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2010 (9) TMI 1119 - AT - Income TaxQuantum of disallowance of aviation expenses and depreciation with respect to Bell Helicopter and Cessna aircraft - interest expenditure is allowable as a business expenditure while computing the total income - HELD THAT:- the revenue is no fair in adopting 20% (1/5th of the claim) in respect of the Bell Helicoptor and in adopting 30% (nearly 1/3th of the claim) in respect of the Cessna Aircraft and in our opinion, it constitutes an artificial difference. It is also relevant to mention that the section 038(2) refers to the expression ‘fair’ and neither of the IT authorities ie AO or CIT(A) have undertaken any exercise to establish the said fairness in adopting the said percentages. It is true that the onus is on the assessee to substantiate the claim of the assessee. Considering the peculiar circumstances better known to the assessee, there is surrender of claim to the extent of 1/7th of the total claims ₹ 93,96,771/- (ie ₹ 66,04,980/- on account of depreciation of vehicles and ₹ 27,91,791/- on account of aviation expenses). At this point of time, in our opinion, the Onus has shifted to the revenue to demonstrate that the said surrender is incorrect and estimations made by the AO are fair within the meaning of section 038(2). Fairness is an important factor in matters of quantification of the disallowances, when section 038(2) is invoked. The revenue has not done any probe independently to demonstrate that assessee’s offer is unfair and his estimations are fair. Hence, we are of the opinion, that the estimations made by the AO, which are confirmed in case of the Cessna Aircraft and alterted in case of Bell Helicoptor are hereby set aside. Therefore, we are of the opinion, that the offer of the assessee to restrict the disallowance to 1/7th of the claims in respect of both Bell Helicoptor and the Cessna Aircraft, is reasonable and fair. Accordingly, the AO is directed. Thus, the original grounds raised by the assessee are allowed. Income from house property - determination of the annual letting value (ALV) - HELD THAT:- In the present case, The assessee has let out space to the sister concern, and is receiving ₹ 10,000/- per month from each sister concern. Therefore, the assessee’s property is covered by provisions of clause (b) of section 23(1). This is a fact that assessee’s actually rent received or receivable in respect of the said property is not in excess of the ALV computed under clause (a) of section 23(1). In the light of these facts, AO’s decision to invoke a comparable case to the property covered under clause (b) is not in tune with the above referred legal position. Further, it is not also the case of the AO that assessee is covered by the exemptions provided in the Maharashtra Rent Control Act and, therefore, ALV of the property shall be determined on the basis of the comparable cases. In any case, the standard rent is upper limit for determination the ALV as held in the case of Makrupa Chemicals Pvt Ltd[2006 (9) TMI 207 - ITAT BOMBAY-F].Therefore, we are of the opinion that the order of the CIT (A) does not call for any interference. claim of interest expenditure - HELD THAT:- On considering the facts that the assessee is in fact entitled to the deduction in respect of the relatable interest on the loan invested in the acquisition of the TCS shares, the claim is allowable either u/s 36(iii) or section 48 and certainly not under the provisions of section 57(iii) for the reason that the impugned interest expenditure is not ‘expanded wholly and exclusively for the purpose of making or earning such income’ i.e interest income against which the said interest expenditure is allowed by the CIT(A) to be set off. Therefore, we do not agree with the CIT(A) in concluding that the addition of ₹ 22,13,037/- being disallowance of interest paid on borrowed funds is held to be allowable u/s. 57(iii). entitled to deduction either u/s 36(iii) - HELD THAT:- Regarding the relevant interest segment relatable to SPANCO shares, in the absence of any successful acquisition of shares and no consequential income chargeable to tax u/s 48 or 56 of the Act, we are of the opinion, the assessee is entitled to deduction u/s 36(iii) of the Act. Accordingly, the additional ground raised by the assessee is allowed and consequently, the ground raised by the revenue is dismissed. deletion of addition u/s 69C - HELD THAT:- The AO has not produced the details of any enquiries conducted by the Investigation Directorate in the case of the assessee for penny shares irregularly. No proof that the broker was paid 10% commission by the assessee was brought on record. No documents or statement of the assessee or the broker or any material on which the Assessing Officer has relied has been brought on record before making the addition @ 10% of the sale consideration. As the addition has been made entirely on conjectures and surmises the addition of ₹ 7,48,500/- is directed to be deleted. Therefore, it is the case of addition based on the surmises, which is not sustainable in law. Accordingly, the we find no reason to interfere with the order of the CIT(A). Accordingly, the revenues appeal is dismissed.
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