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2015 (5) TMI 1216 - ITAT INDOREAddition on account of processing charges paid for availing personal and home loans - Expenditure not connected with business - disallowance u/s 37(1) - whether section 40a(ia) is applicable to it or not? - HELD THAT:- The assessee has paid interest on housing loan and claimed as business expenditure. We find from the order that the assessee has taken housing loan from HDFC Bank and he has also taken housing loan from Indiabulls Private Limited. It is the contention of the assessee that the assessee has taken this housing loan but this loan has been used in his jewellery business. Therefore, this may be allowed as business expenditure, but we find that the housing loan is taken from Indiabulls and Reliance Capital for construction of house, therefore, we are of the view that the AO, has not verified whether this housing loan has been used for construction for construction of house or not. The AO has also not verified from the Bank as to how the assessee has taken his loan from Indiabulls and Reliance Capital for construction of house and housing loan has been used in business purpose. Therefore, we restore this issue to the file of AO and the AO is directed to verify from Bank and concerned companies for what purpose the assessee has taken this loan and housing loan and how it was used and how it was shown to be taken from India bulls Housing Finanace and Reliance Capital. The AO is directed to make the inquiry and if the AO finds that the assessee has taken this housing loan for which housing loans are given for business purpose, then processing charges and interest payment should be decided accordingly. The AO is directed to verify whether section 40a(ia) is applicable to it or not. Addition u/s 68 - assessee has taken unsecured loan from the above parties and has not submitted the income tax returns of the depositors - HELD THAT:- The assessee has submitted the balance sheet and list of sundry creditors. The accounts of the two borrowers show that there was no movement in the accounts of the two parties. The borrowing amount was not paid since last three years, therefore, the AO has held that liability is ceased. Therefore, he has added it u/s 41(1) of the Act. We find that Hon'ble Supreme Court in the case of Sugauli Sugars [1999 (2) TMI 5 - SUPREME COURT] wherein it is clearly held that if any liability which the assessee wanted to pay this amount, then the Limitation Act would not apply and the liability still remains. Therefore, the ld. CIT(A) is justified in his action and our Pinterference is not required. Gross profit addition by 2 % - HELD THAT:- We find that the AO has not pointed out any specific explanation or evidence in rejecting the claim of low gross profit rate. The books of the assessee are audited by statutory auditors. The assessee has given the reasons that there was fall in gross profit due to the market condition on account of rate of fluctuation in gold and silver ornaments. Looking to these facts in to consideration, we are of the view that it is proper and appropriate to restrict the addition on account of gross profit @ 2.5 % instead of 2% adopted by the ld. CIT(A). In the result, this ground is partly allowed.
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