TMI Blog2014 (7) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... of business, then the interest paid has to be allowed under section 36(1)(iii) – thus, the matter is to be remitted back to the AO for examination of the nature of the overdraft account and the fund flow of such account to examine the utilization of overdraft account for the business purpose – Decided in favour of Assessee. As regards the disallowance of motorcar expenditure and depreciation on motorcar, it is seen that the disallowance has been made on account of personal user - the assessee has not been maintaining a log book for his business purpose, therefore, personal element of usage of motorcar cannot be ruled out - disallowance @ 20% is slightly on higher side, thus, the disallowance is restricted on account of motorcar expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the details of interest received and interest paid. On verification of such details, he noted that the assessee has earned interest of ₹ 17,32,363, on the FDRs and has claimed the expenditure of ₹ 5,93,873, as interest paid to bank on overdraft account, car loan, etc. In response the show cause notice as to why such a disallowance should not be disallowed as the same has been incurred only for the fixed deposit interest, the assessee did not submit any reply and, accordingly, the Assessing Officer held that the expenditure claimed can neither be allowed under section 36(1)(iii) nor under section 57(iii). The Assessing Officer further noted that the assessee has debited motorcar expenditure of ₹ 78,145 and depreciation on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for business purpose. Simply because the interest has been paid on overdraft facility, it cannot be held that it is for the purpose of business. Thus, he upheld the disallowance made by the Assessing Officer. 7. On the second issue also, he held that the disallowance made by the Assessing Officer on account of motorcar expenditure and depreciation @ 20% is quite fair and just in the absence of any detail about the usage for the business purpose. 8. Before us, the learned counsel submitted that the assessee is engaged in the business of wholesale of plywood. He has only one overdraft account from which he has been carrying out his business. For availing the overdraft facilities, the assessee had to pledge FDRs on which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the aforesaid amount of ₹ 17,32,363, the assessee has reduced ₹ 5,93,873, which are as under: i) Interest paid on overdraft account with SBI ₹ 5,66,188 ii) Interest paid on others ₹ 27,685 ₹ 5,93,873 12. Thus, the net interest of ₹ 11,38,490, was shown on the credit side of Profit Loss account. The assessee s claim of interest of ₹ 5,66,188, paid on overdraft account has been claimed as business expenditure under section 36(1)(iii). The assessee s contention has been that it has only one account which is overdraft account from which he has been carrying out his business and also has personal investment. This overdraft facility has been obtained after pledging of the FDRs. On a perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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