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2016 (11) TMI 1024 - HC - Income TaxInterest paid to third party - diallowance of claim as business expenditure while estimating the net profit - Held that - As no interest or very low rate of interest has been charged from family concerns on advances, the assessee has raised loans and paid interest and forwarded the same for non-business consideration therefore the interest from the said amount cannot be allowed as business expenditure u/s 37 of the Act being for non-business consideration, in the absence of any explanation or evidences by the assessee in support of his claim. - Decided against assessee
Issues:
1. Tribunal's decision on interest paid to third party as business expenditure. 2. Addition on account of income from Trailer. Analysis: 1. The appellant challenged the Tribunal's decision regarding interest paid to a third party as business expenditure. The Tribunal observed that the interest paid was not admissible for business purposes. The Revenue contended that interest on certain amounts advanced to family concerns was not allowable as business expenditure due to lack of evidence supporting its business nature. The AO was directed to disallow interest on a specific amount not used for business purposes, leading to partial relief for the assessee. The Tribunal upheld the AO's decision to disallow interest at a reduced rate, ultimately ruling in favor of the department against the assessee. 2. Regarding the addition on income from a Trailer, the assessee disputed the AO's decision, while the Revenue challenged the CIT(A)'s deletion of the addition. The Tribunal considered the circumstances where trailers were seized by a financier, leading to heavy expenses for one trailer to make it operational again and the sale of the other trailer after a period. The Tribunal found no specific defects in the accounts related to the income from trailers. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the addition, dismissing the Revenue's grounds and allowing the assessee's appeal. In conclusion, the High Court dismissed both appeals, affirming the Tribunal's decisions on both issues.
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