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2016 (9) TMI 67 - AT - Income TaxAllowable business expenditure - directors remuneration - Held that - As regards directors remuneration debited in the profit and loss account we find that it was for the purpose of business. The directors remuneration is authorized by Article of Association of Company which is within the limit. The statutory auditor of the company has not commented against this expenditure. It is a part of administrative expenditure. Without using the services of the directors the key decisions of the business cannot be taken. Therefore it is essential to give remuneration as per Rules and Regulations of the company. In view of this this expenditure is allowable as business expenditure. Disallowance of interest on bank loans and processing charges on such loans - AO has disallowed these expenditure because no any business activity has been done - Held that - After analyzing the balance sheet of the company we find that there is no vast difference between the figures of balance sheet as compared to the previous year except schedule-9 relating to loans and advances (advances recoverable in cash or in kind) which has been increased by Rs. 8, 44, 28, 188/- in asset side of the balance sheet and in schedule 2 secured loans has been enhanced by Rs. 8, 17, 55, 868/- at liability side in the balance sheet. The company has paid interest & processing charges on this loan to the bank. The interest paid is allowable u/s. 36(1)(iii) of the IT Act for purchase of asset only when such assets are first put to use in the business. It is clear from the audited accounts of the company and submissions made before the lower authorities that the aforesaid term loan has been given as advance for purchase of land. However the record reveals that no such land stood purchased by the assessee company. Therefore once the asset in the form of land for which the assessee is said to have given the advance does not stand proved in possession of the assessee there is no question of its use for the purpose of business. Only advancing the money for acquisition of asset does not qualify the deduction of interest unless the said asset is acquired by the assessee company and is put to use by it for the purpose of business. In the instant case no such circumstances exist. Therefore in these peculiar facts and circumstances in our considered opinion the assessee is not entitled to get deduction of interest and processing charges on the impugned loan as revenue expenditure. Decided partly in favour of assessee
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