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TMI Blog2012 (12) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground Nos.2 & 3 of the modified grounds of appeal read as under:- 2. INTEREST DISALLOWANCE: The learned Officers below have erred in adding back interest paid on the loan borrowed for the purpose of purchase of properties, cars, bank charges and foreign bill discounting charges by contending that the appellant has availed loan and utilised the same for advancing to the director, whereas the advances given to the director is out of surplus funds and the loan from the Bank has been borrowed for these specific business purposes and are clearly identifiable and hence, allowable. The following are the specific loans and interest thereon which were disallowed. Sl. No. Particulars Amount of interest 1 Interest on export packing credit 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (the Act). In reply, the assessee pointed out and gave a break-up of the interest expenditure and submitted that the borrowings were for specified purpose and therefore could not have been given as interest free loans to the managing director. These details have already been given in the modified grounds of appeal reproduced hereinabove. The assessee also pointed out that the loan to Smt.Soundarya Raghu as on 31.3.2005 stood at Rs.3,76,83,576 and as on 31.3.2006 the same stood higher at Rs.4,49,33,494/-. It was pointed out that for the assessment year 2005-06, no interest has been disallowed because there was no nexus between the borrowed funds and the advances made. Presuming that there was diversion during the previous year what could hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer, giving rise to grounds No.2 & 3 by the assessee before the Tribunal. 7. At the outset, it was submitted by the ld. counsel for the assessee that the interest expenses were in respect of specific loans and could not have been used for giving interest free loans to the managing director. Apart from the above, it was pointed out that in the computation of total income, the assessee had himself added a sum of Rs.11,81,716 which is interest on home loan to the profit as per profit and loss account, while computing income from business and claimed the same as deduction from income under the head 'income from house property'. That deduction was disallowed. It was therefore submitted that in any event, the disallowance of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business and the entire clientele of the appellant company are from abroad and it is extremely required for the company officials to travel abroad for various purpose. The learned AO disallowed a sum of Rs.14,74,280/- under this head and the learned CIT-Appeals reduced this disallowance to Rs.11,05,710/-. 5. The learned Officers below have erred in adding back the business promotion and tour and travel expenditure on the ground that original vouchers and proof for expenditure was not produced, whereas the learned Officers below did not call for such vouchers and also did not provide sufficient time and opportunity for the appellant to produce the relevant documents. The learned AO disallowed a sum of Rs.6,04,270/- under this head and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it had incurred a sum of Rs.6,04,270/- towards business promotion and tour and travel expenses, which has been disallowed by the learned assessing officer on the ground that the original vouchers and proof for expenditure was not produced. The assessee that the learned assessing officer did not provide sufficient time and opportunity for the assessee to produce the relevant documents and concluded that the expenditure was personal expenditure and disallowed the same. The Assessee further submitted that expenditure incurred and proved to be for the purpose of business activities of the assesse cannot be disallowed. It was argued that the reasonableness and commercial expediency are the prerogative of the assessee. The Assessee also gave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, we are of the view that foreign travel is a necessary incident of the business of the Assessee. At the same time the inability of the Assessee to produce bills and purpose of foreign travel, calls for some disallowance. We are of the view that 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/-. As far as Gr.No.6 is concerned, the details of the Business promotion expenses are given at page-74. The details of tour and travel expenses are not available. The required supporting evidence was not filed even before us. Nor any explanation given regarding the necessity and business purpose of these expenses. In these circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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