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2014 (1) TMI 1436 - AT - Income TaxDisallowance made on motor car expenses - Depreciation of car Held that - The funds of the Assessee were used for the purpose of acquisition of motor car and the motor car was used for the purpose of business Assessee did not produce the copy of the annual accounts to substantiate its claim that the funds of the Assessee has been used for acquisition of motor car - the Assessee has neither brought any material on record to prove that the asset was used by the Assessee for the purpose of business and the Assessee was exercising its domain, possession and ownership over the asset to the exclusion of all others - in the interest of justice and fair play one more opportunity be granted to the Assessee to substantiate his claim of expenses before the A.O. to his satisfaction thus, the matter remitted back to the AO for fresh adjudication Decided in favour of Assessee. Re-computation of disallowance of Interest expenses Interest free advances Held that - There was no details are available with respect to the interest paid by the Assessee - there is no finding of AO or CIT(A) that the Assessee has not paid any interest to Vijay Stationers - this factual aspect needs to be verified by A.O the matter remitted back to the AO for verification. The assessee has not placed any material on record to substantiate its claim that the Assessee was having sufficient interest free advance which has been utilized for the purpose of advancing the aforesaid amounts the CIT(A) has given a finding that Assessee s total capital and reserves of Rs. 9.25 crore were invested in fixed assets and inventory exceeding Rs. 26 crore and therefore the same was not available for providing interest free advances - the Assessee can be granted one more opportunity to substantiate its claim of use of interest free funds for making advances the matter remitted back to the AO for fresh adjudication Decided partly in favour of Assessee.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act, 1961. 2. Disallowance of car depreciation and motor car expenses. 3. Disallowance of interest expenses related to advances to Sun Insulators Pvt. Ltd. 4. Disallowance of interest expenses related to advances to Shree Ambica Geotechs Pvt. Ltd. 5. Disallowance of interest expenses related to advances to Soham Integrated Textile Park Pvt. Ltd. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A: Ground not pressed by the appellant and therefore dismissed. 2. Disallowance of Car Depreciation and Motor Car Expenses: During the assessment proceedings, the Assessing Officer (A.O.) disallowed the depreciation of Rs. 3,11,611/- and motor car expenses of Rs. 8,85,405/- claimed by the Assessee on the grounds that the motor car was registered in the name of the Director and not the company. The A.O. held that for claiming depreciation, the asset should be owned and used for the business by the company. The CIT(A) upheld the A.O.'s decision, citing the lack of evidence proving the car's use for business purposes and referencing judicial precedents, including a Supreme Court decision. The Tribunal, however, remitted the matter back to the A.O. for reconsideration, directing the Assessee to provide necessary details to substantiate its claim. 3. Disallowance of Interest Expenses Related to Advances to Sun Insulators Pvt. Ltd.: The A.O. disallowed interest expenses, calculating it at an average rate of 12% on the interest-free advance of Rs. 14,50,000/- given to Sun Insulators Pvt. Ltd., resulting in a disallowance of Rs. 24,39,600/-. The CIT(A) directed the A.O. to recompute the disallowance for the period the advance was outstanding. The Tribunal remitted the issue back to the A.O. for verification of the Assessee's claim that the advance was funded by an interest-free loan from Vijay Stationers Pvt. Ltd. and to decide the matter as per law. 4. Disallowance of Interest Expenses Related to Advances to Shree Ambica Geotechs Pvt. Ltd.: The A.O. disallowed interest expenses on an advance of Rs. 33,00,000/- given to Shree Ambica Geotechs Pvt. Ltd. The CIT(A) upheld the disallowance but directed the A.O. to recompute the interest for the actual period the advance was outstanding. The Tribunal remitted the issue back to the A.O. for the Assessee to substantiate its claim that the advance was out of sale proceeds and interest-free funds. 5. Disallowance of Interest Expenses Related to Advances to Soham Integrated Textile Park Pvt. Ltd.: The A.O. disallowed interest expenses on an advance of Rs. 1,55,80,000/- given to Soham Integrated Textile Park Pvt. Ltd. The CIT(A) directed the A.O. to verify if the advance was for booking a unit in the Textile Park, which would qualify as a business advance. The Tribunal found no infirmity in the CIT(A)'s order and upheld the direction for verification. Conclusion: The Tribunal partly allowed the Assessee's appeal for statistical purposes, remitting the issues back to the A.O. for fresh consideration and verification based on the evidence provided by the Assessee. The Assessee was directed to cooperate with the A.O. by furnishing necessary details promptly.
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