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2018 (12) TMI 118 - ITAT PUNEAddition on the basis of 12% profit element in the closing work in progress - Held that:- Considering the totality in this case and the fact that the ad hoc addition has been made on the premise that the assessee failed to furnish details, we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this score is set-aside and the matter is restored to the file of AO. We order accordingly and direct him to verify the assessee’s details and seek any other further details, if required, for enabling him to complete the assessment in right perspective. Addition on account of rental income and disallowance of proportionate depreciation allowance and insurance expenses - Held that:- As observed that the assessee admittedly earned rental income of ₹ 1,25,000/-, which was accepted during the course of survey. In that view of the matter, inclusion of ₹ 10,50,000/- as income from house property, cannot be faulted with. Disallowance of expenses - Held that:- The assessee has placed on record a chart showing the use of its office premises by Phinix Shelter Pvt. Ltd., other group entities and self. This chart indicates that the assessee used only 30% of the office premises for its business purpose and remaining 70% was used by Phinix Shelter Pvt. Ltd. and other related entities. Section 38(2) of the Act provides that where any building etc. is not exclusively used for the purpose of business, the deductions under relevant clauses of sections 30, 31 and 32 shall be proportionately reduced. Once it is found as an admitted position that the assessee was using only 30% of the premises, it is but natural that the disallowance in respect of depreciation and other expenses to the extent of 70%, being, relatable to the part not used by the assessee exclusively for its business purposes, cannot be faulted with. Addition towards interest - Held that:- The Hon'ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd.[2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that where an assessee possessed sufficient interest free funds of its own which were generated in the course of relevant financial year, apart from substantial shareholders’ funds, presumption stands established that the investments in sister concerns were made by the assessee out of interest free funds and, therefore, no part of interest on borrowings can be disallowed on the basis that the investments were made out of interest bearing funds - Addition as the amount of net advances to the sister concerns is less than the amount of share capital and free reserves.
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