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TMI Blog2012 (5) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... formation about future sales opportunities and market exposure. It was further submitted that the above payments were made in connection with the business of the assessee, therefore, all the amounts paid were fully allowable. The AO after considering the submissions of the assessee, observed that the assessee had not submitted the details about the services rendered by the HUFs and there was nothing on record what were the specific services rendered by them. He, therefore, disallowed the claim of the assessee of Rs. 7,50,000/- and added the same to the total income of the assessee. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the CIT(A). The CIT(A) confirmed the addition made by the AO observing as under:- "5.2 I have carefully considered the order of the AO and the submission made by the appellant in the statement of facts. I find that the AO had disallowed the sales consultancy charges as they had remained unproved and unsubstantiated by the appellant. The appellant has given a detailed write up as to why it is an allowable expense during the course of appellate hearing. I have considered the submission. I find that nothing new has been brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered by the said HUFs were not explained or submitted the details before the AO. He, therefore, submitted that the issue to be restored to the file of the AO for fresh decision. 6. We have heard the parties, perused the record and gone through the orders of the authorities below. It is observed that the fact of paying Rs. 7,50,000/- to three HUFs are not disputed by the revenue. The only grievance of the revenue is that details of nature of services rendered by the HUFs and how those services were utilized for the business of the assessee, were not filed by the asesssee. We are of the view that since the said required details are necessary to decide the issue, we restore the issue to the file of the AO to decide the issue after examining the details, which will be put-forth by the assessee before him and in accordance with law after providing reasonable opportunity of hearing to the assessee. The assessee is directed to furnish the details like what was the services rendered by the HUFs and how the services were useful in the business of the assessee in respect of the consultancy charges, in support of its claim. Thus the ground raised by the assessee is allowed for statistic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualify for depreciation as the section nowhere states that the building should have a certain specifications so long as there is a building on the said plot and it is used for the business of the appellant, depreciation cannot be denied. The AO is directed to allow depreciation on the said property. However, as the land value would not quality for depreciation, the depreciation on land has to be disallowed. The appellant has submitted that the value of land is Rs. 16,80,000/- and the depreciation on it @ 5% for ½ years works out to Rs. 84,000/-. The AO after verification is to disallow this. Similarly, for the addition of godown at No. W 471, as the purchase date is 20/09/2006 as it has been put to use only in October, 2006, depreciation is allowable only for ½ year @ 5%. I find the appellant has itself claimed depreciation as mentioned above. The AO may verify the same while allowing depreciation. Regarding the addition of off ice premises, I find that the same has been put to use in the year from February onwards to be used as a storage centre. Documents to prove the same has been submitted. The AO I find has made no effort to establish his observation that the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the previous owner but the said payments are effected by the assessee as the bank account show as the payment made by cheque. In view of the findings of the CIT(A), we do not find any reason to interfere with the order of the CIT(A) in restricting the disallowance of depreciation from s. 3,89,464/- to Rs. 84,000/-. Accordingly we uphold the order of the CIT(A) and dismiss the ground raised by the revenue. 12. Ground No. 2 is directed against the action of the CIT(A) in restricting the addition made on account of interest on borrowed capital from Rs. 7,98,459/- to Rs. 73,015/-. 13. During the course of assessment proceedings, the AO found that assessee had paid interest of Rs. 7,87,104/- at 18% per annum to the persons from whom unsecured loans had been taken. All these persons are within the meaning of section 40A(2)(b). On query by the AO, the assessee had submitted that interest paid by the assessee to the individuals @ 18% per annum on borrowed capital cheaper than the interest rates prevailing in the market during that period which was around 21% and also submitted that these loans were unsecured loans and the rates of interest is more than bank rates for unsecured loans. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, therefore, it is proved that amount borrowed is not used for the purpose of business. He further submitted that as per the provisions of section 36(iii) the interest is accordingly being capitalized and the same shall not be allowed as deduction. 15. On the other hand, the learned counsel for the assessee submitted that all the properties bought during the previous year 2006-07 are put to use and details of various expenses incurred for usage of the said property such as water charges, taxes, transportation expenses etc are explained properly, but, the AO without considering the same, disallowed the interest. The learned counsel for relied upon the judgment of the Hon'ble Supreme Court in the case of DCIT Vs. Core Health Care Ltd., [2008] 298 ITR 194(SC) in support of its case. 16. We have considered the rival submissions, perused the record and gone through the orders of the authorities below. The grievance of the AO for disallowing the interest claim of the assessee is that the there is no document or evidence that the building and office was put to use during the FY 2006-07 and has been used for the purpose of business and neither the assessee has produced electricity bill ..... X X X X Extracts X X X X X X X X Extracts X X X X
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