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2012 (9) TMI 754 - AT - Income TaxDisallowance of interest expense in relation to advance given to sister concern - Assessee has not charged any interest on its advance to a 100% subsidiary and to a group company – Assessee contended that such amount was given in the ordinary course of the business – Subsidiary company have no other business and only having land on which construction is not permissible – No increase in share capital & reserves but secured loan has been raised - Held that:- As concluded from the facts of case the interest free funds available with the assessee are far more than the interest free advances. Interest free advance granted by the assessee to the subsidiary company was less than cash profit generated by the assessee. Therefore, it should be presumed that the subsidiaries were paid out of the profit of the assessee which is far in excess of the amount paid to the subsidiaries. Decision in favour of assessee Disallowance of employees' contribution to P.F – Assessee contended that these payments have been made within the due date of filing of return u/s. 139(1) – Held that:- As the dates provided by assessee are not available in either of the orders of the authorities below. Therefore for verification issue remand back to AO. Disallowance of prior period expenses – Assessee argued that said expenditure related to the electricity charge – Held that:- Only expenditure which is related to the accounting year under consideration has to be allowed against the declared receipts except the expenditure which was not crystallized in earlier accounting years. Further assessee has failed to prove that the expenditure in question was crystallized only in the accounting year. Appeal decides in favour of revenue Depreciation on Hotel building – Assessee claim depreciation on hotel building claimed by assessee at 15% - AO allow 10% - Held that:- As decided in earlier years by CIT(A)that depreciation for hotel building will be allowable only @ 10%. Appeal decided in favour of revenue Ad-hoc disallowance of interest expenses against dividend income u/s 14A – Held that:- The AO must adopt reasonable basis for effecting the apportionment with reasonable opportunity of being heard provide to assessee. Disallowance should be restricted to 1% of dividend income. Therefore, earning exempt dividend income should be restricted to 1% of dividend income. Decision in favour of assessee
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