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2022 (3) TMI 1329 - ITAT JAIPURDisallowance u/s 14A r.w.r. 8D - HELD THAT:- AO completely ignored the submission of assessee and made the disallowance. At this juncture, our attention was drawn towards the Balance Sheet observed that out of total investment of ₹ 4,33,92,050/-, a sum of ₹ 2,77,92,050/- represents the amount invested in Convertible Warrants and thus could not form part of total investments eligible for consideration of disallowance u/s 14A read with Rule 8D of the Rules. AO while computing the disallowance, considered total value of investment, thus the basic approach of the AO to the issue in hand is patently wrong. Further investment in equity shares was carried over from preceding year and was not made in the year under consideration. Apart from this, the AO has failed to bring on record the nexus between the funds borrowed and invested in the equity shares having tax free income, therefore, we are of the view that the AO without appreciating these facts concluded that investment in shares was made out of borrowed funds. Assessee is having Closing Balance of Unsecured Loan taken from M/s Anil Special Steels Industries Ltd. (ASSIL) of ₹ 3,34,31,537/- out of which a sum of ₹ 83.20 lacs was old term loans given for the acquisition of Plant & Machinery on which interest @ 18% is being paid and balance amount is interest free receipt, meaning thereby that assessee has already received more interest free funds than advance made and no interest bearing fund were utilized during the year for making providing advance to ASSIL, thus question of making any disallowances is beyond the scope of section 14A and 36 (1)(iii) - we are of the considered view that the interest bearing funds taken by assessee were utilized wholly and exclusively for the purpose of business, in respect of which no disallowance could be made, therefore, we direct to delete the disallowance so made and confirmed qua this issue. Addition u/s 68 - AO doubted the creditworthiness of the lender and made addition - HELD THAT:- Assessee has discharged the onus as required u/s 68 of the Act by proving identity of creditor, genuineness of transaction and creditworthiness/capacity of creditor. In fact, the AO has not disputed the identity and genuineness of lender rather made the addition solely alleging creditworthiness. So far as creditworthiness is concerned, the assessee has furnished audited Balance Sheet of M/s Pooja Vintrade Pvt. Ltd. which duly incorporates all the entries. It was submitted by the ld. AR that the assessee cannot be penalized for non compliance of notices on the part of debtor. In this regard, we are of the view that it is not the case that notice u/s 133(6) remained unserved rather notice remain uncomplied for the reason best known to them. During the course of appellate proceedings, the ld. CIT(A) directed to produce the party, however being located outside Jaipur (at Kolkatta), they could not be produced and due to the fact that the borrower is always in subdued capacity, assessee could not compel the lender to appear. However, assessee with best efforts was able to obtain affidavit from director of Pooja Vintrade Private Ltd , duly confirming the fact that they have advanced loan to assessee in F.Y. 2011-12, which has closing balance of ₹ 21,80,000/- as on 31.03.2012, which was furnished before ld.CIT(A), however was brushed aside. The ld. CIT(A) while confirming the addition has stated that the assessee has not submitted complete Balance whereas the assessee vide letter has submitted detailed Balance Sheet. Thus we found merit in the contention of the ld. AR and the case laws relied upon before us are also found support the case of the assessee. No new facts and circumstances has been put forth by the ld. DR, therefore, we direct to delete the addition made and confirmed U/s 68 of the Act. Disallowance of expenses claimed in the P&L account as vehicle and travelling expenses - HELD THAT:- The Coordinate Bench of Pune Tribunal in the case of DCIT v. Kolhapur Zilla Sahakari Dudh Utpadak Sangh Ltd. [2008 (3) TMI 389 - ITAT PUNE-A] has held that “S. 37(1)-For the expenditure to be allowable u/s. 37(1), it may be incurred `voluntarily' and without any 'necessity' and if it is incurred for promoting business and to earn profits, assessee can claim deduction u/s. 37(1), even though there was no compelling necessity to incur such expenditure.” We found merit in the contention of the ld. AR and the case laws relied upon before us are also found support the case of the assessee. No new facts and circumstances has been put forth by the ld. DR, therefore, we direct to delete the addition made and confirmed qua this issue.
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