amount advance to Sun Insulator Pvt. Ltd. amounting to Rs. 14,50,000/- was out of the loans receipts from the Vijay Stationers Pvt. Ltd. and further no interest has been paid to Vijay Stationers Pvt. Ltd. 12. Before us, there was no details are available with respect to the interest paid by the Assessee. Further there is no finding of A.O or CIT(A) that the Assessee has not paid any interest to Vijay Stationers. We therefore feel that this factual aspect needs to be verified by A.O. We therefore remit the issue to the file of A.O. and direct him to verify the facts and thereafter decide the matter as per law. 13. With respect to Shree Ambika Geo Tax Pvt. Ltd. The ld. A.R. has submitted that the amount was advanced out of the ....