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2012 (10) TMI 783 - AT - Income TaxAddition towards estimated interest on advances - Held that:- AO disallowed interest @12% per annum on the amount paid to three relatives on loan taken by the assessee on the ground that the assessee paid interest to the bank and on unsecured loans. Neither the date of advances nor the nexus between loans or advances and funds borrowed is evident from the impugned order nor the CIT(A) recorded any findings as to the business expediency of interest free advances or on the nexus between borrowed funds and interest free advances. As the complete facts are not available nor the assessee furnished date(s) of interest free advances or dates of borrowings and nor furnished any material, establishing commercial expediency in advancing aforesaid funds nor the CIT(A) recorded any findings on these aspects, it will be fair and appropriate to set aside the order of the CIT(A) and restore the issue raised in this ground back to his file for deciding the matter afresh in accordance with law - in favour of assessee for statistical purposes. Payment to MCD towards registration, conversion and parking charges - revenue v/s capital - Held that:- Expenses which are permitted as deductions are such as are made for the purpose of carrying on the business and if a sum is paid by an assessee conducting his business because in conducting it he has acted in a manner which has rendered him liable to penalty for breach of laws, it cannot be claimed as a deductible expense. The assessee is expected to carry on the business in accordance with law. The evasion of law cannot be a trade pursuit. Since in the instant case, MCD demanded the aforesaid compounding charges only when Hon’ble Apex Court directed the MCD to act and seal the premises in view of flagrant violations of various laws including Municipal Laws, Master Plan and other plans besides Environmental laws and indisputably, the assessee misused its property and violated the civic and Environmental laws, it is to be opined that aforesaid charges paid by the assessee to MCD, could not be allowed in view of explanation to sec. 37(1). Thus the issue as to whether expenditure is revenue or capital, becomes academic and therefore, does not survive for our adjudication - against assessee. Disallowance of 1/5th of expenses - conveyance, vehicle maintenance & telephone expenses - Held that:- Since personal use of cars and telephones by the Karta of the assessee HUF and his family members or staff has not been denied nor it was claimed that the Karta or his family members had any independent vehicles or telephones for personal use, disallowance of 1/5th of the conveyance expenses, expenses on running and maintenance of vehicles as also expenses on telephones/mobiles, in the light of provisions of sec. 38(2) is reasonable - against assessee.
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