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2022 (10) TMI 338 - AT - Income TaxAddition of interest u/s 36(1)(iii) - Interest paid to relatives & associates of the directors @18% for the last many years related to unsecured loan creditors - AO allowed 12% interest on comparing the interest rates of banks and disallowed balance interest @6% u/s 36(1)(iii), on the plea that the bank interest was lesser - HELD THAT:- The assessee had not paid the amount to any non-income bearing fund. The entire amount was utilised for regular business transaction. The section 36(l)(iii) is not applicable for assessee. As Dr. in argument relied on order of the CIT(A). The addition is liable to quashed. Expenses related payment of freight was paid in cash by assessee which are disallowed under section 40A(3) - The freight is included in the bill amount and related with the purchase value. Also, the assessee submitted the certificate from Panchayat where it is clear that there is no bank for completing the banking transaction for payment to the transporter. This cash payment is covered under Rule 6DD(J) of the Income Tax Rule 1962. So, the addition u/s 40 A(3) is uncalled for. The claim was also made by the ld. AO that no deduction TDS u/s 194C of the Act related to payment of freight but the assessee has submitted the judgment of jurisdictional High Court and respectfully considering the order of Hon’able High Court, the addition u/s 40A(3) is liable to be rejected. Loan by converting share application money was duly missed out from the tax audit report - The mistake was duly rectified by the CA and copy of the certificate are enclosed. Only tax audit report is not a sufficient for adjudicated the issue. The books of account is relevant for analysis the issue - DR had not made any strong objection in particular issue.In the ledger account of the assessee the balance of loan is reflected. Mere, observation of Tax Audit report is not serving the purpose. So, the addition made amount is liable to be quashed. Disallowance of 1/5 expenses of the car, scooter, motorcycle, telephone and depreciation on car which was used for director’s personal expenses - There is no specific findings by both the revenue authorities. The disallowance cannot be done on the adhoc basis where the total expenses are .04% of the total turnover. CIT(A) is equally fallacious since the expenses are extremely useful for furtherance and growth of any business, leave aside the assessee's business. No worthwhile argument has been advanced by the CIT(A) as to why he has treated this expense as bogus. It has been held in a plethora of judgments that any expense that goes towards better understanding and/or management of one's business is an expense allowable u/s 37 of the Act. It has also been held that it is not for the AO to step into the shoes of a businessman and dictate to him how he should run his business. Therefore, the disallowance of expenses quashed.
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