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2017 (8) TMI 917 - ITAT MUMBAIDisallowance of interest on housing loan borrowed from Citibank - Held that:- On perusal of the details filed by the assessee, we find that the bank has issued two separate confirmation letters for repayment of interest which shows that one loan is borrowed in the name of M/s Peejay Silk Mills and another in the name of M/s Jessica Impex. Though assessee claims to have borrowed both the loans for the purpose of acquisition of property, but failed to prove the nexus of the loan and purchase of property. Therefore, we are of the view that the AO was right in making disallowance towards interest paid 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. 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 and direct him to consider the explanation of the assessee with regard to the allocation of expenditure towards rental income and business receipts. Disallowance of notional interest on loans and advances - Held that:- 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 assessee has advanced interest free funds to the said persons without charging any interest. Therefore, we are of the view that the assessee has failed to prove the nexus between interest free funds and loans and advances given to third parties. The CIT(A), after considering relevant facts has rightly upheld additions made by the AO. We do not find any infirmity in the order of CIT(A); hence, we are inclined to uphold the order of CIT(A) and reject the ground raised by the assessee. Disallowance of depreciation on furniture & fixture on the basis of turnover of the business and “Income from house property” - Held that:- We find force in the argument of the assessee for the reason that the assessee has filed a financial statement explaining the calculation of depreciation wherein he had bifurcated the assets used in the business activity and assets used in the buildings which is part of “Income from house property”. The AO without any basis allocated depreciation on furniture and fixtures on the basis of gross turnover and disallowed depreciation relatable to the activity of “Income from house property” on the ground that the deduction u/s 24 has been allowed. Therefore, we are of the view that the issue needs to be re-examined by the AO in the light of submissions of the assessee that a separate working has been furnished to explain the depreciation on furniture and fixtures, which is fully relatable to business activity of the assessee. Hence, we set aside the issue to the file of the AO and direct him to consider the issue afresh in the light of the details filed by the assessee.
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