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2018 (5) TMI 2087

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....es as its office ignoring the fact that two different portions at the same floor were used by two different firms. Thus the disallowance so made should be deleted. 3. The CIT(A) erred in law and on facts in confirming the disallowance of Rs. 2,09,538/- being l/5th of the electricity expenses of its office at L-41, Connaught Circus New Delhi averring the same to be used by M/s Grant Thornton India (P) Ltd. ignoring the fact that the said company was operating from its operational office at L-60, Connaught Circus, New Delhi just above L-41. Thus the disallowance so made should be deleted. 4. The CIT(A) erred in law and on facts in confirming the disallowance of Rs. 2,09,538/- being l/5th of the electricity expenses of its office at L-41, Connaught Circus New Delhi by averring the same to be used by M/s Walker Chandiok & Associates ignoring the fact and evidences placed on record. Thus the disallowance so made should be deleted. 5. The CIT(A) erred in law and on facts in confirming the addition of Rs. 65,681/- being the amount of stale cheques which were issued during the year but were not presented for payment and the same were reversed since their validity got expired and ther....

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....Rs. 10,47,690/- and some other firms were also being operated from the said premises. Therefore, he drew inference that the total expenditure debited by the assessee could not be accepted. The other firms operating from the same premises are as under : (i). M/s. Grant Thornton India Pvt. Ltd. (ii). M/s. Unravel Mercantile Pvt. Ltd., (iii). M/s. Pallavi Joshi Bhakru, (iv). M/s. Bhakru & Associates, (v). M/s. Walker Chandiok & Assocates. 3. In this regard the assessee was asked to show cause why 4/5th of the expenses should not be disallowed for common use of the premises. In this regard, the assessee submitted detailed reply. The Assessing Officer further observed that the branch office of the assessee firm situated at ground floor, W-129, Greater Kailash-II, New Delhi and claiming rent of Rs. 9 lacs. He further observed that M/s. Bhakru & Associates office is also at ground floor W-129, Greater Kailash, New Delhi. Therefore, he disallowed 50% of the rent payment of branch office keeping in view the relationship of the assessee and Bhakru & Associates, having common place of operation at both the addresses. He also disallowed 1/5th of the electricity and water charges amountin....

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.... of the previous month, and shall be paid/credited to their respective account(s) on the tenth day of the following month." From the above clause of the partnership deed, the Assessing Officer observed that it does not provide for the payment of interest to the first party. Therefore, a show cause notice was issued and finding the reply of assessee unsatisfactory, the Assessing Officer observed that the payment of interest to partner is not in accordance with the provisions of section 40(b)(ii) of the IT Act. Therefore, he disallowed the above amount of interest paid in the hands of the partnership firm. 7. Feeling aggrieved from the order of the Assessing Officer, the assessee appealed before the ld. CIT(A) and made a detailed written submissions wherein various case laws have also been relied upon. The ld. CIT(A) after considering the submissions, partly allowed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Tribunal. 8. The ld. AR of the assessee reiterated the submissions made before the ld. CIT(A). In respect of ground Nos. 1, 3 & 4, the ld. AR submitted that the Assessing Officer had no any cogent material to prove that other firms are running....

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....for the personal use of the partners. He has only drawn inference that some of the business development expenses are personal in nature. She also referred to tax audit report in Form No. 3CD at Sl. No. 17(b) who has reported nil expenditure of personal nature. 13. In respect of ground No. 10 regarding disallowance of interest of Rs. 20,43,675/- paid to partner, the disallowance u/s. 40(b), she also referred tax audit report wherein at Sl. No. 17(g), the tax auditor has reported nil interest which is inadmissible u/s. 40(b). It was also submitted that the interest payment was supported by partnership deed clause (5). In the preceding years 2008-09 and 2009-10, similar issue was raised by the Assessing Officer which has been accepted by the ld. CIT(A). Therefore, the consistent view should be followed by the Assessing Officer. The concerned partner has also offered it as his income and has paid taxes thereon @ 30. Therefore, there is no loss to the Revenue. 14. On the other hand, the ld. DR relied on the orders of the lower authorities, stating that the impugned order of ld. CIT(A) is based on plausible reasons, which needs no interference. It is submitted that every assessment yea....

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....horities below have wrongly observed that the electric and water expenses are also attributable to this concern. Moreover, it is worthwhile to note that additions on the identical issue were made in the preceding assessment years 2008-09 and 2009-10, where the ld. CIT(A) has decided the issue in favour of the assessee in the identical facts and circumstances of the case. There is no material before us to show that those orders of the ld. CIT(A) were either reversed or set aside by any of the higher forum. There is also no material on record to establish that there is any change in the fact situation of the instant case. We, therefore, find no justification to deviate from the findings of the Revenue authorities reached in the preceding years and not to follow the rule of consistency during the year under consideration. In such view of the matter, the grounds Nos. 1, 3 & 4 raised by the assessee deserve to be allowed. 16. In respect of ground No. 2, we find that the assessee has explained that M/s. Bhakru Associates (Prop. Ms. Pallavi Joshi) has its registered office at Ground Floor, W-129, Greater Kailash, New Delhi and has attached copy of a letter head of the firm (PB-28) in sup....

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....the impugned year, no benefit of expenditure has been enjoyed by the assessee. The Assessing Officer is, therefore, directed that the benefit should be given to the assessee after due verification from the record of the assessee as to when the current liability has been discharged. Therefore, the alternative ground of the assessee is allowed. 18. In respect of ground No. 7 & 8, we find that in the order of Assessing Officer, he has disallowed 1/6th of the depreciation on cars amounting to Rs. 5,48,340/-. The ld. CIT(A) has confirmed the disallowance as the Assessing Officer has applied the provisions of section 38(2) which provides as under : (2) Where any building, machinery, plant or furniture is not exclusively used for the purposes of the business or profession, the deductions under sub-clause (ii) of clause (a) and clause (c) of section 30, clauses (i) and (ii) of section 31 and clause (ii) of sub-section (1) of section 32 shall be restricted to a fair proportionate part thereof which the Assessing Officer may determine, having regard to the user of such building, machinery, plant or furniture for the purposes of the business or profession. According to that section, if th....