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TMI Blog2014 (3) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... be held to be justified in restricting the addition on account of disallowance of any interest – Decided in favour of Assessee. Disallowance of motor car expenses – Held that:- The mere fact that the vehicle not standing in the name of the assessee, cannot be a reason for making or sustaining any disallowance on the account of motor car expenses – Relying upon CIT vs. Mirza Ataullaha Baig and other [1992 (10) TMI 52 - BOMBAY High Court] – the assessee to be entitled to depreciation on vehicle purchased which was not registered in the assesses's name – the reason of the AO for making the disallowance of expenses cannot be sustained – thus, it will be just and fair if 10% of the total motor car expenses, in respect of all the 9 cars, are held to be relatable to be personal use by the partners of the firm – Decided partly in favour of Assessee. Disallowance of depreciation and interest paid on loan – Held that:- The sustenance of the disallowance of depreciation on that ground cannot be sustained – the disallowance of depreciation is sustained @ 10% on account of personal use by the partners in respect of all the motor cars - the interest part towards loan on motor car is deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as noticed by the A.O. that the account of M/s. Modern Textile Rayon Silk Mills Pvt. Ltd. (hereinafter called MTRS) had opening balance of Rs.1.46 crore. The A.O. noted that the assessee made certain purchases from this party and the closing balance was at Rs.2.00 crore. In the opinion of the A.O., the assessee diverted its interest bearing funds in making the payment to MTRS, a sister concern of the assessee. Accordingly, the A.O. held that the interest on borrowings was not allowable u/s.36(1)(iii) to this extent. This has resulted into an addition of Rs.23.81 lakhs. 10. The learned CIT(A) accepted the assessee's stand in particular that the assessee was dealing in such types of commodities which were not usually available in the market. MTRS supplied the goods to the assessee on the condition of 100% advance. He observed that the appellant, therefore, is understandably under obligation to keep the advance amount with MTRS . He however, held that the A.O. should have allowed credit for the sales figure during the year and advance for 4 to 5 months was justifiable. Considering these facts, he directed the A.O. to reduce the disallowance of interest by 50%. The assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business or profession, is allowed as deduction. So long as the purpose of utilisation of the capital borrowed is towards business, no disallowance can be made. As admittedly, the advances were made by the assessee to its sister concern for effecting purchases, in our considered opinion, the learned CIT(A) cannot be held to be justified in restricting the addition on account of disallowance of any interest. In the result, this ground of the assessee is allowed and that of the Revenue is dismissed. 3. In view of above findings given by the Tribunal in the own case of the assessee in earlier years, following the same for the sake of consistency, this issue is decided in favour of the assessee accordingly. Ground No.2 On the facts and in the circumstances of the case and in law the ld. CIT(A)-29 erred in confirming the disallowance of Motor Car expenses of Rs.1,14,877/- being 20% of the total expenses debited to Profit Loss A/c and Rs.1,88,470/- towards depreciation on Motor car at 20% of Rs.9,42,352/- being the alleged non business use and for not keeping log book. 4. Ld. A.R. has submitted that the identical issue has been adjudicated by the Tribunal in the own c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it may, it is observed from the assessment order that the assessee did not have complete details in respect of motor car expenses because no log book etc. were maintained. Considering the totality of the facts and circumstances of the present case, in our considered opinion, it will be just and fair if 10% of the total motor car expenses, in respect of all the 9 cars, are held to be relatable to be personal use by the partners of the firm. We accordingly sustain the disallowance at Rs.82,859/-. This ground is partly allowed. 15. Ground no.3 of the assessee's appeal is against the sustenance of disallowance of depreciation and interest paid on loan for motor car on the ground that the 5 motor cars were not registered in the name of the assessee. For the reasons discussed in respect of ground no. 2, we hold that the sustenance of the disallowance of depreciation on that ground cannot be sustained. However, considering the mandate of section 38(2), we sustain disallowance of depreciation @ 10% on account of personal use by the partners in respect of all the motor cars. In so far as the interest part of Rs.1,57,319/- towards loan on motor car is concerned, in our considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance at Rs.50,000/- only and the Revenue has not preferred any appeal on this issue, hence the disallowance sustained by the CIT(A) under this head is confirmed. Ground No.4 On the facts and in the circumstances of the case and in law the ld. CIT(A)-29 erred in confirming the disallowance of a sum of total Rs.20,000/- (Rs.10,000/- each) on account of Travelling and Conveyance expenses out of Rs.4,13,897/- and Rs.87,855/- respectively as the expenses incurred is in cash. 8. Ld. A.R. submitted that the issue raised vide ground No.4 has already been considered and decided by the Tribunal in the own case of the assessee for earlier years vide order dated 23.05.12 in ITA Nos.2915, 2916, 6035, 6785, 2247 2248/M/2007. The relevant findings of the Tribunal are reproduced as under: 18. The last ground of the assessee's appeal is against the sustenance of addition of Rs.14,285/- being 50% of the travelling expenses. The assessee claimed the deduction of Rs.1,42,850/- towards Travelling and Conveyance Expenses. Only kutcha bills and vouchers were produced. The A.O. made disallowance of 20% of such expenses which was reduced to 10% in the first appeal. In our considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly decided in favour of the assessee. 13. The issue taken by the assessee in ground No.2 of this appeal is relating to disallowance of Motor Car expenses of Rs.2,42,987/- being 20% of the total expenses debited to Profit Loss account. This issue is identical to the issue raised by the assessee in his ground No.2 of the appeal for assessment year 2005-06 and in view of our findings given above, this issue is partly allowed in favour of the assessee restricting the disallowance at the rate of 10% of the total expenses claimed under this head. 14. The issue taken by the assessee in ground No.3 of this appeal is relating to confirmation of disallowance of Sales Promotion expenses of Rs.20,000/- out of Rs.8,98,213/- being personal in nature. In view of our findings given in para 7 above while deciding the identical issue for assessment year 2005-06, the disallowance of Rs.20,000/- made by the CIT(A) under this head is hereby confirmed. 15. The issue taken by the assessee in ground No.4 of this appeal is relating to disallowance of Rs.20,000/- on account of Travelling and Conveyance expenses out of Rs.1,43,347/- and Rs.87,441/- respectively. In view of our findings giv ..... 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