2012 (8) TMI 1003 - AT - Income Tax

Summary

Issues involved: Disallowance of interest payment, disallowance of telephone and motor car expenses, depreciation.

Disallowance of Interest Payment:
The assessee, a trading firm, made advances without charging interest, leading to disallowance of interest payment by the Assessing Officer (A.O.). The CIT (A) upheld the disallowance based on lack of business expediency, citing the S. A. Builders case. The A.R. argued against disallowance on the opening balance, referencing past deductions. The Tribunal, following the Karnataka High Court decision, directed the A.O. to calculate disallowance only on the loan amount for the year at 6%, allowing the appeal.

Disallowance of Telephone and Motor Car Expenses:
The A.O. disallowed 1/4th of telephone and motor car expenses as personal in nature. The CIT (A) reduced the disallowance to 1/5th after considering the written submission by the assessee. The A.R. contended that the disallowance was adhoc and lacked specific instances of personal expenses. The Tribunal upheld the CIT (A)'s decision, rejecting the appeal on this ground.

In conclusion, the appeal of the assessee was partly allowed, with the Tribunal directing the A.O. to calculate the disallowance of interest payment only on the loan amount for the year and upholding the CIT (A)'s decision on the disallowance of telephone and motor car expenses.