TaxTMI 
TaxTMI 
2016 (10) TMI 1416
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....rly. c) That notwithstanding the above said ground of appeal, the Worthy CIT (A) has erred in rejecting the contention of the assessee that there was business purpose in advancing the funds to the sister concern and, as such, no disallowance of interest was called for. 2. That the CIT (A) has erred in upholding the addition made by the Assessing Officer by making ad-hoc disallowance of expenditure @ 10% to the tune of Rs. 92,92,170/- under the head "Magazines & Journals" as per para 14 page 31 of the order. 3. That the Worthy CIT (A) has erred in confirming the action of the Assesssing Officer in capitalizing the sum of Rs. 1,03,75,854/- as capital expenditure out of expenditure claimed under the head repair and maintenance. 4. That the disallowance is otherwise not proper since the Hon'ble Income Tax Appellate Tribunal, Amritsar Bench, Amritsar has allowed the expenditure on similar facts in Asstt. Year 2006-07 and the CIT (A) has wrongly mentioned in the order that the ITAT has confirmed the disallowance of expenditure in Asstt. Year 2006-07. 5. That the addition in the aforesaid paras has been made by not considering the detailed subm....
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....Pvt. Ltd., wherein it has been held that if the assessee had made interest free advances from interest free advances, then no disallowance of interest can be made. The ld. AR submitted that the issue is also covered by the judgment of Hon'ble Supreme Court in the case of Hero Cycles Ltd., wherein Hon'ble the Supreme Court has held that if there were interest free funds available with the assessee which were more than the amount invested, no disallowance can be made under section 36(1)(iii) of the Act. The ld. AR in this respect file a copy of balance sheet of the assessee for the year under consideration and invited our attention to the shareholders capital and reserves and surplus which amounted to Rs.116.50 crores. The ld. AR submitted that the amount of investment as noted in the assessment order and as in the balance sheet is only Rs.12.53 crores, which are much less than the interest free funds available with the assessee. In view of the above, it was submitted that no disallowance should have been made under section 36(1)(iii) of the Act. 5. As regards Ground No.2, regarding ad-hoc disallowance of expenditure @ 10% under the head 'Magazines and Journals', the ld. AR submit....
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.... crores and, therefore, the assessee company could in any case, utilize those funds for giving advance to its directors." Further, we find that in the group companies of the assessee, i.e., in MBD Printographics Pvt. Ltd. and in Holy Faith International Pvt. Ltd., the Tribunal has already deleted similar disallowance. The relevant orders of the Tribunal are placed at pages 1 to 27 of the paper book. 9. Undoubtedly, the interest free funds as mentioned above, which are more than the interest free investments, therefore respectfully following the judgment of the Hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. (supra), no disallowance was warranted under section 36(1)(iii) of the Act. In view of the above discussion, Ground no.1 of the appeal is allowed. 10. Now, coming to Ground no.2, we find that in the assessment year 2012-13 in the case of the assessee itself, the AO had made similar disallowance of 10% of expenses on purchase of Magazines and Journals. The findings of the AO in para 3.2 of the order are reproduced below: "3.2 I have gone through facts of the case and reply of the assessee. It is noticed that a similar issue has been raised during the ....
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....ssessee are audited. No defects were found contained therein. The disallowance, thus, amounts to an ad-hoc disallowance, which is impermissible in law, as held in the following decisions: i) 'Seasons Catering Services (P) Ltd. vs. DCIT', 134 TTJ 554 (Del. Trib.) ii) 'Vijay Infrastructure Ltd vs. ACIT', ITA No.254/LKW/2015, ITAT Lucknow Bench. iii) 'ACIT vs. M/s. Mangaro Industries (Regd)', ITA No.983/CHD/2013, ITAT, Chandigarh Bench. iv) 'CIT vs. Modi Xerox Ltd.' 344 ITR 411 (All.) v) 'Aradhana Beverages & Foods Co. (P) Ltd. vs. DCIT', 51 SOT 426 (Del. Trib.) vi) 'ACIT vs. Ashok J Patel' 59 SOT 53 (Ahd. Trib.) 8. In view of the above, finding it to be unsustainable, the disallowance made is deleted. Ground Nos. 1 & 2 are accepted." 12. Thus, respectfully following the order of the Tribunal, we delete the ad-hoc addition made by the AO of Rs.92,92,170/-. In view of the above, Ground no.2 of the assessee is allowed. 13. Ground Nos.3 & 4 has already been dismissed as not pressed. 14. Ground Nos. 5 & 6 are general in nature and therefore, do not require any adjudication. 15. In the result, the appeal filed by th....