TaxTMI 
TaxTMI 
TaxTMI 
2014 (3) TMI 535
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....erest bearing borrowed funds." 2. Ld. A.R. of the assessee submitted that the identical issue has been adjudicated by the Tribunal and decided in the own case of the assessee for earlier years vide order dated 23.05.12 in ITA Nos.2915, 2916, 6035, 6785, 2247 & 2248/M/2007. The relevant findings of the Tribunal are reproduced as under: 9. Ground no.1 of the assessee's appeal is against the sustenance of addition of Rs.11,90,550/-, being 50% of the total disallowances of interest of Rs.23,81,097/- made by the AO. Briefly stated the facts of this ground are that the assessee paid interest on loans to various financial institutions. During the course of the assessment proceedings it was noticed by the A.O. that the account of M/s. Modern Textile Rayon & Silk Mills Pvt. Ltd. (hereinafter called MTRS) had opening balance of Rs.1.46 crore. The A.O. noted that the assessee made certain purchases from this party and the closing balance was at Rs.2.00 crore. In the opinion of the A.O., the assessee diverted its interest bearing funds in making the payment to MTRS, a sister concern of the assessee. Accordingly, the A.O. held that the interest on borrowings was not allowable u/s.36(1)(ii....
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....es from this sister concern, who was manufacturing the goods as per the specific orders of the assessee. The A.O. has himself admitted this fact when he noted that as against the opening balance of Rs.1.46 crore, the assessee effected purchase from is sister concern during the year at Rs.1.42 crore. There cannot be any dispute on the proposition that if funds are advanced for the purpose of business, there cannot be any question of disallowance of interest on the ground that the interest free funds were utilised to make such advance. From the very prescription of section 36(1)(iii), it is discernible that the amount of interest paid in respect of capital borrowed, for the purpose of business or profession, is allowed as deduction. So long as the purpose of utilisation of the capital borrowed is towards business, no disallowance can be made. As admittedly, the advances were made by the assessee to its sister concern for effecting purchases, in our considered opinion, the learned CIT(A) cannot be held to be justified in restricting the addition on account of disallowance of any interest. In the result, this ground of the assessee is allowed and that of the Revenue is dismissed." 3. ....
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....e of the assessee, cannot be a reason for making or sustaining any disallowance on the account of motor car expenses. So long as the expenses are incurred on the motor vehicles for the purpose of business, the same have to be allowed as deduction. The Hon'ble Jurisdictional High Court in the case of CIT vs. Mirza Ataullaha Baig and other (1993) 202 ITR 291 (BOM) has held the assessee to be entitled to depreciation on vehicle purchased which was not registered in the assesses's name. In the light of this judgment and several other judgments on the same issue we hold that this reason of the A.O. for making the disallowance of expenses cannot be sustained. Be that as it may, it is observed from the assessment order that the assessee did not have complete details in respect of motor car expenses because no log book etc. were maintained. Considering the totality of the facts and circumstances of the present case, in our considered opinion, it will be just and fair if 10% of the total motor car expenses, in respect of all the 9 cars, are held to be relatable to be personal use by the partners of the firm. We accordingly sustain the disallowance at Rs.82,859/-. This ground is part....
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....erefore, made disallowance at 20% of such expenses at Rs.81,412/-, which was reduced in the first appeal to 10%. 17. After considering the rival submissions and perusing the relevant material on record, we are of the opinion that the learned CIT(A) was justified in sustaining the disallowance at 10% of such expenses in view of the facts that these expenses were not properly substantiated with bills etc. This ground is not allowed." 7. Though the Tribunal confirmed the disallowance in earlier years to the extent of 10% of the total expenses under this head, which comes out to be Rs.144444.10 for this year but, since the CIT(A) has restricted the disallowance at Rs.50,000/- only and the Revenue has not preferred any appeal on this issue, hence the disallowance sustained by the CIT(A) under this head is confirmed. Ground No.4 "On the facts and in the circumstances of the case and in law the ld. CIT(A)-29 erred in confirming the disallowance of a sum of total Rs.20,000/- (Rs.10,000/- each) on account of Travelling and Conveyance expenses out of Rs.4,13,897/- and Rs.87,855/- respectively as the expenses incurred is in cash." 8. Ld. A.R. submitted that the issue raised vide ground N....
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....sallowance in earlier years to the extent of 10% of the total expenses under this head, which comes out to be Rs.21676.10 for this year but, since the CIT(A) has restricted the disallowance at Rs.10,000/- only and the Revenue has not preferred any appeal on this issue, hence the disallowance sustained by the CIT(A) under this head is confirmed. ITA No.1453/M/2012 (A.Y. 2006-07) 12. Vide Ground No.1 of this appeal the assessee has agitated the confirmation of disallowance of interest of Rs.3,86,908/-. In view of our findings given above while adjudicating ground No.1 of the appeal for assessment year 2005-06, this issue is accordingly decided in favour of the assessee. 13. The issue taken by the assessee in ground No.2 of this appeal is relating to disallowance of Motor Car expenses of Rs.2,42,987/- being 20% of the total expenses debited to Profit & Loss account. This issue is identical to the issue raised by the assessee in his ground No.2 of the appeal for assessment year 2005-06 and in view of our findings given above, this issue is partly allowed in favour of the assessee restricting the disallowance at the rate of 10% of the total expenses claimed under this head. 14. The ....