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2020 (5) TMI 79 - AT - Income TaxDisallowance of prior period expenses - HELD THAT:- Having said that, the fact that the interest was paid by the assessee has not been disputed by the Revenue and following the proposition laid down by the Hon’ble Supreme Court in case of case of Excel Industries [2013 (10) TMI 324 - SUPREME COURT] where there is no change in effective rate of tax at which the assessee company has paid the taxes in the preceding financial year and in the year consideration, there is no loss to the Revenue. Whether such borrowing has been made for business purposes has not been examined by the Assessing officer as the claim was rejected on ground of prior period expense, the same has to be examined by the Assessing officer. Therefore, for these two limited purposes of examining the effective rate of tax at which the assessee company has paid taxes and whether borrowing has been made for business purposes, the matter is set-aside to the file of the Assessing officer after providing reasonable opportunity to the assessee. In the result, ground No. 2 of assessee’s appeal is allowed for statistical purposes. Disallowance of travel expenses - whether such travel have been undertaken for the purposes of assessee’s business or not? - HELD THAT:- In the instant case, we find that nothing has been brought on record in terms of any dealer’s meeting invitation and related correspondence which can reasonably be relied upon in support of assessee’s contention. In absence of appropriate documentary evidence in support of the foreign travel, the onus cast on the assessee is not satisfied and we see no infirmity in the action of the Assessing officer and the disallowance so made by the Assessing Officer is hereby confirmed and the Ground No. 3 of assessee’s appeal is dismissed. Disallowance of rent expenses - Addition u/s 40A(2)(b) - assessee company was using the said premises just for address purposes and no business activities were being carried out and the said premises were actually residence of the directors - HELD THAT:- On perusal of the minute books of the assessee-company, it is noted the meetings of Board of Directors and also of the shareholders in terms of annual general meetings are regularly held at this place. Therefore, we find that the said office premises have been used for the purposes of assessee-company’s business and it has established the necessary nexus of the rent expenses being incurred for the purpose of its business - rent payments have been made by the assessee company to one of its Directors, however, merely because payment has been made to a related person would not be sufficient to make the disallowance U/s 40A(2)(b) - onus is on the Revenue to bring on record comparable instances wherein the rent payment for similar premises are the lower than the rent paid by the assessee-company - there is nothing on record which has been brought by the Revenue to hold the payment as excessive -disallowance so made by the Assessing Officer is hereby deleted - ground no. 4 of assessee’s appeal is allowed. Disallowance of interest u/s 36(1) - HELD THAT:- There are liquid funds which are not locked up in assets and inventory and which can be actually used for placing the advance towards the purchase of land. That is, availability of surplus deployable funds at the relevant point in time when the advances were placed towards the purchase of land. Secondly, whether such funds are arising out of operating revenues for the year and otherwise available as part of free reserves and doesn’t carry any interest burden or not. In the instant case, we find that there are mere contentions not supported by any hard data and figures. At the same time, where the Assessing officer alleges that interest bearing funds have been used for placing such advances, the onus is equally on the Revenue to support the said contention with verifiable hard data and figures. Merely stating that the assessee is paying huge interest cost on borrowed funds and has given interest-free funds is not sufficient as necessary nexus has to be established between the borrowed funds and placing of such advances. There are short-comings on both side, the matter require further examination, and in the interest of justice, it would be appropriate that the matter is set-aside to the file of the Assessing officer to examine the same afresh after providing reasonable opportunity to the assessee. In the result, the matter is set-aside to the file of the AO and the ground of appeal is allowed for statistical purposes. Disallowance of salary expenses - HELD THAT:- CIT(A) has recorded a finding that during the assessment and appellate stage, the assessee did not furnish complete name and address or designation of the employees whom the salary was claimed to have been paid and the maximum salary is claimed to have been paid in cash. Per contra, the contention of the asseseee is that it maintains full record of salaries subject to regular scrutiny of labour department. Further, salary has been paid after deduction of ESI, PF etc and details are available on record showing month wise salary, PF, ESI and net payment to employees along with evidences. The question is whether such records were produced and available before the Assessing officer for his examination or not, however, we donot find any clear answer from the perusal of records. Given that such records are claimed to be maintained at the relevant point in time and already subject to scrutiny of labour department, we believe that the assessee deserve one more opportunity to produce such records for verification before the Assessing officer and the matter is accordingly set-aside to the file of the Assessing officer. In the result, the ground of appeal is allowed for statistical purposes. Disallowance @15% out of various expenditures - HELD THAT:- There are contradictory claims and contentions advanced by both the parties and in absence of relevant facts emerging from records, we deem it appropriate to restore the matter to the file of the Assessing officer to examine the same afresh and to pass a speaking order in this regard. Factum of particular expense payment in assessee’s line of business may be consistent with earlier years, however, the examination thereof is a factual exercise to be undertaken every year and outcome thereof need not be guided solely with the outcome and treatment done in the earlier years. It is therefore, incumbent on part of the Assessing officer, where he intends to disallow any expenses, to bring out specific defect in the documentation so maintained for the year under examination and submitted for verification, and record a finding that a particular expense has not been incurred for the purposes of business or the expense is bogus in nature for the relevant year. In the result, the ground of appeal is allowed for statistical purposes. Non deduction of TDS - payments u/s 194H and 194C - HELD THAT:- Payments are below the threshold limits provided in the respective TDS provisions and thus, the disallowance so made is directed to be deleted. In the result, the ground of appeal is allowed.
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