9911796707
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Issues:
1. Disallowance under rule 6B of IT Rules for presentation articles. 2. Disallowance of interest on funded interest. Issue 1: Disallowance under Rule 6B of IT Rules for Presentation Articles: The appeal challenged the disallowance of Rs. 47,654 under rule 6B of the IT Rules for the assessment year 1988-89. The CIT(A) upheld the disallowance, concluding that the expenditure on presentation articles exceeding Rs. 50 per article should be disallowed under rule 6B. The appellant argued that the presentation articles, such as dry-fruit packets and suit-lengths, were meant for creating goodwill and maintaining relations, not for advertising. The Tribunal noted that the presentation articles did not bear the company's name or logo and were not intended for advertising. Citing precedents, the Tribunal held that the disallowance under rule 6B was unsustainable as no advertisement element was involved. The disallowance was deemed unjustified, and it was deleted. Issue 2: Disallowance of Interest on Funded Interest: The appellant contested the disallowance of interest on funded interest amounting to Rs. 5,60,337. The appellant argued that financial difficulties led to the conversion of unpaid interest into term loans by financial institutions, and the interest on funded interest was a legitimate business expenditure. The CIT(A) disallowed the interest on funded interest, stating that it had already been allowed in the assessment, denying a double benefit. The Tribunal disagreed with this view, noting that funded interest transformed into a new loan with specific repayment terms and interest rates. Considering interest on funded interest as an expenditure incurred exclusively for business purposes, the Tribunal set aside the CIT(A)'s decision and directed the AO to allow the interest claimed by the appellant. In conclusion, the Tribunal allowed the appeal, ruling in favor of the appellant on both issues.
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