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2016 (4) TMI 1009 - AT - Income Tax


Issues involved:
1. Restriction of interest rate claimed by the assessee.
2. Disallowance of various expenses by the Assessing Officer.

Issue 1 - Restriction of interest rate claimed by the assessee:
The case involved the assessee filing a return of income declaring an amount, which was later scrutinized by the Assessing Officer (AO). The AO noticed interest paid on unsecured loans and questioned the rate of interest paid. The assessee defended the interest rate paid, stating it was reasonable and necessary for business purposes. The AO, however, restricted the interest rate, leading to an addition to the income. The assessee appealed to the CIT(A), arguing for the deletion of the addition. The CIT(A) partially agreed with the assessee and restricted the interest payment to lenders at 13%. The assessee further appealed, emphasizing that the loans were essential for business and no excessive interest was paid. The ITAT Delhi observed that there was no evidence to show the loans were misused or that the interest rate was excessive. Consequently, the ITAT directed the AO to allow the claim of the assessee, deleting the addition.

Issue 2 - Disallowance of various expenses:
The AO disallowed a portion of expenses, including car insurance, car depreciation, telephone expenses, vehicle running and maintenance, and interest on car loan. The assessee had voluntarily disallowed a part of vehicle expenses for personal use. The AO, however, disallowed more expenses, leading to a further disallowance. The CIT(A) upheld the AO's decision, stating that fixed statutory allowances did not justify personal use of assets. The assessee appealed, arguing that the expenses were for business purposes. The ITAT Delhi noted that while some expenses were justifiably disallowed for personal use, others like car insurance, car depreciation, and interest on car loan were necessary regardless of personal use. The ITAT restricted the disallowance to 10% of telephone expenses and upheld the disallowance of vehicle running and maintenance expenses. The disallowance of car insurance, car depreciation, and interest on car loan was deleted. The findings in this issue applied to another appeal with similar grounds and amounts.

In conclusion, both appeals were partly allowed by the ITAT Delhi, with detailed analysis and reasoning provided for each issue involved in the judgment.

 

 

 

 

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