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2015 (7) TMI 210 - AT - Income TaxDisallowance of interest liability made under section 36(l)(iii) - interest paid for advances given for land proposed to be used for construction in the factory of the respondent- assessee firm - CIT(A) deleted the disallowance - Held that:- CIT(A) reached the conclusion after properly appreciating the facts governing the issue. The CIT(A) had come to the conclusion that there were enough internal accruals to make the above advances after considering the material on record. The view taken by the CIT(A) that when there is a mixture of borrowed funds and internal accruals, the presumption that the investments have been made out of internal accruals is supported by the decision of High Court of Calcutta in the case of Woolcombers of India Ltd. vs CIT,[1981 (2) TMI 36 - CALCUTTA High Court], Reliance Utilities and Powers Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY), S.A. Builders Ltd. vs. CIT (A) & Anr. (2006 (12) TMI 82 - SUPREME COURT ). - Decided against revenue. Interest paid into on unsecured loans borrowed from the relatives of the partners of respondent-assessee firm - disallowance on the ground that interest paid was excessive - CIT(A) deleted the addition - Held that:- AO had not brought any comparable rate of interest which is reasonable. No disallowance can be made based on mere suspicion. Therefore we are of the opinion that there is no basis to hold that payment of interest at 15% is excessive and accordingly we hereby confirm the order of the CIT(A) on this ground of appeal and therefore the ground of appeal filed by the revenue is dismissed.- Decided against revenue. Disallowance of keyman insurance policy - CIT(A) has allowed it after observing that there is no restriction under the Act that only the premium paid in respect of one person only to be allowed as deduction - Held that:- AO had not disputed the allowability of the premium paid for keyman insurance policy. He was of the only view that the premium paid in respect of only one person can be allowed. He had no dispute at all about allowability of the keyman insurance policy premium. Similarly the provisions of the Income Tax Act does not stipulates that the premium paid in respect of only one partner or director is alone allowable. In absence of such bar we are of the opinion that deduction should be allowed and therefore we uphold the order of the CIT(A) - Decided against revenue. Disallowance of commission - Held that:- The entire expenditure on commission paid to Mr. Karl Neuchel was genuine and incurred for the purpose of the business of the assesee, which is allowable as per the provision of section 37(1) of the Act. As agreeing with the contention of the appellant that stipulation in the contract regarding the commencement of the agreement w,e,f 1.1.2006 does not mean that athe appellant was debarred from making payment of commission for the earlier period when the services rendered by him are not disputed by the AO. Therefore, the addition made by the AO is deleted - Decided against revenue. Disallowance of building repair expenses - CIT(A) deleted the addition - Held that:- The finding of CIT(A) is based on the well settled principle of law that the expenditure not resulting in creation of asset should be allowed as a revenue expenditure as held by Supreme Court in the case of Empire Jute Company Ltd. Vs. CIT [1980 (5) TMI 1 - SUPREME Court] . Therefore the order of CIT(A) is in conformity with the well settled principle of law, hence we uphold the order of the CIT(A) in deleting the addition and this ground of appeal filed by the revenue is also dismissed.- Decided against revenue. Disallowance of the staff welfare expenses - Held that:- From the bills on record we notice that this expenditure relates to refreshment, tea, milk, Prasad provided to workers who were outside the factory and office. From these it is very clear that the vouchers are mostly not supported by bills but nevertheless it cannot b e said that the expenditure was not incurred. In the absence of any evidence on record brought by AO to say that the assessee has not incurred this expenditure, the disallowance of expenditure is not justified - Decided against revenue. Disallowance of Staff Welfare Expenses - Held that:- From the bills on record we notice that this expenditure relates to refreshment, tea, milk, Prasad provided to workers who were outside the factory and office. From these it is very clear that the vouchers are mostly not supported by bills but nevertheless it cannot b e said that the expenditure was not incurred. In the absence of any evidence on record brought by AO to say that the assessee has not incurred this expenditure, the disallowance of expenditure is not justified. No disallowance can be made on round some basis without pointing out the defects in the books of accounts. Hence we are of the considered opinion that the CIT(A) is not justified in confirm the disallowance to the extent of ₹ 50,000/- out of staff welfare expenses.- Decided against revenue.
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