2004 (6) TMI 298 - AT - Income Tax

Summary

Issues:
1. Disallowance of interest amounting to Rs. 1,33,161.
2. Disallowance of traveling expenses amounting to Rs. 5,501.
3. Charging of interest under sections 234B and 234C.

Issue 1: Disallowance of Interest

The appeal filed by the assessee was against the order of the CIT(A) regarding the disallowance of interest amounting to Rs. 1,33,161 for the assessment year 1993-94. The disallowance was based on various loans taken by the assessee from banks, where it was found that interest paid exceeded the actual interest due in certain cases. The CIT(A) sustained the disallowance after detailed analysis, leading to the aggrievement of the assessee. The ITAT reviewed the interest disallowable and directed relief in one case where the interest payment was deemed for business purposes. The ITAT also deliberated on the deductibility of interest on loans taken for advance income-tax, citing relevant case laws. The issue was remanded to the AO for further verification on whether the interest on advance tax was paid from business profits or bank loans, necessitating a fresh decision.

Issue 2: Disallowance of Traveling Expenses

The appeal also contested the disallowance of traveling expenses amounting to Rs. 5,501. The CIT(A) had upheld the disallowance after examining the facts of the case. The ITAT declined to interfere with the CIT(A)'s decision, thereby affirming the disallowance of the traveling expenses.

Issue 3: Charging of Interest under Sections 234B and 234C

Regarding the charging of interest under sections 234B and 234C, the AO's order lacked specific direction for such charges, only mentioning "issue demand notice and challan." Citing legal precedents, the ITAT emphasized the necessity of a clear directive under the relevant section for interest to be charged. Relying on previous judgments, the ITAT directed the AO not to levy interest under sections 234B and 234C of the IT Act due to the absence of explicit instructions in the AO's order.

In conclusion, the ITAT partially allowed the assessee's appeal, providing relief on the disallowance of interest subject to further verification, maintaining the disallowance of traveling expenses, and directing against the charging of interest under sections 234B and 234C. The judgment addressed each issue comprehensively, considering legal principles and case laws to arrive at a reasoned decision.