TMI Blog2012 (12) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... elling expenditure - disallowance for want of sufficient proof – Held that:- As foreign travel is a necessary incident of the business of the Assessee but at the same time the inability of the Assessee to produce bills and purpose of foreign travel, calls for some disallowance - it would be just and fair to disallow 50% of the expenses claimed by the Assessee. Accordingly the disallowance is directed to be restricted to 50% of Rs.14,74,280/- - partly in favour of assessee. - ITA No.214/Bang/2011 - - - Dated:- 4-7-2012 - SHRI N. BARATHVAJA SANKAR AND SHRI N.V. VASUDEVAN, JJ. Appellant by : Shri Vishnu Moorthy, C.A. Respondent by : Shri S.K. Ambastha, CIT-I(DR) ORDER Per N.V. Vasudevan, Judicial Member T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have erred in disallowing a sum of Rs.23,29,484.00 though the appellant had claimed interest of Rs. 11,47,768/- after disallowing interest pertaining to the property transactions amounting to Rs. 11,81,716.00 out of the total interest as below: Sl. No. Particulars Amount of interest 1 Interest on export packing credit 3,27,024 2. Interest on Foreign bills discount 3,70,547 3. Interest on car loan 1,09,488 4. Interest on home loan 11,81,716 5. Interest on Mortgage loan 1,39,501 6. Interest on Term loan 4,537 7. Bank charges 1,96,671 Total 23,29,484 4. The Assessing Officer noticed that the assessee advanced interest free loans of Rs.4,49,33,493 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2005 to Rs.11,59,32,765/- as on 31.03.2006. The increase is to the extent of Rs.6 Crores and the advance considered by the Assessing Officer as diversion have gone up by around Rs.85 Lakhs only. The Assessee thus submitted that the disallowance cannot be sustained on any basis. 5. The AO, without giving any finding that borrowed funds on which interest was paid were given as interest free loan to the managing director, disallowed interest expenditure by observing that the Assessee should have charged interest from the Managing Director for the advances granted to the Managing Director as the company paid interest on loans taken. The AO further observed that had this money not been advanced to the Managing Director, it would have been ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has not examined the availability of surplus funds with the assessee which can justify interest free loans to the managing director. The AO has proceeded on the basis that the assessee need not have borrowed money from banks and financial institutions and could have used the interest free loan given to the managing director instead of borrowing funds and paying interest. In our view, this cannot be a basis for making disallowance of interest expenses. We accept the submission of the assessee that the loans having been borrowed for specific purposes, could not have been given as interest free loans to the managing director. In other words, the assessee has established that borrowed funds on which interest was paid had been utilized for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess income relatable to such travel etc. 12. Before CIT(A), the Assessee submitted that it had income from exports and foreign travel was necessary to earn such income. The Assessee gave details of the travel expenses incurred. The CIT(A) was of the view that the details submitted were not fully verifiable and not supported by proper vouchers. He was of the view that 25% of the disallowance made by the AO should be deleted. Accordingly addition made by the AO was restricted to Rs.11,05,710/-. Still aggrieved, the Assessee has raised ground No.4 before the Tribunal. 13. The AO also disallowed a sum of Rs.6,04,270/- out of the expenditure claimed by the Assessee to have been incurred towards business promotion and tour and travel expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its requirement for business purposes etc. Hence, 1 allow 25% of this total expenditure as allowable. Accordingly, the disallowance made by the AO under the heads amounting to Rs.4,53,203/- is sustained. Reliance is also placed on the following judicial precedents: CIT Vs. Shahibag Entrepreneurs (P) Ltd., 215 1TR 810 (Guj.) wherein the court has (held) that Before an assessee can become entitled to an allowance u/s 37(1), he must satisfy the department of the purpose for which the amount is spent. L.H. Sugar Factory and Oil Mills Pvt. Ltd. Vs CIT 125 ITR 293 (SC) - Where an assessee claims a deduction the onus is on him to bring all material facts on record to substantiate his claim. Therefore, the appellant gets a relief of Rs.15 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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