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TMI Blog2015 (1) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... is an allowable deduction u/s 24(b). As the assessee has not been able to substantiate its claim regarding supply of material by alleged creditors, inasmuch as the AO, inter alia, observed that the interest had not been paid and it was merely credited in the accounts of the parties year after year. Therefore, we restore the matter to the file of AO for verification of bills, confirmation of parties etc. which were filed before ld. CIT(A) and also to verify whether the payment of interest had been made to parties in subsequent years or not, as claimed by assessee. - Decided in favour of assessee for statistical purposes. Disallowance of various expenses claimed by the assessee u/s 37(1) - Held that:- CIT(A) correctly restricted the disallowance to the extent of 10% out of salary claimed to have been paid to the employees, further restricted disallowance, and on estimate basis, to ₹ 6,500/- as against 11,500/- on account of telephone expenses; ₹ 24,000/- as against 54,000/- on account of security expenses; ₹ 14,610/- as against 24,610/- on account of conveyance expenses; ₹ 14,780/- as against 19,780/- on account of staff welfare expenses; and ₹ 6,670/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law and on facts in confirming the disallowances of following expenses incurred by the appellant company in the course of business of the appellant company and were eligible deductions under section 37(1) of the Act: S. No. Nature of Expenditure Amount of disallownce 1. Salary 31,800/- 2. Telephone expenses 6,500/- 3. Security Expenses 24,000/- 4. Conveyance Expenses 14,610/- 5. Staff Welfare Expenses 14,780/- 6. Office Expenses 6,670/- 3.1. That the disallowance so confirmed by the learned Commissioner of Income Tax (Appeals) are based on mere assumptions and presumptions and on erroneous assumption that a part disallowance of expenditure is permissible in the hands of accounts is not justified. 3.2. That the learned Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wable deduction u/s 24 of the I.T. Act. The assessee pointed out that these parties had supplied materials and done some work relating to the construction of building in FY 2002-03 from which the assessee was deriving rental income. The AO again issued notice u/s 133(6), calling for details of transaction made by them with the assessee. However, since there was no compliance from M/s Sonali Enterprises and M/s Super Sales (India), other parties only sought time but no details were filed. The AO denied the assessee's claim, inter alia, for the following two reasons: (b) When specifically asked, the assessee has submitted as an afterthought that this amount of interest is allowable from the house property income as the interest was paid on the credit balance of the parties who have done construction work or supplied material for construction. No proof was filed to show that the creditors have done any work or supplied material to the assessee company. Even the notices u/s 133(6) issued and served on creditors parties on the addresses given by assessee remained uncomplied with. (c) As per the provisions of section 24 of the IT Act 1961, a deduction of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty belonging to Pentagon Firm for a sum of ₹ 2,00,000/-. Over and above this, the assessee had also undertaken to pay a sum of ₹ 1,45,000/- to one of the creditors of the said firm. The assessee claimed deduction under section 24(1)(vi) in respect of interest paid by him to the said creditor. It was held that there was no nexus or connection between the purchase consideration of ₹ 2,00,000/- and the undertaking given by the assessee to pay ₹ 1,45,000/-. Thus, it could not be said that this amount of ₹ 1,45,000/- was borrowed towards purchase of property. Therefore, it was held that section 24(1)(vi) has no application to the facts and circumstances of the case. 2.5. Aggrieved, assessee is in appeal before us 3. We have considered the submissions of both the parties and have perused the record of the case. The short point for consideration is whether the interest credited to sundry creditor's account par takes the character of interest payable as contemplated u/s 24(b) or not. It cannot be denied that for the relationship of lender (creditor) and borrower (assessee), it is not necessary that there should be actual flow of money between lend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of conveyance expenses; ₹ 14,780/- as against 19,780/- on account of staff welfare expenses; and ₹ 6,670/- as against ₹ 12,670/- on account of office expenses. Having heard both the parties, we see no reason to interfere in the conclusion arrived at by the ld. CIT(A) on these counts. Accordingly, grounds of appeal nos. 3, 3.1 and 3.2 stand dismissed. 6. Apropos charging of interest u/s 234B raised in ground no. 4, the same is consequential. Ld. AO shall recalculate the charging of interest u/s 234B, if any, while giving effect to appellate order. 7. In the result, assessee's appeal is partly allowed statistical purpose. ITA no. 3473/Del/2010 (A.Y. 2007-08): 1. That on facts and in law the orders passed by the A.O. and partly confirmed by the Commissioner of Income Tax (Appeals) (hereinafter referred to as CIT(A) ) are bad in law and void ab initio. 2. That the Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the disallowances of following expenses incurred by the appellant company in the course of business of the appellant company and were eligible deductions under section 37(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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