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2010 (2) TMI 918 - AT - Income TaxDisallowance of car expenses and depreciation, telephone expenses, business promotion expenses - assessee appeared from time to time and filed the required details, without discussing anything in the assessment order & AO disallowed 1/5th of the car expenses and depreciation on car and 1/5th on telephone expenses being treated as personal nature - Held that:- Merely on estimate or on ad hoc basis no disallowance can be made, AO has to give a specific finding as to which expenses are not wholly and exclusively for the business purposes. Therefore, the disallowance is not called for Disallowance of interest on borrowed capital – expenses claimed under section 36(1)(iii) - interest paid in respect of capital borrowed for the purposes of business or profession – Held that:- Terms of MOU have been followed in letter and spirit, amount was borrowed for the purpose of business and hence interest paid on such borrowal are allowable. If by giving the advances the business interest of the assessee is served and even if such advances are without charging any interest or whether such advances are to associate concern, it will not alter the situation. Advances for the purpose out of borrowed funds will still be considered to be "Capital borrowed for the purpose of business" and hence interest payable on such borrowal are allowable as deduction under sec.36(1)(iii) of the Act while computing the business income. Therefore, there is no ground to disallow the interest payable by the assessee, appeal is dismissed.
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