2019 (4) TMI 1217 - AT - Income Tax

Disallowance of interest expenses - Assessee company has raised unsecured loan/other credits from various parties - HELD THAT - While we accept the proposition as laid down by the ld.CIT(A) in principle, however, the fact remains that no evidence was filed either before the Assessing Officer or before the CIT(A) to suggest that such advances were given to companies/parties engaged in the business of real-estate and, in fact, the assessee has either purchased land from the said parties or has entered into any agreement with the same parties. The assessment order clearly reveals that despite opportunities granted by the Assessing Officer, the assessee failed to produce any documentary evidence to support its claim that the advances were given for purchase of land. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee. - Decided in favour of revenue for statistical purposes. Disallowance of Foreign Travel expenses, Business Promotion expenses and rebate - additional income surrendered by the assessee will cover the disallowance above - HELD THAT - During the course of assessment proceedings, the assessee did not furnish the details as called for by the Assessing Officer for which he disallowed foreign travelling expenses and business promotion expenses. Although the CIT(A) deleted the addition/disallowance on the ground that the assessee has surrendered an amount of ₹ 461.15 lakh towards disallowance u/s 40A(3)/40(a)(ia) and u/s 68 and 69C of the Act and other unexplainable documents/entries for which no addition is called for, however, it is a fact that the assessee has claimed deduction u/s 80IB(10) on the additional income so declared. Therefore, it cannot be said that the additional income surrendered by the assessee will cover the disallowance of the above expenditure for want of bills and vouchers and the expenditure which is being claimed by the assessee. We, therefore, reverse the order of the CIT(A) and restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee. Ground of appeal Nos.2, 3 and 4 raised by the Revenue are accordingly allowed for statistical purposes.

Summary

Issues:
1. Disallowance of interest expenses
2. Disallowance of foreign travel expenses
3. Disallowance of business promotion expenses
4. Disallowance of rebate

Issue 1: Disallowance of Interest Expenses:
The Revenue appealed against the CIT(A)'s decision to delete the disallowance of interest expenses amounting to ?22,21,526. The Assessing Officer disallowed the interest on the grounds of diversion of borrowed funds for non-business purposes. The CIT(A) deleted the disallowance based on the argument that the advances were given for business needs and not to any associated concern. However, the tribunal found that no evidence was provided to support the claim that the advances were given for land procurement. Consequently, the tribunal directed the issue to be restored to the Assessing Officer for further examination, giving the assessee another opportunity to substantiate the purpose of the advances.

Issue 2: Disallowance of Foreign Travel Expenses:
The Assessing Officer disallowed ?30,08,000 of foreign travel expenses as the assessee failed to provide supporting documents justifying the expenses. Similarly, ?32,10,556 of business promotion expenses were disallowed due to lack of details and documentation. The CIT(A) deleted these disallowances, citing the voluntary surrender of a larger amount previously. However, the tribunal noted that the surrendered amount did not cover the disallowed expenses. Therefore, the tribunal reversed the CIT(A)'s decision and directed the issue to be reconsidered by the Assessing Officer with an opportunity for the assessee to provide evidence supporting the expenses.

Issue 3: Disallowance of Rebate:
The Assessing Officer disallowed a rebate of ?19,14,551, stating it was not recoverable from a specific entity. The CIT(A) overturned this disallowance, emphasizing that the assessee had voluntarily surrendered a substantial amount earlier. The tribunal, however, found that the surrendered amount did not cover the disallowed rebate. Consequently, the tribunal reversed the CIT(A)'s decision and directed the Assessing Officer to reevaluate the issue with proper substantiation from the assessee.

Conclusion:
The tribunal allowed the Revenue's appeal for statistical purposes on all issues, directing the Assessing Officer to reexamine the disallowed expenses and rebates with proper evidence and documentation from the assessee. The tribunal emphasized the importance of substantiating expenses and rebates to support their business nature and purpose.