TaxTMI 
TaxTMI 
2018 (6) TMI 1121
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.... 3. The Learned Commissioner of Income Tax (Appeals) has erred, without appreciating the facts, supporting evidence and submissions placed on record, in sustaining the disallowance of interest amounting to Rs. 1.68,600/- by applying the provisions of section 40A(2)(b) of Income Tax Act, 1961. 4. The Learned Commissioner of Income Tax (Appeals) has erred in sustaining the addition of Rs. 2,88.377/-,being disallowance of watch and ward expenses by applying the provisions of S.40(a)(ia) of the Income Tax Act. 1961. without properly appreciating the facts, supporting evidence and submissions placed on record. 5. The Learned Commissioner of Income Tax (Appeals) has, without appreciating the facts, submissions and evidence placed on record, erred in sustaining the addition of Rs. 1,23,995/- being 1/10th of certain expenses treating the same as expenses in personal nature. 6. The appellant craves leave to add, alter, amend or delete any of the ground of appeal before the appeal is finally disposed off. 2. Briefly stated facts of the case as culled out from the order of the lower authorities are that the assessee derived income from running an authorize....
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....sions and perused the relevant material on record. Before us, the Ld. counsel referred to the copy of letter dated 19/04/ 2010 issued by the SIDBI, which is available on page 56 of the paper book. According to the said letter, a term loan of rupees aggregating to Rs. 32.22 lakhs was sanctioned to the assessee under credit link capital subsidy scheme of government of India. The Ld. counsel referred to page 55 of the paper book, which is a copy of submission filed before the Assessing Officer. According to the said letter, the term loan for purchase of machinery was disbursed to the assessee 19/05/2010, but the required machine was not available so the assessee deposited the said amount in the CC limit account. The machinery was purchased by the assessee on 08/10/2010. The copy of the bill of M/s Raja machinery tools indicating purchase of machinery on 8/10/2010 is available on page 58 of the paperbook. The Assessing Officer disallowed the interest corresponding to the period from 19/05/2010 to 08/10/2010 in terms of section 36(1)(iii) of the Act. For ready reference, the relevant section and proviso thereto is reproduced as under: "36. (1) The deductions provided for in the....
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....od of time. In our opinion, the Assessing Officer has not examined the issue of extension of existing business profession in the case of the assessee, and therefore, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh in accordance with law. Needless to mention, the assessee shall be afforded adequate opportunity of being heard on the issue in dispute. The ground No. 1 of the appeal is accordingly allowed for statistical purposes. 4. The ground No. 2 of the appeal relates to disallowances Rs. 5,62,937/- out of building repair expenses, Rs. 13,000/- on account of website designing and internet expenses and Rs. 26,453/- on account of EAPBX repair aggregating to Rs. 5,96,472/-. 4.1 Regarding the building repair expenses, amounting to Rs. 5,92,937, the Assessing Officer observed that the assessee incurred expenses on plywood, aluminium items for windows repairing and fitting, cement bricks etc.; which were for complete change of the floor, doors, & windows and thus, it was not a repair work but the overall replacement of window, door and shelves etc., the advantage of which will continue for number of years and not in the nature o....
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.... have heard the rival submissions and perused the relevant material on record. From the facts on record and building repair ledger account available on page 60 of the paper book, we find that the expenses have been incurred mainly for purchase of AC sheets, aluminum items, cement, bars, plywood, channel etc. The claim of the assessee is that the expenses have been incurred on the repair of Windows, shelves, almirahs, flooring, stores etc. of the existing building. According to the Assessing Officer, these new windows or floorings would provide enduring benefit to the assessee and therefore, the expenditure is in the nature of capital expenditure. In our opinion, the expenses would qualify for capital expenditure, if a new asset has been created or efficiency of the existing asset has been enhanced. In the instant case, by way of repairing the windows or the floor, no new asset has been created. Had the expenditure incurred on creation of a new room or space in the building, it would have increased the efficiency of the building. But before us, no such evidences have been brought on record by the Revenue, which could establish coming into existence of a new asset or increase in effi....
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....r in restricting the interest at the rate of 12% in respect of the three parties out of six parties. According to him, as there is no change in the facts and circumstances, when compared with earlier years, therefore, in view of the rule of consistency, the disallowance deserve to be deleted. In support of the rule of consistency, the Ld. counsel relied on following judicial precedents: • 385 ITR 295, CIT Vs. Excel Industries Ltd. (Supreme court) • 193 ITR 321-323 Radhasoami Satsang Vs. CIT (Supreme Court) also followed by P&H High Court in 278 ITR 262. • 264 ITR 276, CIT Vs. ARG Securities Printers (Jurisdictional Delhi High Court). • 300 ITR 75 (Delhi), Director of Income Tax (E) Escorts Cardiac Diseases. 5.3 On the contrary, the Ld. DR submitted that interest paid to the persons specified under section 40A(2)(b) is being excessive as compared to the interest paid on money borrowed by the assessee and therefore, the Assessing Officer is justified in disallowing the excessive interest expenditure. 5.4 We have heard the rival submissions and perused the relevant material on record. There is no dispute as the three persons to....
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.... and ward expenses ( i.e. security expenses) was paid to following three parties: - Paid to Premier Security (P) Ltd. Rs. 69,441/- - Paid to Arises Integrated Security Rs. 2,00,076/- - Paid to SP Automation Rs. 18,860/- 6.2.1 The Ld. counsel submitted that each transactions made with Premier Security Private Limited and M/s. SP Automation was not more than Rs. 30,000/- and the total payment in the financial year was less than Rs. 75,000/-and thus the expenditure in respect of these two parties was not liable for deduction under section 194C of the Act during relevant period. 6.2.2 As regards to the payment of Rs. 2,00,076/- made to M/s Aries Integrated Security Solutions, Mohali, the Ld. counsel referred to copy of a certificate issued by the party, which is available on page 75 of the paper book. In the said certificate, it is certified that said amount has been shown as receipt/income during the year and consideration by the said party. 6.2.3 The Ld. counsel submitted that the proviso to section 40(a)(ia) has been inserted by the Finance Act, 2012, w.e.f., 01/04/2013 and proviso to section 201(1) of the Act has been inserted by Finance Act, 201....
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....ing Officer for verification of facts and decide the issue in accordance with law after providing adequate opportunity of being heard to the assessee. The Ground No. 4 of the appeal is accordingly allowed for statistical purposes. 7. The ground No. 5 relate to ad-hoc 10% disallowance of Rs. 1,23,995/- out of various expenses aggregating to Rs. 12 39,949/-. 7.1 The Assessing Officer made disallowance of Rs. 1,23,995/- at the rate of 1/10th of the expenses, out of list of expenses like travelling, telephone, festival, car running, car depreciation, welfare and sales promotion expenses aggregating to Rs. 12,39,949/-, in view of element of personal expenses, nonmaintenance of the logbook of vehicles and telephones, self-made vouchers for the expenses like travelling, festival, welfare etc. The Ld. CIT(A) also upheld the disallowances. 7.2 Before us, the Ld. counsel of the assessee submitted that the assessee company maintained books of accounts like cashbook, Journal, Ledger and sales and purchase Day books and stock registers as prescribed under the Excise Act and same were produced before the Assessing Officer and examined by him. He submitted that no such ad-hoc disallowanc....
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....the Company. If the Managing Director used some of the calls for personal purposes, that would not make the expenditure incurred by the company being not for the purpose of its business. At best, the expenditure referable to the personal use of the telephone by the Managing Director may constitute extra remuneration to the Managing Director. But so far as the assessee company is concerned, the entire amount will be allowable as business expenditure. ITO Vs. Ashoka Betelnut Co. (P) Ltd. (1985), 21 TTJ (Mad) 465 TM (1984) 10 ITD 788 (Mad) (TM) followed". • 70 TTJ 338, Metallizing Equipment Co. (P) Ltd. Vs. DCIT (ITAT Jodhpur Bench). • 112 Taxman (Magazine) 195 I & I Electricals (P) Ltd. Vs. ITO (ITAT Jaipur Bench), in which it was held as under:"The claim of the assessee, a private limited company, for deduction of telephone expenses, vehicle maintenance expenses and car depreciation, was partially disallowed by the Assessing Officer on account of personal use. The disallowance was confirmed by the Commissioner (Appeals). On second appeal: Held, Personal disallowance in the case of a company should not be made. Therefore, the disallowance was to be deleted."....