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2022 (8) TMI 595 - AT - Income TaxAddition u/s 14A - Expenditure on exempt income - HELD THAT:- As the issue is squarely covered in favour of the assessee and the AO has not brought out the nexus that the assessee has made investments in the instrument given to rise to exempt income out of interest bearing funds, we presume that the investment came out of available interest free funds. Hence, we delete the disallowance and allow the appeals of the assessee on this issue. Disallowance of expenses relatable to exempt income u/r.8D(2)(iii) of the Rules, i.e. average value of investment @ 0.5% i.e. particularly in AY 2012-13 - We direct the AO to verify the investments which give rise to exempt income and consider for disallowance u/r.8D(2)(iii) of the Rules, only those investments which has given rise to exempt income only and accordingly, make disallowance. Similar is the position in AY 2013-14, wherein u/r.8D(2)(iii) of the Rules, the disallowance and for the AY 2014-15, the disallowance - Similar are directions in these two assessment years. AO will verify the instrument giving rise to exempt income and only for those instruments, the investment will be considered for making disallowance u/r.8D(2)(iii) of the Rules and accordingly, this common issue is decided in terms of above directions. Consequently, the appeal filed by the assessee is partly allowed for statistical purposes. Disallowance of staff training expenses - assessee stated that persons were deputed for higher studies only after taking the large business interest of the assessee company into consideration and its large number of associated companies - as argued company sponsored the persons and deputed them for higher study on the understanding that on completion of advanced study, they would return to India and serving the company or in any of its group/associated company promoted by the group concern in a position of responsibility - HELD THAT:- After hearing both the sides and going through the facts of the case, we noted that this issue is exactly identical and there is no change in facts in these two years also, what was before the ITAT in AY 2010-11 [2015 (7) TMI 1411 - ITAT CHENNAI] and hence, taking the issue as covered, we decide the issue against the assessee. This issue in both the appeals of the assessee is dismissed. Disallowance of foreign travel expenses - Allowable revenue expenses u/s 37 - HELD THAT:- Before us, assessee only made bald submission that the assessee has spent money towards travel expenditure of Consultants of the assessee company and for this, he relied on the decision of JK Industries Ltd. v. CIT [2011 (3) TMI 23 - CALCUTTA HIGH COURT] - Now, we noted that the Hon’ble Madras High Court has categorically held that expenses on foreign travel, wife of Director of assessee’s company, the assessee has to show that the expenditure is incurred for the business purpose. Here, even now, on a query from the Bench, the ld.Counsel could not produce any evidence or explain how the business expenditure incurred for foreign travel of sister of Director of the assessee company that Ms.Anitha Raajyalaxmi Ratnam, is for the purpose of business. He failed to do so. In the absence of any evidence, we have no alternative except to confirm the addition. Disallowance of medical expenses of family member of the Director of the assessee company - HELD THAT:- Hon’ble Madras High Court relied on the decision in the case of Gordon Woodroffe Leather Manufacturing Co. [1961 (12) TMI 4 - SUPREME COURT] wherein, certain tests laid down by the Hon’ble Supreme Court were that the payment should have been made as a matter of practice which affected the quantum of salary. There should be expectation by the employee for payment of medical expenses. The sum of money was expended on the ground of commercial expediency and in order to facilitate indirectly the carrying on of the business of the assessee. If any one of the tests was not satisfied that medical expenditure incurred on by an employee should not be allowed as a valid business expenditure in the hands of the assessee u/s 37 - Based upon the above points, the High court held that the expenditure in connection with the payment of Medical expenses met out by the company even though, the same had been spelt out in the letter of appointment cannot be regarded as sufficient for treating the expenditure as business expenditure. As in the case of CIT v. TIAM House Service Ltd. [1998 (11) TMI 45 - MADRAS HIGH COURT] wherein, the decision of the Hon’ble Supreme Court was followed. We are of the view that these expenses incurred towards medical expenses of the relative of the Director of the assessee company in foreign currency are personal in nature and not in relation to any business connection. Hence, the lower authorities have rightly disallowed the same and we confirm the same. Disallowance of Interest for diversion of borrowed funds to subsidiary company at Lower rate of Interest - HELD THAT:- Assessee stated at the best, the matter can be referred back to the file of the AO for verification of the actual availability of surplus funds. Since, assessee has filed these details before us as the assessee is having surplus funds with it for making advance to TVS Srichakra Ltd. according to us, in such situation, no disallowance has been made in view of the decision of the Hon’ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd.,. [2009 (1) TMI 4 - BOMBAY HIGH COURT]Accordingly, we remit this issue back to the file of the AO with the above directions. This issue is allowed for statistical purposes. TDS u/s 194C - disallowance made in respect of freight charges paid for non-deduction of TDS - HELD THAT:- We noted that CIT(A) has given exactly the same findings that there are penal provisions for the lapse, no disallowance can be made by invoking provisions of Sec.40(a)(ia) and accordingly, respectfully following the decision of the Hon’ble Madras High Court in the case of Dilip Kumar [2019 (11) TMI 987 - MADRAS HIGH COURT] and we dismiss this appeal filed by the Revenue.
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