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2019 (1) TMI 2005 - AT - Income TaxDisallowance of interest expenses - unsecured loans are raised for the purpose of making investments in the capital work in progress - HELD THAT:- Unsecured loans are raised for the purpose of making investments in the capital work in progress. This presumption clearly contradicts with CIT(A)’s own finding, as reproduced above, to the effect that “the appellant’s funds are mixed and from the common funds investments are made in CWIP as well as inventory and debtors etc”. If the funds are mixed funds, as is the finding of the CIT(A), there cannot be any basis for the conclusion, as has been eventually adopted by him, that entire unsecured loans are used for the purpose of investment in CWIP (i.e. capital work in progress). It is also not in dispute, and the financial statements filed by the assessee clearly re-establish that, that the investments in CWIP are far in excess of the interest free funds available to the assessee. In such circumstances, in the light of judgment in the case of CIT Vs Raghuvir Synthetics Ltd [2013 (7) TMI 806 - GUJARAT HIGH COURT] and Reliance Utilities & Power Ltd (2009 (1) TMI 4 - BOMBAY HIGH COURT), the presumption has to be that the investments are made out of interest free funds. That is the approach consistently taken by various coordinate benches of this Tribunal. Clearly therefore, whichever way one looks at it, there is no legally sustainable foundation for the presumption that borrowed funds were used in the capital work in progress. CIT(A) himself admits that the funds are mixed and that the only basis is the nature of loan i.e. secured loan vs unsecured loan. In view of these discussions, as also bearing in mind entirety of the case, we uphold the plea of the assessee and delete the impugned disallowance on the admitted presumption that the secured loans were used in the capital work in progress. The assessee succeeds on this point. Disallowance being repairs and maintenance expenses of Plant and Machinery,repairs and maintenance expenses to factory building AND vehicle expenses, telephone expenses and office expenses - HELD THAT:- We are of the considered view that the impugned disallowance, which are purely adhoc in nature, are simply based on surmises and conjectures and cannot, therefore, meet any judicial approval. The stand of the assessee that all the details were duly produced before the Assessing Officer, and that there is no requisition which remains to be complied with, has simply been brushed aside. In any case, in the case of a corporate assessee, there is no question of personal expenses. We have also noted that similar disallowances have been deleted in the earlier years as well. In view of these discussions, as also bearing in mind entirety of the case, we uphold these grievances of the assessee and delete the impugned disallowances. Disallowance out of labour charges - CIT-A reducing the same to 10% instead of 20% disallowed by the Assessing Officer instead of deleting the same in toto - HELD THAT:- The reasons for upholding the disallowance are rather vague and proceed on sweeping generalizations. The allowances are purely adhoc in nature and no specific legally sustainable defects have been pointed out and the stand of the assessee that all the details were duly produced before the Assessing Officer, and that there is no requisition which remains to be complied with, has simply been brushed aside. We have also noted that similar disallowances have been deleted in the earlier years as well. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and delete the impugned disallowance in entirety. Deduction u/s. 80HHC - reduction of 90% of interest income and misc. income from the profit of eligible business income and by rejecting the claim of deduction in respect of export incentives - HELD THAT:- As fairly agree that this issue is required to be restored to the file of the Assessing Officer for fresh adjudication with the benefit of direct decisions from Hon’ble Supreme Court in the case of ACG Associated Capsules Ltd [2012 (2) TMI 101 - SUPREME COURT] and Topman Exports [2012 (2) TMI 100 - SUPREME COURT] That is precisely what was done by the Tribunal in the earlier assessment years. We accept the plea and remit the matter to the file of the AO for fresh adjudication as such.
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