9911796707
TMI Blog2017 (8) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... by the bank clearly establishes payment of interest of ₹ 3,99,896. Therefore, we direct the AO to allow interest of ₹ 3,99,896 as claimed by the assessee as against ₹ 3,39,896. Disallowance of expenditure of staff salary, repairs and maintenance and water charges - Held that:- AO, without any basis, simply divided the total expenditure on the basis of turnover which is not only illegal but illogical. We find force in the arguments of the assessee for the reason that unless the AO specifies himself nexus between the expenditure debited in the P&L Account to the receipts cannot disallow expenditure on the basis of receipts. The assessee has filed its financial statements for the relevant financial year. On going through the financial statement filed by the assessee, we find that the assessee has allocated expenditure relatable to rental income and business income. The AO, ignoring the workings filed by the assessee, disallowed expenditure on adhoc basis without any basis. Therefore, we are of the considered view that the issue needs to be reconsidered by the AO in the light of the explanation of the assessee. Hence, we set aside the issue to the file of the AO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ND Shri G Manjunatha (ACCOUNTANT MEMBER) For The Appellant : Shri RK Bothra For The Respondent : Arju Garodia ORDER Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of CIT(A)-36, Mumbai dated 06-01-2016 and it pertains to assessment year 2010-11. The assessee has raised following grounds of appeal:- 1. On the facts, in law and in the circumstances of the case, whether the learned CIT (A) was justified in confirming the action of A.O. that interest paid to citi bank on housing loan account no. 2211395 to the extent of ₹ 60,000/- is not allowable as deduction. 2. On the facts, in law and in the circumstances of the case, whether the learned CIT (A) was justified in confirming the action of A.O. that interest paid to citi bank on housing loan account no. 219658 to the extent of ₹ 7,74,887/- is not allowable as deduction. 3. On the facts, in law and in the circumstances of the case whether the learned CIT(A) was justified in confirming the action of the A.O. disallowing a sum of ₹ 2,75,000/- out of salary, Repairs and Maintenance and Water charges. 4. On the facts of the case, in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.2,11,109/- 3. Aggrieved by the assessment order, the assessee preferred appeal before CIT(A). Before CIT(A), the assessee has filed elaborate written submissions and challenged additions made by the AO towards disallowance of municipal taxes, interest on housing loan, adhoc disallowance of expenditure and disallowance of depreciation on the basis of apportionment between income declared under the heads, business income and income from house property . The CIT(A), after considering the submissions of the assessee partly allowed appeal filed by the assessee, wherein he has confirmed additions made by the AO towards disallowance of interest paid on housing loan, disallowance of expenditure; however, allowed partial relief in respect of notional interest worked out by the AO on advances, re-working of depreciation on fixed assets, etc. Aggrieved by the order of CIT(A), the assessee is in appeal before us. 4. The first issue that came up for our consideration is disallowance of interest on housing loan borrowed from Citibank. The facts which lead to the impugned addition are that the assessee has borrowed two housing loans from Citibank, vide loan accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on housing loan borrowed in the name M/s Jessica Impex. Insofar as housing loan borrowed in the name of M/s Peejay Silk Mills, on perusal of certificate of interest issued by the bank clearly says that the assessee has paid interest of ₹ 3,99,896, but the AO has allowed interest amount of ₹ 3,39,896. Thus, there is a difference of ₹ 60,000 which has been explained by the assessee that the AO has taken incorrect figure which is evident from the fact that the certificate issued by the bank clearly establishes payment of interest of ₹ 3,99,896. Therefore, we direct the AO to allow interest of ₹ 3,99,896 as claimed by the assessee as against ₹ 3,39,896. 6. The next issue that came up for our consideration is disallowance of expenditure of ₹ 2,75,711 out of staff salary, repairs and maintenance and water charges. The AO has worked out expenditure debited in the P L Account on the basis of gross receipts and disallowed a sum of ₹ 2,75,711 proportionately on the basis of gross receipts from rent and gross receipts from business. The assessee has claimed rental income under the head Income from business and claimed expenses against such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended out of interest free funds available. The assessee further contended that it has interest free funds of ₹ 98,57,000 whereas its advances are ₹ 55,28,591, therefore, the AO was incorrect in adding notional interest on business advances. The assessee further contended that many of the advances have become bad which are irrecoverable as these advances are more than 10-12 years old paid for either purchase of raw materials or expenses. Therefore, there is no reason for computing notional interest on such advances in the absence of any nexus between diversion of interest bearing funds to non business purposes. 8. Having heard both the sides and considered material on record, we find that the AO as well as the CIT (A) has recorded a categorical finding that the assessee has paid interest on unsecured loans borrowed from other parties, whereas not charged any interest on loans and advances. We further observe that the assessee has failed to prove the nexus between advances and business connection. Though assessee claims that these advances become bad debt and not recoverable, but failed to file any evidence. This factual situation compel us to conclude that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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