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2019 (3) TMI 1029 - AT - Income TaxDisallowance of interest expenses u/s 36(1)(iii) - corresponding loans availed by the assessee were diverted for giving interest free advances to the sister concerns for non business purpose - CIT-A allowed the claim - HELD THAT:- Out of the loans and advances so given totalling to ₹ 5.37 crores, a sum of ₹ 4.75 crores was given to the two partners of the assessee firm namely Meghna Bhattar and Padma Bhattar. As further explained on behalf of the assessee, the remaining advances were given for the purpose of business. As regards the advances of ₹ 4.75 crores given to the partners, it is observed that this entire amount was withdrawn by them at the fag end of the previous year and interest calculated @ 16% on the said amount was disallowed in the assessment originally completed u/s 143(3). Moreover a sum of ₹ 2.20 crores was available in the partners Capital A/c at the relevant time which was also available with the assessee to give interest free advances. Thus we are of the view that the disallowance of interest made by the AO was not sustainable and the CIT(A) is fully justified in deleting the same. - Decided in favour of assessee Disallowance of business promotion expenses - ad-hock disallowane @ 30% - HELD THAT:- The AO however treated the business promotion expenses claimed by the assessee as unverifiable for want of supporting bills and vouchers and made a disallowance of 30% without making any enquiry whatsoever from the parties to whom the said expenses were paid by the assessee. He also did not point out even a single instance to show any unverifiable element involved in the business promotion expenses claimed by the assessee. Keeping in view all these facts and circumstances of the case, we find ourselves in agreement with the Ld. CIT(A) that the adhoc disallowance of 30% made by the AO out of business promotion expenses is not sustainable. - Decided in favour of assessee Disallowance of salary expenses - addition @8% on allegation that the entire salary expenses claimed by it were wholly and exclusively for the purpose of its business - CIT-A delete the addition - HELD THAT:-salary expenses of ₹ 9.13 crores incurred during the year under consideration were justified by the assessee by explaining the nature of its business as well as the necessity of incurring the said expenses for the purpose of such business. As rightly contended by the learned counsel for the assessee, the business expediency of the salary expenses thus was duly established by the assessee and even the reasonableness of the quantum of such expenses incurred during the year under consideration for earning insurance commission of 14.27 crores was also established by the assessee. Even the AO did not dispute the same but still made a disallowance of 8% out of salary expenses on adhoc basis on the ground that the claim of the assessee for the salary expenses was not fully justified. It is observed that no reason whatsoever was given by the AO to come to this conclusion and there was no basis whatsoever given by him to make an adhoc disallowance of 8% without disputing the business expediency of the salary expenses claimed by the assessee or the reasonableness thereof - Adhoc disallowance of 8% made by the AO out of salary expenses was not sustainable - Decided in favour of assessee
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