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2020 (11) TMI 257 - AT - Income TaxDisallowance in respect of job work charges paid to sister concern of the assessee - HELD THAT:- The expenditure has been purportedly incurred by the assessee on testing of the meters. The authorities below has observed that in fact the assessee was itself doing testing of the meters from its sister concern M/s. Pal Mohan Electronic Pvt. Ltd. and was receiving job work charges for testing of meters. Since the assessee itself was self equipped for testing of the meters, there was no reason for assigning job work of testing meters to M/s. Pal Mohan Electronic Pvt. Ltd. Further, except for single journal entry dated 31/3/2015 no material was furnished by the assessee before the Assessing Officer to substantiate genuineness of the expenditure. No material was placed on record by the assessee either before the CIT(A) or before the Tribunal to controvert the findings of the Assessing Officer. No merit in ground No.1 of the appeal, the same is dismissed, accordingly. Disallowance of claim of deduction u/s 36(1)(iii) - AO observed that the assessee has made borrowings of ₹ 14.21 crores during the period relevant to the assessment year under appeal and has paid interest of ₹ 1.57 cores @ 11.05% - HELD THAT:- AO while making the addition has observed that the assessee has diverted borrowed funds for non-business purposes and has debited huge interest expenditure in the P&L Account. AO while holding so has not given his finding on the fact that the list of parties given by the assessee to whom advances have been allegedly made are not the suppliers of material to the assessee. AO has not named the parties to whom alleged interest free advances are given by the assessee for non business purpose.This issue needs revisit to the file of AO as directed to re-examine the issue and pass a speaking order after affording reasonable opportunity of hearing to the assessee, in accordance with law. - AO while deciding the issue afresh shall also test the alleged interest free advances on the touchstones of ratio laid down in the case of CIT vs. Reliance Utilities and Power Limited [2009 (1) TMI 4 - BOMBAY HIGH COURT]. The ground No.2 is allowed for statistical purpose. Disallowance of vehicle running and maintenance expenses - AO disallowed the entire expenditure on the premise that the assessee has failed to provide copy of registration books of the vehicle, log book, etc - CIT(A) restricted the disallowance to 50% - contention of the assessee before lower authorities is that the petrol and vehicle maintenance expenses were incurred for the vehicles of directors and staff of the company at New Delhi - HELD THAT:- Taking into consideration entire facts on record, personal use of vehicles by the directors and their family cannot be ruled out, hence, after factoring for personal use of vehciles, deem it appropriate to restrict disallowance to 10% of the total expenditure claimed for petrol and vehicle maintenance. The ground No.3 of appeal is partly allowed, in the terms aforesaid. Business promotion expenses - HELD THAT:- The expenditure has been made on entertainment of customers, gifts, etc. The payment for the expenditure has been made by credit card. The disallowance has been made primarily for the reason that the assessee has failed to furnish copies of bills, vouchers, etc. Considering entire facts disallowance of 50% is on higher side. Disallowance to the extent of 10% of the expenditure claimed would meet the ends of justice
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