TMI Blog2012 (10) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to examine the issue whether the asset on which loan is availed for the purpose of business or not and decide the issue accordingly. Disallowance Interest on TDS - restored to the file of the AO with a direction to examine whether the assessee itself added back the said amount while filing the return of income or not and decide the same in accordance with law after giving reasonable opportunity of hearing to the assessee in the matter - appeal of the assessee is treated as allowed for statistical purposes. - ITA No. 1039/Hyd/2009 - - - Dated:- 12-7-2012 - SHRI CHANDRA POOJARI AND SHRI VIJAY PAL RAO, JJ. Appelllant by : Shri V. Raghavendra Rao Department by : Shri B.V. Prasad Reddy ORDER Per Chand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e work-in-progress to the sister concern. As such, transfer of work-in-progress to the sister concern reflected in assets side of the Balance Sheet of assessee instead of work-in-progress account resulting NIL a/c. In other words, it was submitted that the assessee made the following journal entry in its books of account: Navayug Engg. Company Dr Rs. 2,56,32,196/- To Work-in-progress A/c Cr .Rs. 2,56,32,196/-) According to the learned counsel, the work-in-progress, which was in semi-finished stage has been transferred to its sister concern and they have carried on the work on behalf of the assessee and the assessee received fixed percentage of commission from this contract. He contended that the AO overlooked the very vital fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el submitted that having assessed the income under the head business, the AO contracted himself in holding that there was no business done by the assessee. He allowed the entire expenditure on administrative overheads and personnel overheads and the bank charges of Rs. 1,31,425/-, which are all business expenses. In this connection, he referred to the decision of the Hon ble Mumbai Bench of the ITAT in the case of Mafatlal Holdings Ltd. Vs. Addl. CIT, 85 TTJ 825, 839-840, held that the lower authorities contradicted themselves in allowing business expenses and then disallowing interest by holding that the assessee did not do business. The Hon ble Bench there allowed the appeal by holding that interest on borrowal funds cannot be disallowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-, the learned counsel submitted that this expenditure on hire purchase finance falls u/s 37(1) and not u/s 36(1)(iii) as held by the AO and CIT(A). According to that section so long as the expenditure is for the purpose of business and neither personal nor of capital nature, it has to be allowed. The expenditure on finance charges i.e. interest has been incurred at the time of hire purchase agreement term, although it is being paid actually in the following months/years, on instalment basis. He, therefore, submitted that it is revenue expenditure being discharged in instalments. For this proposition, he relied on the decision of the Hon ble Supreme Court in the case of Madras Industrial Investment Co. Vs. CIT, 325 ITR 805 clearly applies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, set aside this issue to the file of the AO to examine whether the assessee diverted the funds or work-inprogress and decide the issue afresh in accordance with law. 6.1 As regards disallowance of interest on hire purchase loan of Rs. 5,27,429/-, if this loan is availed for the purpose of acquiring the asset for the purpose of business, interest on the same should be allowed. Therefore, the AO is directed to examine the issue whether the asset on which loan is availed for the purpose of business or not and decide the issue accordingly. 6.2 Regarding disallowance of interest on TDS of Rs.75,147/-, it is observed that whether the assessee has already taken in to account the same while computing the income or not has to be exam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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