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Issues involved:
1. Disallowance of traveling expenses 2. Disallowance of interest expenditure Issue 1: Disallowance of traveling expenses The assessee appealed against the disallowance of traveling expenses amounting to Rs. 2,19,703 made by the Assessing Officer (AO) on the grounds that the expenses were incurred for business purposes. The contention was that the director's wife accompanied him on business trips due to his health conditions. The Commissioner of Income-tax (Appeals) (CIT(A)) upheld the disallowance, stating that the wife's accompanying could not be solely considered for business purposes and personal benefits could not be ignored. The Appellate Tribunal found contradictions in the facts presented and remanded the issue back to the AO for further examination, emphasizing the need for clear evidence to support the disallowance decision. Issue 2: Disallowance of interest expenditure The AO disallowed interest expenses amounting to Rs. 21,22,921, claiming that they were not attributable to the business requirements of the assessee company. The disallowance was based on the assumption that borrowed funds had been diverted for non-business purposes. The CIT(A) confirmed the addition, stating that the funding of interest-free loans from borrowed funds was not disputed by the appellant. However, the Appellate Tribunal found that the nexus between interest-bearing loans and interest-free advances was not established. As a result, the Tribunal set aside the CIT(A)'s decision and remanded the matter back to the AO for a fresh adjudication with proper opportunity for the assessee to present their case. In conclusion, the Appellate Tribunal allowed the appeal for statistical purposes, emphasizing the importance of clear evidence and proper examination in determining the allowability of expenses and interest disallowances in accordance with the Income-tax Act, 1961.
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