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2022 (3) TMI 1065 - AT - Income TaxDisallowance of interest on loans and advances - AO disallowed the interest expenses on the ground that the advances have been given by the assessee for purposes unrelated to business activities and the assessee has given interest free loans and advances to related parties out of the interest bearing fund - HELD THAT:- From the perusal of the above schedule it can be observed that all the loans and advances are in the nature of Advance against material & services, Security Deposits, MAT Credit, Balance with statutory/government Authority etc and are business advances and as such are related to business purposes. As such the observation made by the Assessing officer that advances are not for business purposes are contrary to the facts on record. Balance sheet of the assessee company for FY 2013-14 as per which the shareholder fund and as such the appellant has sufficient non-interest bearing fund. Thus, the assessee has been found to be having enough own non-interest bearing fund. Hence, we hold that no disallowance is called for on account of loans and advances given is called for. Ad hoc disallowance of expenses - AO disallowing 10% of total expenses under the head brokerage and commission and while disallowing 10% of expenses under various heads (like packing material consumed, electricity & water, equipment hire charges, communication expenses, freight & forwarding, business promotion expenses, legal & professional charges, stock handling & supervision charges, clearing & forwarding charges etc) observed that the assessee has not submitted the documentary evidence - HELD THAT:- The said observation made by the AO that the assessee has not provided the documentary evidence in respect of expenses is contrary to the facts on record. In this regard the assessee submitted all the documentary evidence with the submission filed during assessment proceedings. CIT(A) held that "the disallowances are simply made on ad hoc basis without pointing out any defects in the books of the assessee or any other specific short coming. The expenses that are duly vouched and audited cannot be summarily disallowed. Such a disallowance cannot be sustained in absence of any valid basis. The disallowances are liable to be deleted. Thus the disallowances were made on ad hoc basis, we decline to interfere with the order of the Ld. CIT(A). - Decided against revenue.
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