TaxTMI 
TaxTMI 
TaxTMI 
2023 (7) TMI 735
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....'the Act') for Assessment Year 2010-11 with the following grounds: "1 The Ld. CIT(appeals) has erred in law and on facts in upholding the disallowance out of consultancy charges of Rs.20,76,342/- as capital expenditure relatable to capital work in progress and not allowable u/s.37(1)of the Act. 2 He has erred in law and on facts in upholding the disallowance of interest of Rs.44,89,423/- as pertaining to capital work in progress without properly appreciating the facts of the appellant. 3 He has erred in law and on facts in upholding disallowance of Rs.2,14,419/- out of travelling expenses." 2. At the time of hearing of the instant appeal, none appeared on behalf of the assessee. It has been pointed out by the Ld. DR that Official Liq....
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....dition on this ground." 5. As the part of consultancy charges has been paid in connection with term loan for purchase of fixed assets, according to the Ld. AO, such expenditure needs to be capitalized. As per the working of disallowance made by the assessee of Rs.20,76,342/- was, therefore, disallowed and added back to the total income of the assessee holding it capital in nature, which was, in turn, confirmed by the First Appellate Authority with the following observation: "(d).2 The appellant reiterated the explanation and contended that AO has not appreciated the facts, explanation and evidences properly. The payments made for consultancy expenses are for advisory services in the matter of financial consultancy for credit facilities a....
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.... and every payment in the garb of interest in excess of what can really be termed as 'interest' cannot be allowed as deduction under the section 36(l)(iii) of the Act." These charges / payments are not finance charges and appellant had already taken into account the processing charges for both Bank of India as well as State Bank of India in the capital work in progress. It is therefore, the allowability of these consultancy charges has to be examined only u/s.37(1) of the Act. (d).5 I am not inclined with the AO that without assigning any sustainable reason he treated these expenditure as capital because a part of this expenditure is relatable to acquisition of loan from bank for capital assets purchases as reflected by the appell....
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.... hence such part is excludable as capital expenditure and not allowable u/s.37(1) of the Act. That part of expenditure is not for commercial expediency for facilitating the carrying on the business. It is therefore, such part expenses out of consultancy charges are though not capital expenditure but the same are related to /incidental to acquisition of plant/machinery for 'capital work in progress' and therefore not allowable u/s.37(1) of the Act. Now in reference to quantum of disallowances, on being asked, the appellant himself submitted the working of disallowances of Rs. 20,76,342/- (No such details were filed before me in appeal) and therefore the dispute of quantum of disallowance is not justified if there and agitated. ....
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.... work in progress'. The appellant, on the other hand, requested for direction for capitalization and allowability and depreciation thereon. It was further pointed out by the assessee that there is no direct nexus between funds utilized for the capital work in progress and availability of sufficient interest free funds, however, the same were not found to be acceptable in the absence of funds flow submitted by the assessee. 8. During the course of appellate proceeding, the assessee submitted as follows: (e).3 The appellant during appeal contended that A.O. has not appreciated the explanation and evidences submitted in this regard. The appellant reiterated the contention of mixed bag of transaction in C.C. a/c. It is also contended that ap....
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.... of Rs.6,74,542/- was disallowed by the Ld. AO. 12. Before the First Appellate Authority, the details thereof was duly submitted, particularly, bills for ticket booking, forex purchases etc. Upon verification of the same, the Ld. CIT(A) restricted such disallowance to the amount of Rs.2,14,419/- with the following observations: "The appellant submitted details in the form of bills for ticket booking, forex purchase etc. From the verification of such bill / vouchers, it has been gathered that (i) Shri Bhawan Bharwad and Shri Himanshu Varia travelled through Thai Airways with return ticket from Mumbai to Bangkok and back on 29/12/09 to 01/01/2010. The bill dt. 28/12/09 from M/s Royal orient Tours & Travels, Ahmedabad for Rs.....