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2014 (3) TMI 535 - ITAT MUMBAIDisallowance of interest u/s 36(1)(iii) of the Act Diversion of Interest bearing borrowed funds Held that:- As decided in assessees own case for the earlier assessment year, the assessee had interest free funds available at its disposal at a higher figure then the amount advanced to its sister concern, the closing balance of which has been reported Relying upon CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - if there are interest free fund available with the assessee sufficient to meet its investment and at the same time, loan has been raised, it can be presumed that the investments were made from interest free funds - From the very prescription of section 36(1)(iii), it is discernible that the amount of interest paid in respect of capital borrowed, for the purpose of business or profession, is allowed as deduction - So long as the purpose of utilisation of the capital borrowed is towards business, no disallowance can be made - the advances were made by the assessee to its sister concern for effecting purchases, the CIT(A) cannot be held to be justified in restricting the addition on account of disallowance of any interest Decided in favour of Assessee. Disallowance of motor car expenses Held that:- The mere fact that the vehicle not standing in the name of the assessee, cannot be a reason for making or sustaining any disallowance on the account of motor car expenses Relying upon CIT vs. Mirza Ataullaha Baig and other [1992 (10) TMI 52 - BOMBAY High Court] the assessee to be entitled to depreciation on vehicle purchased which was not registered in the assesses's name the reason of the AO for making the disallowance of expenses cannot be sustained thus, it will be just and fair if 10% of the total motor car expenses, in respect of all the 9 cars, are held to be relatable to be personal use by the partners of the firm Decided partly in favour of Assessee. Disallowance of depreciation and interest paid on loan Held that:- The sustenance of the disallowance of depreciation on that ground cannot be sustained the disallowance of depreciation is sustained @ 10% on account of personal use by the partners in respect of all the motor cars - the interest part towards loan on motor car is deductible in view of the fact that the cars were purchased by the assessee firm and were standing in its balance sheet Decided partly in favour of Assessee. Disallowance of sales promotion expenses Disallowance of Travelling and conveyance expenses Disallowance of Telephone and Mobile Charges - Nature of Expenses Personal OR Business - Held that:- The CIT(A) was justified in sustaining the disallowance at 10% of expenses in view of the facts that these expenses were not properly substantiated with bills etc. Only kutcha bills and vouchers were produced for Travelling and conveyance expenses - Decided against Assessee.
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