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2012 (10) TMI 1133 - AT - Income TaxDisallowance of expenses computing the income from Hawala business - Held that - CIT(A) is not correct in stating that the A.O. had not disallowed the interest expenses. There is also no finding by the A.O. that the interest expenses were not genuine. Therefore, in our view, the order of the CIT(A) which is based on wrong facts cannot be sustained. Therefore, set aside the order of the CIT(A) and allow the claim of interest of ₹ 1,04,703/-.
Issues: Disallowance of expenses in computing income from Hawala business.
Analysis: 1. The appellant, engaged in Hawala business, disputed the disallowance of expenses for the assessment year 1999-2000. 2. The appellant claimed expenses for administrative, sale promotion, brokerage, warehouse charges, and interest. The dispute revolved around the computation of income from the Hawala business. 3. Initially, the CIT(A) directed the assessing officer (A.O.) to estimate the commission at 0.4% of turnover. However, the Tribunal later directed the commission to be estimated at 1% of total turnover. 4. The A.O. allowed only a portion of the expenses in the first instance, leading to subsequent appeals and directions from the Tribunal. 5. In the final order dated 22.12.2009, the A.O. disallowed certain expenses on an estimated basis and also disallowed interest expenses of Rs. 1,04,703. 6. The CIT(A) confirmed the disallowance of expenses on an estimated basis but did not address the disallowance of interest expenses. 7. The appellant appealed to the Tribunal, focusing on the disallowance of interest expenses. 8. The Tribunal noted that the A.O. had not allowed the interest expenses, contrary to the earlier direction to allow all genuine expenses for running the business. 9. The Tribunal found no justification for disallowing the interest expenses, as they were genuine and necessary for the business operation. 10. Consequently, the Tribunal set aside the CIT(A) order and allowed the claim for interest expenses of Rs. 1,04,703. 11. The appeal by the assessee was allowed, and the order was pronounced on 30th October 2012.
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