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2018 (7) TMI 817 - AT - Income TaxDisallowance u/s.14A - assessee did not raise this particular ground in the statement of grounds of appeal before the Ld.CIT(A) and thus prays for reappraisal of the said ground - Held that:- As gone through the materials available on record including the orders passed by the authorities below. We find merit in the plea of the assessee towards inadvertence for omitting to raise a specific ground for adjudication before CIT(A) despite detailed presentation of facts in ‘statement of facts’. In the facts and circumstances of the case, we consider it just and proper and in the interest of justice to set aside the issue in dispute and restore the matter to the file of the ld.CIT(A) to decide the issue afresh Disallowance of interest expense @ 6% (18% - 12%) out of interest payment - whether the interest received by the assessee @ 12% which is reasonable and not the estimated rate of interest @18% notionally as done by the ld.CIT(A) - Held that:- We find that the AO has not made any enquiry as to the prevailing market rate of interest independently and only on surmises and conjectures without any basis the order of disallowance of 6% interest as made excessive. We therefore set aside the order of disallowing interest expense of ₹ 12,330/-. Thus, ground of appeal preferred by the assessee is allowed. Disallowance of depreciation on Car - rate claimed by the assessee can only be considered had it been a commercial vehicle and used in the business of hiring and thus 50% of the depreciation was allowed by the AO and excess depreciation denied - Held that:- We find merit in the plea of the assessee towards inadvertence for omitting to raise a specific ground for adjudication before CIT(A) despite detailed presentation of facts in ‘statement of facts’. In the facts and circumstances of the case, we consider it fair and proper and in the interest of justice to set aside the order passed by the authorities below on the issue in dispute and restore the matter to the file of the ld.CIT(A) to decide the issue afresh upon giving a proper opportunity of hearing to the assessee and further taking into consideration of the entire evidence already available on record as well as other documentary evidence which the assessee may choose to file in support of the claim on the issue. Thus, the said ground preferred by the assessee is allowed for statistical purposes. Disallowance of interest expenses/salary being excess u/s.40A(2)(b) - Held that:- We have found justification in the submission made by the Ld.AR particularly when no deliberation has been made by the ld.AO while deviating from his earlier stand taken by Revenue in accepting the rate in regard to payment of salary and performance of these employees in the earlier assessment year. We, therefore, do not justify the orders passed by the authorities below and delete such addition. Disallowance of insurance expenses - Held that:- The assessee is following mercantile system of accounting and the assessee was given ample opportunities to substantiate their claim. The issue is not of commercial expediency/business purpose but the expenses shown by the assessee were incurred for insurance for the period falling in next year and have not approved. Since it has not approved and it pertains to subsequent year, it is not allowable and we find no infirmity in the order passed by the Ld. CIT(A) in confirming the disallowance made by him. Addition made u/s.37 - disallowance of commission expenses/payment made to agents - Held that:- We find that the justification given by the Ld.CIT(A) in deleting the addition made by the Ld.AO on commission expenses incurred by the assessee is just and proper relying on observation made in the judgement of CIT vs. Associated Electrical Agencies (2003 (12) TMI 36 - MADRAS HIGH COURT) where it was held that if the assessee which carries on a business finds that it is commercially expedient to incur certain expenditure directly or indirectly, it would be open to such an assessee to do so notwithstanding the fact that a formal deed does not proceed the incurring of such expenditure. Addition u/s.40A(2)(b) on account of excess interest payment - Held that:- he rate of interest will definitely be lesser in respect of the partners since the partners have interest in profits and even the partners may agree to forgo the capital interest also. On this premise, the payment of 18% interest to the parties lending unsecured loans have reasonably given by the Ld. CIT(A) and disallowance made by the AO has been deleted. The reasons for allowing the interest @ 18% as assigned by the Ld. CIT(A) is, according to us, justiciable so far as the interest of the business is concerned. Addition on account of interest of late payment of Excise duty - Held that:- It is well settled that interest on belated payment of excise duty is compensatory in nature and is not in the nature of penalty or offence in terms of Explanation 1 to Section 37 of the Act. Thus, we find merit in the plea of the assessee for the claim of interest amount as business expenditure and we therefore delete the addition.
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