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2019 (5) TMI 274 - ITAT CHANDIGARHDisallowance u/s 36(1)(iii) - proportionate interest disallowance on interest free advances - nexus been established by AO in between the interest free advances and the interest bearing borrowed fund? - HELD THAT:- AO himself admitted that on the loans and advances given by the assessee out of the borrowed funds by using the OD facility the interest was earned, he therefore allowed the interest expenditure to the extent of ₹ 7,17,875/-. As regards to the other interest free advances, the bank statement of the assessee placed at page no. 16 of the assessee’s compilation reveals that the capital of the assessee as on 31.3.2012 was at ₹ 3,48,04,747/- and the Assessing Officer pointed out in the assessment order that the assessee had given interest free advances to the family and relatives for a sum of ₹ 2,79,00,000/- which shows that the interest free funds in the form of capital were more than the interest free loans given to the family and relatives. In the present case, no nexus had been established by AO in between the interest free advances and the interest bearing borrowed funds, therefore, the disallowance made by the Assessing officer out of the interest paid by the assessee and sustained by the CIT(A) was not justified. Accordingly the same is deleted. - Decided in favour of assessee. Disallowance of car expenses - AO was of the view that 1/5th of the expenses were personal in nature - assessee submitted that the disallowance made by the Assessing Officer and sustained by the Ld. CIT(A) was highly excessive - HELD THAT:- Major disallowance was worked out on account of depreciation amounting to ₹ 2,79,870/- which is a statutory deduction. If such figure is reduced from the figure worked out by the Assessing Officer the remaining amount comes at ₹ 1,38,995/- while the assessee has already disallowed suo motu a sum of ₹ 1,92,230/-. Therefore the disallowance made by the Assessing Officer and sustained by the CIT(A) at ₹ 2,26,635/- (₹ 4,18,665 – ₹ 1,92,230/ ) appears to be excessive.Therefore, to meet the ends of justice restrict the addition made by the Assessing Officer and sustained by the Ld. CIT(A) at ₹ 50,000/- instead of ₹ 2,26,635/-. - Decided in favour of assessee partly.
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