TaxTMI 
TaxTMI 
2015 (7) TMI 210
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....erest is paid in respect of the amount borrowed for acquisition of asset, unless asset is acquired and put to use, deduction for the interest cannot be claimed. Allowing any such deduction will be contrary to the proviso to section 36(1)(iii) of the Income Tax Act, 1961'. In the instant case, the plot which was allotted to the assessee was not put to use for business purposes by the assessee during the year." 2."On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the disallowance of interest liability of ~14,28,2301- made by Aa under section 36(l)(iii)of the Income Tax Act, by observing that "the profit generated during the year and recoveries from the debtors etc are more than the investment so made in the assets" without taking into consideration the ratio of the judgment pronounced by the Hon'ble Punjab and Haryana High Court in the case of Abhishek Industries Ltd. reported in 286 ITR 1 (P&H), wherein Hon'ble Court has opined that" the monies received as share capital, as term loans, as working capital loan, as sale proceeds etc., do not have any different colour. Whatever are the receipt....
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....m paid Rs. 6,53,762/- keyman insurance • Disallowance of professional expenses of Rs. 4,97,300/- • Disallowance as capital expenditure of Rs. 1,42,634/- and • Disallowance out of worker welfare expenses of Rs. 1 lac 3.Aggrieved by these disallowances the respondent- assessee firm preferred an appeal before the Commissioner of Income Tax (A) Faridabad who vide order dated 10^th March, 2011 partly allowed the appeal. While doing so the Ld. CIT(A) deleted all the additions except in respect of item f where addition to the extent of Rs. 50,000/- was confirmed by the CIT(A). Being aggrieved by this order the revenue had come up with the present appeal. 4.We shall now deal with the above items groundwise. Ground No. 1 relates to deletion of addition of Rs. 14,28,230/- in respect of interest paid for advances given for land proposed to be used for construction in the factory of the respondent- assessee firm. During the assessment proceedings the AO noticed that the respondent- assessee firm paid advances of Rs. 1,17,66,000/- for the land situated at 261/24, Faridabad that the land was never put to use and theref....
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....und No. 3 of the appeal is allowed." 6.We find that the CIT(A) reached the conclusion after properly appreciating the facts governing the issue. The CIT(A) had come to the conclusion that there were enough internal accruals to make the above advances after considering the material on record. The view taken by the CIT(A) that when there is a mixture of borrowed funds and internal accruals, the presumption that the investments have been made out of internal accruals is supported by the decision of High Court of Calcutta in the case of Woolcombers of India Ltd. vs CIT,7, Taxman 188, Hon'ble Mumbai High Court in the case of Reliance Utilities and Powers Ltd. (221 CTR 435), S.A. Builders Ltd. vs. CIT (A) & Anr. (2006) 206 CTR (SC) 631. 7.Therefore Ld. DR has not brought any evidence on record in rebuttal of the facts relied by CIT(A). We therefore confirm the findings of the CIT(A) on this ground . Accordingly this ground of appeal filed by the revenue is dismissed. 8.The next ground of the appeal relates to the interest paid into on unsecured loans borrowed from the relatives of th....
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....ty with provisions of law. We note that the AO had not disputed the allowability of the premium paid for keyman insurance policy. He was of the only view that the premium paid in respect of only one person can be allowed. He had no dispute at all about allowability of the keyman insurance policy premium. Similarly the provisions of the Income Tax Act does not stipulates that the premium paid in respect of only one partner or director is alone allowable. In absence of such bar we are of the opinion that deduction should be allowed and therefore we uphold the order of the CIT(A). This ground of the appeal filed by the revenue is dismissed. 11.The brief facts leading to this addition of Rs. 4,97,300/- is extracted by CIT(A) in para 6.4 of his order which is as under :- "6.4. In ground No.6 of appeal, the appellant has challenged the disallowance of Rs. 4,97,300/- out of commission. During the year, the appellant had entered into an agreement with one Mr. Karl Neuchel to promote its exports sales, for which a commission of 5% subject to monthly income of 1000 euro was fixed. The agreement was entered into on 20.03.2005 which clearly stipulated that the con....
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.... was paid commission at fixed rate, the quantum of sales becomes irrelevant. Therefore, the entire expenditure on commission paid to Mr. Karl Neuchel was genuine and incurred for the purpose of the business of the assesee, which is allowable as per the provision of section 37(1) of the Act. I agree with the contention of the appellant that stipulation in the contract regarding the commencement of the agreement w,e,f 1.1.2006 does not mean that athe appellant was debarred from making payment of commission for the earlier period when the services rendered by him are not disputed by the AO. Therefore, the addition of Rs. 4,97,300/- made by the AO is deleted and ground No. 6 of appeal is allowed." 12.We do not find any reason to interfere with the findings of the CIT(A), Therefore ground of appeal is allowed. 13.The next ground of appeals relates to disallowance of Rs. 1,58,482/- out of total building repair expenses amounting to Rs. 12,46,045/- holding them to be capital expenditure. On appeal before CIT(A), the CIT(A) after perusing the nature of expenditure incurred come to the conclusion that the expenditure does not result in a creat....
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....mpire Jute Company Ltd. Vs. CIT 124 ITR 1. Therefore the order of CIT(A) is in conformity with the well settled principle of law, hence we uphold the order of the CIT(A) in deleting the addition and this ground of appeal filed by the revenue is also dismissed. 15.The next ground of appeal relates to disallowance of Rs. 1 lac out of the staff welfare expenses incurred. It was pleaded before Commissioner (Appeals ) that all the expenses were duly vouched and produced before AO. From the bills on record we notice that this expenditure relates to refreshment, tea, milk, Prasad provided to workers who were outside the factory and office. From these it is very clear that the vouchers are mostly not supported by bills but nevertheless it cannot b e said that the expenditure was not incurred. In the absence of any evidence on record brought by AO to say that the assessee has not incurred this expenditure, the disallowance of expenditure is not justified. On similar reasoning, we also allowed the cross objection filed by the respondent-assessee firm and therefore we dismiss the ground of appeal filed by the revenue. CO No. 235/2011 16.This crosss objection is filed by the assessee ....