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2018 (4) TMI 1660 - AT - Income TaxDisallowance of interest expenses - Allowable business expenses - CIT(A) deleted the addition as convinced with the claim of expenditure and on finding that both the assessee and Goyal & Co. are taxed at the maximum rate of tax, there would be no revenue leakage if the expenditure are claimed by either of the two - HELD THAT:- There is no dispute that the assessee has in fact incurred the expenditures which have been disallowed by the A.O. Equally true that nowhere the A.O. has mentioned that the expenditures were not related to the business of the assessee. As also true that quantitative specification of works allotted to assessee has not been mentioned in the said agreement but at the same time, the A.O. has accepted the said agreement without questioning its legality or enforceability. Sale consideration was first received by Goyal & Co. and thereafter after the gap of 4 to 6 days, the same was transferred to the account of the assessee. On such fact, it cannot be said that the assessee has deliberately passed on some favour to Goyal & Co. Therefore, it cannot be said that by doing so, the assessee has unnecessarily incurred interest expenditure on loans from Punjab National Bank. The assessee is also having sufficient interest free funds available with it. The disallowance of proportionate interest is uncalled for. Expenditure on Tube Well was incurred for the constant availability of flow of water for RCC work and Plaster work. A.O. has not disputed that such expenditure was never incurred for the purpose of the business. Expenditure on Wooden Work is also not in dispute. The only reason for making the disallowances is that the assessee has done some work beyond the scope of work allotted to it. Assuming, yet not accepting, the contention of the A.O. is correct then also if the assessee has done some work which was not allotted to it, the same would be a matter of dispute between the assessee and Goyal & Co. By no stretch of imagination, the expenditure incurred can be disallowed. - Decided in favour of assessee.
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