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TMI Blog2013 (8) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, assessee fails on this Ground. Depreciation on buildings - Held that:- ere was no evidence to show that the building was complete and put to use during the year under consideration. The CIT(A) has also denied the claim primarily basing on the contents of the Director’s report of the assessee company which indicated that the building was still under construction as on 31.03.2008. The CIT(A) further noticed from the Director’s report an averment that the company would start installation of equipments in the building from October, 2008. There is no material brought on record to negate the findings of the Assessing Officer as well as the CIT(A) and for that reason we are unable to interfere with the conclusion drawn. Disallowance of Telephone Expenses on the ground that the same was for personal use Disallowance on the basis of ITS data - Held that:- We restore the matter back to the file of the Assessing Officer who shall allow a reasonable opportunity to the assessee to reconcile the ITS data and thereafter he shall examine the impugned addition afresh as per law. Ad-hoc disallowance of Welfare Expenses - Held that:- Notably, both the authorities below have launched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recarious financial conditions. In respect of advances to another sister concern namely Trinity Forge Ltd., it was explained that the said sum was receivable on account of sales made to the party in the earlier years and was not recovered due to poor financial condition. The Assessing Officer was of the opinion that poor financial condition of the sister concerns was no reason to extend interest-free advances to them where assessee itself was paying substantial interest on borrowings. The Assessing Officer concluded that the assessee had diverted interest bearing funds towards interest-free loans to its sister concerns and accordingly proportionate interest @ 12% on the advances so made to the sister concerns was worked out of ₹ 29,36,965/-, which was disallowed under Section 36(1)(iii) of the Act. 3. In appeal before the CIT(A), assessee made two fold arguments. Firstly, as per the assessee, the advances were made for business purposes and therefore no disallowance was called for. Without prejudice to the above contention, assessee contended that even assuming that the advances were for non-business purposes, the funds advanced to the sister concerns of ₹ 2,44,74,71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her hand, assessee incurred interest expenditure of ₹ 2,85,38,397/- on borrowings. The Revenue has disallowed the interest proportionate to the impugned interest-free advances by invoking Section 36(1)(iii) of the Act professing that the same is for non-business purposes. That such advances are for non-business purposes is not an issue for consideration before us inasmuch as the assessee has not disputed the position arrived at by the CIT(A) that such advances are for non-business purposes. However, before us, the disallowance has been sought to be resisted on the basis of the proposition emerging from the judgement of the Hon ble Bombay High Court in the case of Reliance Utilities Power Ltd. (supra) whereby it can be said that where an assessee has advanced interestfree funds to the sister concerns and the assessee has both interest bearing and interest free funds, and if the interest free funds are sufficient to cover the advances to sister concerns, a presumption can be drawn that funds advanced to the sister concerns are out of interest-free funds available with the assessee. In this connection, the appellant has sought to point out that the total interest-free funds av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest-free only if interest-free are sufficient to cover the investment is a proposition which is available only in a situation where the investments are for business purposes, is wrong. We say so for the reason that if the investments/advances to the sister concerns were for business purposes then the question of disallowance under Section 36(1)(iii) would not arise at all, as Section 36(1)(iii) explicitly permits deduction for the amount of interest paid in respect of capital borrowed for the purposes of business or profession. Once interest is paid in respect of funds used for purposes of business there is no question of its disallowance under Section 36(1)(iii) of the Act and there would not be a necessity to see as to whether the funds advanced to sister concern are out of interest-bearing borrowings or not. In our view, the CIT(A) erred in not appreciating the judgement of the Hon ble Bombay High Court in the case of Reliance Utilities Power Ltd. (supra) in its proper respective. Accordingly, on this ground the order of the CIT(A) is setaside and the Assessing Officer is directed to delete the addition of ₹ 29,36,965/- made under Section 36(1)(iii) of the Act. On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. In the above background, assessee is in appeal before us. However, there is no material brought on record to negate the findings of the Assessing Officer as well as the CIT(A) and for that reason we are unable to interfere with the conclusion drawn by the lower authorities. On the basis of the facts on record, as emerging from the orders of the authorities below, it is quite evident that claim of the assessee for depreciation of ₹ 13,57,651/- with respect to the new building at Shikrapur unit was untenable and has been rightly denied by the lower authorities. We hereby affirm the same. Thus, on this Ground assessee fails. 11. The next Ground of Appeal is with regard to a disallowance of ₹ 1,00,000/- out of Telephone Expenses on the ground that the same was for personal use. The Assessing Officer had made a disallowance of ₹ 5,00,000/- for personal element out of total expenditure claimed under the head Postage Telephone Expenses amounting to ₹ 24,78,806/-. The CIT(A) has reduced the disallowance by an amount of ₹ 4,00,000/-, and not being satisfied, assessee is in further appeal before us. 12. In this context, after hearing the rival stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowed 10% of the total expenditure, which amounted to ₹ 6,52,530/-. The CIT(A) has also sustained the disallowance, against which assessee is in appeal before us. 18. The stand of the assessee before the CIT(A) as well as before us is to the following effect. Firstly, as per the assessee in the earlier years certain expenses were included under the head salary and wages while in the year under consideration, such expenses were included under the head staff welfare and because of regrouping of the expenditure under the head staff welfare , the figure was not comparable to that of the earlier year. Secondly, it was explained that during the year under consideration expenditure on account of bus facility for Shikrapur plant and tea expenses and safety gear for workers was increased inasmuch as in the earlier year such expenses pertained only to six months. Thirdly, it was contended that the increase is otherwise also justifiable inasmuch as the turnover has also increased in the current years. 19. On the other hand, the learned Departmental Representative has pointed out the increase in expenditure is abnormal and thus the disallowance has been rightly made. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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