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2014 (1) TMI 704

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..... n - Held that:- The assessee has explained the source for the sum - The AO has only on presumption estimated 40% of the cash credit loans to have been used for the repairs and renovations of sheds - Additions cannot be made on presumptions especially when the assessee has produced factual evidence to prove that the balance of the cost in respect of the repairs and renovations were from sister concern – Thus, the disallowance as confirmed by the CIT(A) further confirmed. The amount of Rs.1,27,000/- only out of the total of Rs.1,81,288/- relates to the term loan in relation to repairs and renovations of the capital asset - the amount of Rs.1,27,000/- is also liable to be disallowed on the same lines as the amount of Rs.7,35,627/- has been .....

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..... f interest to Rs.7,35,627/- in place of Rs.11,86,555/- made by the AO, when the entire expenditure pertained to capital work in progress shown by the assessee and therefore was capital in nature. 2. On the facts and in the circumstances of the case, the Ld. CIT(A)is not justified in deleting the addition of Rs.7,09,622/- made by the AO u/s. 2(22)(e) on the ground that the assessee itself was not a shareholder in the lending company which observation is contrary to the provisions of Section 2(22)(e). 3. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in deleting the above addition u/s. 2(22)(e) on the basis of the orders of the ITAT in other cases on this issue, when the Department has contested those o .....

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..... t itself. The assessee has also capitalized the cost of the repairs and renovations. Obviously, once the cost of repairs and renovations is capitalized, the interest on the loan taken for the said repairs and renovations cannot be treated as revenue expenditure. Under the circumstances, the findings of the Ld. CIT(A) on this issue stands confirmed. 6. In the result, appeal of assessee is dismissed. 7. In respect of ITA No.642/CTK/2012 i.e. revenue's appeal, it was submitted by the Ld. DR that the first issue was against the action of Ld. CIT(A) in restricting the disallowance of interest to Rs.7,35,627/- challenged in the assessee's appeal. It was the submission that the AO had originally disallowed an amount of Rs.11,86,555/-. It was t .....

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..... ns to have been used for the repairs and renovations of sheds. Additions cannot be made on presumptions especially when the assessee has produced factual evidence to prove that the balance of the cost in respect of the repairs and renovations were from sister concern. Under the circumstances, admittedly, the disallowance as confirmed by the Ld. CIT(A) at Rs.7,35,627/-, which is liable to be confirmed and we do so. Coming to the issue of bank commission, admittedly, the amount of Rs.1,27,000/- only out of the total of Rs.1,81,288/- relates to the term loan in relation to repairs and renovations of the capital asset. Admittedly, this amount of Rs.1,27,000/- is also liable to be disallowed on the same lines as the amount of Rs.7,35,627/- has b .....

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..... le to be confirmed. It was the submission that the assessee company was not a shareholder in the sister concern being M/s. Dharitri Agro Tech Pvt. Ltd. 12. We have considered the rival submissions. Admittedly, it is noticed that the Ld. CIT(A) has deleted the addition made by the AO by invoking the provisions of section 2(22)(e) of the Act by following the decision of Coordinate Bench of this Tribunal in the case of Falcon Finance Ltd. cited supra. As it is noticed that the issue is squarely covered by the said decision, the finding of the Ld. CIT(A) on this issue stands confirmed. Therefore, ground nos. 2 and 3 of revenue's appeal are dismissed. 13. In the result, appeal of assessee is dismissed and that of revenue is partly allowed. .....

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