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TMI Blog2015 (7) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made by the A.O. invoking the provisions of S. 36(1)(iii) r.w.s. 40A(2)(b) of the Act, saying that the assessee-company itself offered the same for taxation. The 'offering to tax' was under certain misconception of law. The addition is not sustainable and the same be deleted. 3) On the facts and circumstances of the case and in law the amount was offered to tax in A. Y. 2009-10 without appreciating the statutory presumption that the advances/loans covered by S. 40A(2)(b) were given out of own funds which are interest free. The income declared in the return itself exceeds the amount of loans paid to persons covered by S. 40A(2)(b). In view of the statutory presumption advances/loans were presumed to have been given out of the current income of the year on which tax is already paid which goes to build up the interest free funds. The addition of Rs. 34,10,881/- is unwarranted and it be deleted." 3. The Ld. Counsel for the assessee at the outset submitted that the issue stands decided against the assessee by the decision of the Tribunal in assessee's own case for the immediately preceding assessment year. We find the Tribunal in assessee's own case vide I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties. However, in the instant case, the assessee has also obtained loan from private parties and has paid interest @9%. The assessee itself has calculated the interest to be paid to the Directors and related parties @15.60% and offered the balance amount for taxation. Therefore, under the facts and circumstances of the case, the various case decisions relied on by the Ld. Counsel for the assessee are not applicable. 6.3 We further find that the assessee in the grounds has mentioned that it has sufficient interest free funds available which are far in excess of the loans advanced to persons covered u/s.40A(2)(b). In the instant case, there is no question of disallowance of interest on account of interest free advances given to related parties. It is a reverse case wherein the assessee has obtained the loan from related parties by paying exorbitant rate of interest for which the Assessing Officer disallowed the excess interest paid to the related parties by invoking the provisions of section 40A(2)(b) of the I.T. Act. Since the assessee itself has agreed for the addition of Rs. 33,37,059/- to tax being excess interest paid to the related parties covered u/s.40A(2)(b), therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. From the copy of the assessment order, we find on being questioned by the Assessing Officer to explain as to why proportionate disallowance should not be made for claiming the dividend income as exempt u/s.10(34), the assessee in its reply vide submission dated 17-08-2011 has replied as under: " The company has earned a dividend of Rs. 1,60,976/- from Indian Companies which is claimed as exempt u/s 10(34) of the I. T. Act. However, the expenditure incurred regarding the same is negligible and cannot be correctly ascertained". 10.1 We further find similar disallowances were made in the assessment orders passed for A.Yrs. 2006-07 and 2008-09 by the Assessing Officer and nothing was brought to our notice as to the outcome of such disallowance made by the Assessing Officer. The relevant observations of the Assessing Officer at para 4.2 and 4.3 of the assessment order read as under: "4.2 Since the explanation of the assessee as above was not acceptable in pursuance to the provisions of section 14A of the Act rwr 8D of the I, T. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the order of the Tribunal, we find no infirmity in the order of the CIT(A). Accordingly, the same is upheld and the ground raised by the assessee is dismissed. 11. Ground of appeal No.5 by the assessee reads as under : "5) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the ad-hoc disallowance of Rs. 1,32,400/- made by the A. 0. The ad-hoc disallowance be deleted." 12. Facts of the case, in brief, are that the AO during the course of assessment proceedings observed that the assessee has debited an amount of Rs. 13,23,995/- under the heads postage and telephone, furniture repairs and maintenance and cartage. While verifying the bills and vouchers, the AO noticed that some of the expenses were not supported by proper vouchers and are supported by self made vouchers which were not fully verifiable as to the business nexus of the assessee. No telephone call register was maintained to ensure that the entire expenses under this head were incurred for the purpose of business. The AO, therefore, disallowed 10% of the expenses on estimate basis being personal in nature and accordingly made addition of Rs. 1,32,400/- to the total i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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