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Issues Involved: Disallowance of Legal and Professional Expenses, Treatment of Interest on Advances, Disallowance of Business Expenses.
Legal and Professional Expenses Issue: The assessee challenged the disallowance of &8377; 3,34,750 claimed under 'Legal and Professional Expenses'. The AO disallowed the charges related to legal proceedings before the Bombay High Court, stating it was not connected to earning interest income. The CIT(A) upheld the disallowance, noting the absence of business activity or intention. However, the Tribunal found contradictions in the facts presented. It was revealed that the expenses were related to defending a Civil Suit concerning the 'Dheeraj Project'. Considering the nature of the business, the Tribunal directed the AO to allow the professional charges, except for a specific payment, as they were essential for the builder and developer activities. Interest on Advances Issue: The dispute revolved around the treatment of interest income from advances made to sister concerns, assessed under 'Income from Other Sources' instead of 'Business Income'. The assessee argued that the funds were temporarily parked and should be considered business income. However, the Tribunal disagreed, stating that the interest income should be assessed under 'Income from Other Sources' due to the surplus funds situation. The decision of the CIT(A) was upheld, and the appeal on this issue was dismissed. Business Expenses Disallowance Issue: The AO disallowed &8377; 80,970 out of the total business expenses claimed by the assessee. While some expenses were allowed, others were disallowed on the grounds of lack of business activity. The Tribunal considered the recurring nature of the expenses and allowed most of them, except for business promotion expenses. The AO was directed to allow the claimed expenses, except for the specified amount related to business promotion. As a result, the appeal was partly allowed on this issue. The Tribunal's decision on each issue was based on a detailed analysis of the facts and legal arguments presented by both parties, ensuring a fair and reasoned outcome.
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