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TMI Blog2004 (9) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... of the vehicle in terms of s. 38(2) of IT Act, 1961. The AO, therefore, disallowed 1/6th of expenditure on maintenance of jeep and scooter, depreciation on jeep and driver's salary. Accordingly, the disallowance of Rs. 24,150 was made. 4. In appeal before the learned CIT(A), the assessee challenged the disallowance amounting to Rs. 15,083 on account of depreciation. 5. Learned CIT(A) observed that the disallowance had been made considering the fact that the personal use of the vehicle could not be ruled out. He opined that the depreciation was admissible for an asset which was exclusively used for business. He further stated that the assessee had not been able to rebut the presumption that personal use of the vehicle was not ruled out and there was no evidence in the nature of log book or otherwise to substantiate the argument that the vehicle was exclusively used for the business purposes. He accordingly confirmed the disallowance made by the AO. Now, the assessee is in appeal. 6. Learned counsel for the assessee submitted that no disallowance was called for because the depreciation had been allowed on the written down value of the asset and it was immaterial whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO observed that the assessee had paid nominal amount to those persons and the persons were poor people. The AO asked the assessee to produce those persons. However, the assessee submitted that the workers worked collectively and for the sake of accountancy they maintained separate account of each worker and those were not the permanent with any handling agent. So, their personal presence was not possible. The AO did not find substance in the submission of the assessee by stating that availability of cash did not help the assessee and since the assessee failed to produce the persons, the AO considered the credits to be non-genuine, and made addition of Rs. 72,000. 11. The assessee carried the matter to the learned CIT(A) and submitted that the disallowance had been made only on presumptions because all necessary evidences were produced in support of the claim of the expenditure. It was stated that the balances were reflected in the schedule of sundry creditors which represented unpaid wages payable to the four persons and included in the expenditure incurred on freight and wages amounting to Rs. 3,77,618. It was further stated that the outstanding payments were made on 10th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO asked the assessee to produce the persons in whose names a sum of Rs. 72,000 was outstanding. Claim of the assessee was that the amount in question was outstanding on account of freight and wages. It is true that the assessee could not produce the persons although it was required to do so. The onus was on the assessee to prove the genuineness and the correctness of the amount outstanding. It is not in dispute that the aforesaid payments were outstanding in the names of the labourers who generally depend on the day-to-day earning for their livelihood. So, it is unbelievable that those persons waited for six months to claim their daily wages. The assessee did not produce those persons before the AO for their examination although the AO specifically asked to do so. Therefore, the assessee miserably failed to establish the bona fide nature of the outstanding amount. In that view of the matter, we do not find any merit in this ground of assessee's appeal. 16. The next issue vide ground No. 3 relates to disallowance of Rs. 34,125 out of interest paid by the assessee. 17. Facts related to this issue in brief are that the assessee claimed a deduction of Rs. 4,80,883 on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was not enough on the part of the assessee to say that the interest was not charged to keep the assessee-partner in good humour. Learned CIT(A) was of the view that the assessee could not establish that advance given was for business purposes or whether the assessee could derive the benefit out of not charging interest. Learned CIT(A) did not accept this contention of the assessee that the cash balance was available by stating that if cash balances were available borrowings itself were not for the purpose of business and the assessee with liquidity could not claim that it could give interest free advances to the partners and others and then borrow funds from the bank on interest for business purposes. Accordingly, he held that the AO was perfectly justified in disallowing the interest in proportion to the advances made. Reliance was placed on the judgment of the Hon'ble Kerala High Court in the case of CIT vs. B.I. Baby Co. (2002) 174 CTR (Ker) 164. Now, the assessee is in appeal. 20. Learned counsel for the assessee reiterated the submissions made before the authorities below and stated that the AO had not established any nexus between the interest bearing funds and the int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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