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2015 (11) TMI 1442 - AT - Income TaxAddition on interest paid on unsecured loans - CIT(A) deleted the addition - Held that - CIT(A) had considered the letters issued by the creditors demanding interest and threatening withdrawal of money for coming to a conclusion that the interest payment was a genuine allowable business expenditure. There is no dispute that 50% of the total interest outgo pertained to preceding year. Assessee has also not disputed the claim of the revenue that there was no contract with the creditors for payment of any interest. However as per the assessee it had taken a decision during the relevant previous year in the meeting of its Board of Directors held on 23-03-2010 to pay interest from 01-04-2008 at the rate of 7%. Assessment order states that assessee could not produce any evidence regarding any dispute that share holders/directors on the question of interest. No doubt assessee is relying on a resolution of its Board of Directors for payment of interest. Nevertheless we are of the opinion that at least some of the records produced by the assessee before the CIT(A) were not before the AO. Just because AO was present at the time of proceedings before the CIT(A) we cannot say that requirements of Rule 46A of IT Rules stood satisfied. We are of the opinion that the issue therefore requires a fresh look by the AO for verifying the allowability of the claim in accordance with law. We therefore set aside the orders of the authorities below with regard to the allowance of interest back to the file of the AO for consideration afresh in accordance with law. - Decided in favour of revenue for statistical purposes. Disallowance of prior period expenditure - CIT(A) deleted the addition - Held that - Grievance of the revenue is that the evidence produced by the assesssee before the CIT(A) were not before the AO. In our opinion the question whether there was any dispute with regard to cam charges between the assessee and M/s Bharath Mall and such dispute if it existed whether settled require a detailed analysis before coming to a conclusion regarding the allowability of the claim made by the assessee. Unless and until such an exercise is carried out it cannot be ascertained whether the claim is one of prior period expenditure or business expenditure incurred during the relevant previous year. In such circumstances we are of the opinion that this issue also requires a fresh look by the AO. We therefore set aside the orders of the authorities below and remit the issue regarding allowance of prior period expenditure also back to the file of the AO for consideration afresh in accordance with law. - Decided in favour of revenue for statistical purposes.
Issues:
1. Disallowance of interest paid on unsecured loans. 2. Allowability of prior period expenditure. Issue 1: Disallowance of interest paid on unsecured loans: The revenue appealed against the CIT(A)'s deletion of an addition of Rs. 44,42,893 made by the AO on interest paid on unsecured loans. The AO disallowed the interest claimed by the assessee for the period before 01-04-2009. The CIT(A) allowed the claim, stating that the interest expenditure was genuine and allowable. The Tribunal set aside the orders, requiring a fresh look by the AO to verify the claim's allowability in accordance with the law. The issue was remitted back to the AO for further examination. Issue 2: Allowability of prior period expenditure: The revenue contested the CIT(A)'s decision to allow a sum of Rs. 10,07,484 considered by the assessee as prior period items. The AO disallowed the expenditure, stating lack of evidence regarding a dispute with M/s Bharath Mall. The CIT(A) allowed the claim, noting evidence produced by the assessee regarding the dispute settlement. The Tribunal found that a detailed analysis was necessary to determine the claim's nature and remitted the issue back to the AO for reconsideration in accordance with the law. The Tribunal allowed the revenue's appeal for statistical purposes, while dismissing the cross objection filed by the assessee as infructuous.
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