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TMI Blog2015 (10) TMI 2237X X X X Extracts X X X X X X X X Extracts X X X X ..... st on fixed deposit - CIT(A) deleted the addition - Held that:- AO has not made addition of notional interest but this interest has accrued to the assessee on fixed deposit of 30 lakhs made with SBI. The assessee neither credited any interest income to the P 30 lacs is to be sustained. Accordingly, we confirm the addition and reverse the order of CIT(A) on this count. - Decided against revenue. Addition on interest from loan - CIT(A) deleted the addition - Held that:- No notional interest can be added unless and until there is positive proof that the assessee has actually charged interest or credited interest. We find that this is purely a notional interest and assessee specifically contended that this is interest free loan. The assessee since FY 2002-03 no interest has been charged and revenue has not made any addition qua this earlier years also. In view of the above facts, we confirm the order of CIT(A) in deleting the addition and this issue of revenue’s appeal is dismissed. - Decided against revenue. Addition made under the head loss on account of share trading - CIT(A) deleted the addition - Held that:- Purchase and sale bills of shares wherein complete details are enclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. Even otherwise, the assessee now before us contended that in AY 2006-07 the repair expenses were allowed by the AO in full while framing assessment u/s. 143(3) of the Act dated 24.12.2008. We find no infirmity in the order of CIT(A) and hence, this issue of revenue’s appeal is dismissed. - Decided against revenue. Addition in the head of Corporation Tax - CIT(A) deleted the addition - Held that:- All the letters regarding payment of corporation tax was filed before AO vide letter dated 19.02.2007. The same letter was filed before Tribunal also wherein complete details of Corporation Tax paid is enclosed at annexure-7. The relevant details are given at page 35 of assessee’s paper book, which clearly proves that the assessee has paid the Corporation tax and it is the responsibility of the owner only to pay the Corporation tax and not the tenant. Accordingly, we confirm the order of CIT(A) - Decided against revenue. Disallowance of motor car expenses - CIT(A) deleted the addition - Held that:- The assessee in its paper book has filed complete details of motor car expenses as annexure-8 of the same and also depreciation chart on which depreciation is claimed to have been made. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of general expenses of ₹ 16,13,694/- made by the AO." "Assessee's ground No. 1: 1. For that in view of the facts and in the circumstances the Ld. CIT(A) is wholly unjustified in not fully deleting the arbitrary, ad hoc and estimated disallowance of ₹ 17,92,993/- made in assessment on a/c of General Expenses and instead restricting/confirming the disallowance to the extent of ₹ 1,79,299/- (10% of ₹ 17,92,993/-) without considering the facts that the expenses on this a/c were incurred wholly and exclusively for the purpose of business." 3. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has made disallowance on account of general expenses amounting to ₹ 17,92,993/- for the reason that the assessee has claimed expenses against rental income of ₹ 1,60,36,143/-, motor car hire charges of ₹ 8,91,631/- and dividend income of ₹ 17,40,745/-. According to AO, this general expense does have any nexus with earning of income and claim of expenditure. Accordingly, he disallowed the entire claim of ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses as cost for club services and facilities used. In this regard, the CIT(A) deleted the addition by observing that the AO has not specified any particular item of expenditure which is personal in nature and not related to business. He also took note of the fact that 10% of general expenses have already been disallowed in earlier ground which includes club expenses. Before us also, Ld. Counsel for the assessee reiterated the above facts and placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Nestle India Ltd. (2008) 296 ITR 682 (Del) and also other judgments. Hon'ble Delhi High Court in the case of Nestle India Ltd., supra has held as under: "Held, dismissing the appeal, that since the Assessing Officer had allowed a deduction of 50 per cent of ₹ 2 lakhs under section 37(2) of the Act, the expenditure incurred was for business purposes otherwise the entire amount would have been disallowed by the Assessing Officer. Even though there was no specific finding that the payment was made by the assessee for improving its business there was an implicit acknowledgment that the expenses incurred by the assessee were for business purposes. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al is allowed. 9. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the addition made by AO under the head interest from loan amounting to ₹ 1,80,000/-. For this, revenue has raised following ground no. 4: "4. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of interest from loan of ₹ 1,80,000/- made by the AO." 10. We have heard rival submissions and gone through facts and circumstances of the case. Briefly stated facts are that the AO noted the fact that the assessee has given a loan of ₹ 15,00,000/- to one Shri Jaidev Prasad but no interest was charged thereon. This loan was given to Shri Jaidev Prasad in FY 2002-03 but since then no interest has been received by the assessee and even the principal is outstanding. Therefore, the interest has not been charged on the loan. The assessee before the AO contended that this is interest free loan. The AO did not accept the explanation of the assessee and charged notional interest @ 12% on the loan of ₹ 15,00,000/- and accordingly, made addition of ₹ 1.80 lacs. Aggrieved, assessee preferred appeal before CIT(A), w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect was pointed out in the share transaction and on the basis of the same, CIT(A) deleted the addition by observing as under: "Ground no. 5 relates to addition of ₹ 1,80,000/- on account of interest. The AO found that the appellant has given loan of ₹ 15,00,000/- to Shri Jaidev Prasad, but no interest was charged thereon. It was explained before the AO that the loan was given in FY 2002-03, but, since then, no interest has been received by the appellant; and, even the principal has not been returned. The appellant has therefore not charged any interest on the loan. The AO did not accept the explanation and made an addition of ₹ 1,80,000/- on account of interest @ 12%. The ld. AR reiterated the submission already made before the AO. It was also submitted that the provisions of the Income Tax Act provide for taxation of the real income and not the notional income. I find force in the submission of the appellant. The AO has failed to bring any positive material on record to establish that the appellant has actually earned interest on loan. The AO was not justified in making the addition on account of notional interest. Ground no. 5 is allowed." Aggrieved, now re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iss this ground of appeal of revenue. 16. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the addition made by AO under the head legal expenses amounting to ₹ 1,39,836/-. For this, revenue has raised following ground no.6: "6. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of legal expenses of ₹ 1,39,836/- made by the AO." 17. Briefly stated facts are that the AO disallowed the claim of legal expenses of ₹ 1,39,836/- by noting that the legal expenses are incurred with regard to acquisition of properties and maintenance of properties and these are not related to business. Hence, he disallowed the expenses being capital in nature. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) allowed the claim of the assessee by observing that the AO has not brought any material on record to show that expenses are capital or personal in nature. Hence, he deleted the addition. Aggrieved, revenue is in second appeal before Tribunal. 18. We have heard rival submissions and gone through facts and circumstances of the case. We find that these legal expenses comprised of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which represents 49.95% of the loan taken and balance 49.85% borrowing represents loans given to parties. The assessee debited a sum of ₹ 35,81,188/- on account of interest paid/payable to parties and accordingly, he made disallowance u/s. 14A of the Act qua the exempt income but restricted the disallowance to the extent of exempt income only at ₹ 17,40,745/-. Aggrieved, assessee preferred appeal before CIT(A), who directed the AO to apply rule 8D of the I. T. Rules read with section 14A of the Act and made disallowance accordingly. Against these directions, revenue as well as assessee both came in appeal before us. 21. We have heard rival submissions and gone through facts and circumstances of the case. We find that the dividend income earned by the assessee is to the extent of ₹ 17,40,745/-. The AO is unable to prove any nexus with the disallowance of expenditure and that of the earning of exempt income. However, the relevant assessment year involved is 2005-06 and Rule 8D of the I. T. Rules will not apply to this assessment year as held by Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. Vs. DCIT (2010) 328 ITR 81 (Bom), the provision being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not apply to this assessment year as held by Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. Vs. DCIT (2010) 328 ITR 81 (Bom), the provision being prospective and not retrospective. In term of the above, we are of the view that the Tribunal is taking a consistent view and restricted the disallowance at 1% of the exempt income. Hence, we also direct the AO to make disallowance to the extent of 1% of the dividend income. The AO is directed accordingly. Both the ground of appeal of revenue and that of the assessee are partly allowed as indicated above. 24. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the addition made by AO under the head repair charges at ₹ 12,58,563/-. For this, revenue has raised following ground no. 8: "8. The ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of repairing charges of ₹ 12,58,563/- made by the AO." 25. Briefly stated facts are that the AO noted from the accounts of the assessee that it has claimed repair charges expenses at ₹ 12,58,563/-. The AO during the course of assessment proceedings observed that these properti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we confirm the order of CIT(A) and this issue of revenue's appeal is dismissed. 29. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the disallowance of motor car expenses at ₹ 9,70,629/- and depreciation at ₹ 10,02,971/-. For this, revenue has raised following ground no.10: "10. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of motor car expenses of ₹ 9,70,629/- and depreciation of ₹ 10,02,971/- made by the AO." 30. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO disallowed claim of motor car expenses at ₹ 9,70,629/- and depreciation at ₹ 10,02,971/- as no details were furnished before AO. Aggrieved, assessee preferred appeal before CIT(A), who deleted both the disallowances by observing that all the details were furnished before the AO and even in Ay 2003-04 the ad hoc disallowances made @ 20% by the AO was deleted by CIT(A). The CIT(A) observed that he has verified from the records that necessary details were filed before the AO and no specific particular of item is held to be non-genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred on facts and in law in deleting the addition in the head of bad debts written off of ₹ 42,22,131/- made by the AO." 35. Briefly stated facts are that the assessee submitted a detailed list of bad debts at ₹ 42,22,131/- without any evidence that the amounts have been treated as income in earlier years or any recovery measure including legal action have been taken against the debtors. In the absence of the same, the AO disallowed the bad debts. Aggrieved, assessee preferred appeal before CIT(A), who after considering the fact that the assessee has written off the debts in its books of account, which is arising out of the business transaction of the assessee of giving loans and advances. He also observed that the assessee has earned substantial interest out of these loans, which is assessed as business income in the relevant years pertaining to relevant preceding years. The assessee has filed details which are reproduced in CIT(A)'s order at pages 4 to 12. It was contended before the CIT(A) that complete details of debtors were filed before AO vide letter dated 28.12.2008 and the same is also enclosed by the assessee now before us in the paper book. In term of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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