TaxTMI 
TaxTMI 
2018 (4) TMI 1280
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....we shall take up appeal of the assessee for AY 2009-10 in ITA No. 1658/Mum/2013. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") in ITA no. 1658/Mum/2013 for AY 2009-10 read as under- "1. The learned CIT(A)-3, has erred in confirming disallowance of interest of Rs. 4,14,548/- made by the learned Assessing Officer concluding that there is an element of diversion of funds from interest bearing borrowings and earning less interest than paid despite full explanation submitted to the Assessing officer and to learned C.I.T.(A)-3 at the time of hearing and confirmation is without appreciating full facts submitted at the time of hearing. 2. The learned C.I.T.(A)-3 has erred in confirming estimating cash expenses and disallowance of Rs. 4,42,767/- out of total expenses under various heads made of Rs. 17,71,068/- without appreciating full facts and coming to conclusion that all expenses are cash expenses without verifying the details & breakup submitted of the bank payments & cash payments and in addition coming to conclusion without any specific instance noticed of a....
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....sessee has filed an second appeal with tribunal. The learned counsel for the assessee submitted at the outset that authorities below erred in disallowing the interest to the tune of Rs. 4.14 lacs. It was submitted that in earlier years, the borrowings were made from LIC on the interest rate of 9% p.a. and it is only in the month of January 2009, the loan was raised from Kotak Mahindra Bank Limited at the interest of 10.5% p.a.. It was submitted that major loan is from LIC. Thus, it was submitted that the assessee has rightly charged interest @9% p.a. from its sister concern which is subsidiary company and the amounts were advanced in the course of business. The assessee also contended that these loans were advanced based on commercial expediency and relied on the decision of Hon'ble Supreme Court in the case of S A Builders Limited v. CIT (2007) 288 ITR 1(SC) and Hero Cycles Private Limited v. CIT (2015) 379 ITR 347(SC). The learned DR on the other hand relied upon the appellate order of learned CIT(A) and fairly submitted that under these circumstances to verify the contentions of the assessee, matter may be restored to the file of the AO for re-adjudication of the issue on merits....
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....ranted. The assessee had relied upon decision of Hon'ble Supreme Court in the case of S A Builders Limited(supra) and Hero Cycles Private Limited(supra). These contentions of the assessee requires verification by the AO as it required investigation of facts. In our considered view, the matter need to be set aside and restored to the file of the AO for fresh adjudication of the issue on merits in accordance with law after giving proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The AO will admit the evidences / explanations filed by the assessee in its defence in de-novo proceedings and adjudicate the same afresh de-novo on merits in accordance with law in set aside proceedings. This disposed of Ground No. 1 raised by the assessee in memo of appeal filed with the tribunal. The ground no. 1 is allowed for statistical purposes. We order accordingly. 7. The Second ground raised by the assessee is w.r.t. disallowance of expenses to the tune of Rs. 4,42,767/- out of total expenses to the tune of Rs. 17,71,068. The AO observed that the assessee has claimed following miscellaneous expenses which were i....
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....d by the assessee towards following heads, out of which 25% of expenses were disallowed on the allegation that the payments were made in cash, nature of expenses are such that personal element could not be ruled out and also that the self vouchers are prepared by the assessee to claim these expenses. The total expenses out of which 25% disallowance were made are as under: S.No. Head of Expenditure Amount (In Rs.) 1. Conveyance Expenses 3,46,906 2. Diwali Festival Expenses 3,15,744 3. Food & Refreshment 7,71,513 4. Guest House expenses Royal Palms 1,32,614 5. Lodging & Boarding Expenses 1,22,870 6. Entertainment Expenses 7,150 7. Business Promotion Expenses 74,271 Total 17,71,068 The assessee has drawn our attention to the manner in which such self vouchers are prepared and the signatures of the payee were also obtained while making payments in cash. There is no specific incriminating information brought on record by the authorities below to contend that these expenses were incurred for personal purposes or were bogus expenses claimed or that these expenses were not incurred wholly and exclusi....
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.... filed with the tribunal(page 1-3/pb). The details of computation of fringe benefit of Rs. 25,56,971 is placed at page 2/pb.The learned counsel for the assessee also stated before us that all these expenses were duly included while computing fringe benefit tax liability and due fringe benefit tax was separately paid by the assessee on these expenses. It is also not the grievance of the Revenue that these expenses were not incurred wholly and exclusively for the purposes of the business of the assessee. Under these situations it was incumbent on the Revenue to have come out with specific disallowance by going through each of the expenses to come to the conclusion that these expenses were not incurred wholly and exclusively for the purposes of the business or were bogus expenses which has not been done by the authorities below rather an adhoc disallowance has been made by the authorities below on certain assumptions which is not sufficient to fasten tax liability in the instant case. Thus, keeping in view totality of circumstances and peculiar facts of the case before us, we are of the considered view that the disallowance as was made by the AO and as confirmed by learned CIT(A) is n....
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.... the 1962 Rules is meant to advance justice and not to scuttle genuine assessee's. The assessee has rightly relied upon decision of Hon'ble Bombay High Court decision in the case of Smt Prabhavati Shah v. CIT (1998) 231 ITR 1(Bom.). We direct admission of these additional evidences in the interest of substantial justice. The learned DR has relied upon the orders of authorities below. After hearing both the parties and after perusal of the material on record, we are of the considered view, that this issue need to be restored to the file of the AO for de-novo adjudication of the issue on merits in accordance with law after giving proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The AO shall admit evidences and explanations submitted by the assessee in its defence and adjudicate the issue, thereafter, on merits in accordance with law. The ground no. 3 is allowed for statistical purposes. We order accordingly. 12. The next grievance of the assessee vide ground no. 4 is with respect to disallowance of foreign travelling expenses to the tune of Rs. 5,14,804/-. The AO observed that the Chairman Sh. S....
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....that the assessee received dividend of Rs. 21,63,091/- which was claimed as an exempt income. The assessee on being asked by the AO submitted that it had invested surplus funds for making investments and no borrowed funds were used for making investments in securities which yielded exempt income. The AO observed that the assessee had invested high costs funds for making deposits with its sister concern at lower rate of interest and hence it is a case of mixed pool of funds and hence the AO concluded that portion of the interest expenditure has to be attributed to earning of an exempt income. The AO held that the assessee has necessarily incurred expenses towards managing these investments. It was also observed by the AO that during the year itself, some of securities held as investments were sold while others were purchased and it is not a case where no fresh activity in purchase/sale of securities / investments happened during the year. The AO made disallowance of expenditure in relation to earning of exempt income by applying Section 14A of the 1961 Act read with Rule 8D of the 1962 Rules, wherein disallowance were made u/s 14A r.w.r. 8D(2)(ii) to the tune of Rs. 9,04,440/-, whil....