TMI Blog2017 (8) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... interest expenditure claimed by the assessee u/s. 36(1)(iii) would be liable to be made. We thus restore the matter to the file of the A.O for fresh adjudication - Ground of appeal no. 1 raised by the assessee is thus allowed for statistical purposes. Disallowance of the ‘vehicle expenses’ - expenses attributed to the personal usages - Held that:- In the case of the present assessee the A.O had carried out disallowance of ‘vehicle expenses’ not merely for the reason that some part of usage of the motor cars could safely be attributed to the personal usages by the partners of the assessee firm and their family members, but also on the ground that the documentary evidence supporting incurring of the vehicle expenses by the assessee neither did inspire much confidence, nor the authenticity of the same could be proved to the hilt by the assessee. We thus in the totality of the facts involved in the case of the present assessee, in all fairness restrict the disallowance made by the A.O. in respect of ‘vehicle expenses’ to 10%. The order of the CIT(A) upholding the disallowance of ‘vehicle expenses’ at the rate of 20% is thus modified in light of our aforesaid observations. The Gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee firm had substantially overdrawn their capital accounts, which had resulted to debit balances of ₹ 97,16,752/- and ₹ 1,77,96,789/- in their respective capital accounts. Accordingly, the A.O holding a conviction that the assessee had utilised the Interest bearing loans not in its business, but for advancing of interest free amounts to third parties and facilitating overdrawing of the capital accounts by the partners, therefore, disallowed the interest expenditure of ₹ 5,23,872/- claimed by the assessee u/s. 36(1)(iii). The A.O further being of the view that the claim of the assessee in respect of expenditure incurred by way of vehicle expenses was not fully supported by credible evidence, and further in the absence of any log book maintained by the assessee in respect of the vehicles expenses, the personal usage of the vehicles by the partners of the assessee firm and their family members could not be ruled out, thus disallowed 20% of the vehicle expenses and depreciation on motor cars and made a consequential addition of ₹ 31,057/- in the hands of the assessee. The A.O thus deliberating on the aforesaid issues assessed the income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties. It was thus submitted by the ld. A.R. that the A.O while disallowing the entire sum of ₹ 5,23,872/- claimed by the assessee as interest expenditure in its profit and loss account, had gravely erred in failing to take cognizance of the interest of ₹ 3,93,569/-(supra) which was received by the assessee on the amounts advanced by it to certain parties, as well as the substantial interest free funds which were available with the assessee. That in the backdrop of the aforesaid facts, it was further submitted by the ld. A.R. that now when the assessee had substantial interest free funds available with it, therefore, the A.O had gravely erred in disallowing the interest expenditure without establishing any nexus between the interest bearing loans received and the interest free advances given by the assessee. The ld. A.R. further submitted that the appeals of the assessee involving the common issue pertaining to disallowance of interest u/s. 36(1)(iii) for A.Y. 2008-09, A.Y. 2010-11 and A.Y. 2012- 13 (i.e year under consideration) were pending adjudication before the same CIT(A). It was submitted by the ld. A.R that the aforesaid three appeals to the understanding of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which aggregated to ₹ 5,01,57,292/-, interest free loans of ₹ 5,25,04,133/- were available with the assessee. It was thus averred by the ld. A.R that in the backdrop of the aforesaid factual position no disallowance of any part of the interest expenditure of ₹ 5,23,872/- (supra) was called for in the hands of the assessee. Per contra, the ld. D.R relied on the orders of the CIT(A) and submitted that the latter had rightly upheld the disallowance made by the A.O. 7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We have given a thoughtful consideration to the facts of the case and find that a perusal of the relevant pages of the APB, viz. Page 3 Page 4 Page 7 and Page 8 to which our attention was drawn by the ld. A.R prima facie supports his contention, viz. (i) that the assessee was in receipt of interest income of ₹ 3,93,569/- pertaining to the amounts advanced by it to the third parties, and (ii) the assessee was having substantial funds available with him by way of interest free loans. We though are not persuaded to subscribe to the unsubstantiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is thus allowed for statistical purposes. 8. The ld. A.R further assailing the disallowance of ₹ 31,057/- (supra) made by the A.O in respect of the vehicle expenses submitted that as the expenses had been incurred by the assessee exclusively in the course of his business, therefore, no disallowance of any part of the said expenditure was called for in the hands of the assessee. Alternatively, it was averred by the ld. A.R that as depreciation was a statutory allowance, therefore, no part of the same could be disallowed by attributing the same to the personal usage by the assessee. The ld. A.R in order to drive home his aforesaid contention, relied on the order passed by the ITAT, Mumbai B bench in the case of Mukesh K. Shah Vs. ITO (2005) 92 ITD 349 (Mum), wherein the Tribunal had deleted the proportionate disallowance of depreciation in respect of the car used by the assessee for the purpose of his business, for the reason that the same being a statutory allowance, thus, the same cannot be restricted on account of personal usage of the vehicle by the assessee. The Tribunal in the aforesaid case had observed as under:- 13. But as far as the depreciation is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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