TMI Blog2013 (7) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... own was ₹ 1,45,00,622 and for the year ended March 31, 2007 gross profit shown is ₹ 2,12,79,434. Thus, proportionate loom expenditure should be ₹ 18,50,000 (rounded off) (1260374/14500612 x 2,12,79,434). It is stated that in last year the loom expenses have been accepted by the Department. Under the circumstances loom expenses to the extent of ₹ 18,50,000 is allowable as expenditure. We accordingly allow the same and the balance amount of ₹ 4,12,695 is confirmed. The assessee gets relief of ₹ 18,50,000 out of addition of ₹ 22,62,695.- Decided partly in favour of assesse. Disallowance of interest expenses - Held that:- Details of the own funds and others are not available on record. In the absence of relevant details available on record, we are sending back this matter to the file of the Assessing Officer with direction to decide the issue in the light of the above order of the Income-tax Appellate Tribunal, Mumbai Bench, after providing reasonable opportunity of hearing to the assessee. - Decided in favour of assesse by way of remand. Disallowance of depreciation on car - Held that:- the assessee has failed to furnish supporting evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of depreciation amount on one car amounting to ₹ 1,50,000 (car worth ₹ 10,00,000). 5. Because the learned Commissioner of Income-tax (Appeals), Agra wrongly confirmed the addition of ₹ 92,276 out of food and beverage expenses and ₹ 1,35,180 out of fuel of car and scooter. Because the order passed by the learned Commissioner of Income- tax (Appeals), Agra is wrong, illegal and against the facts of the case and liable to be set aside. 3. Ground Nos. 1 and 2 are pertaining to disallowance of loom expenses. The brief facts of the case are the assessee-firm carries on the business of export of handmade woollen carpets and handloom durries. The assessee filed return of income declaring income of ₹ 95,52,710. During the assessment proceedings, the Assessing Officer noticed that the assessee debited an amount of ₹ 22,62,695 on account of loom expenditure. On perusal of the copy of register submitted by the assessee about the looms installations, the Assessing Officer noticed that the number of looms of various sizes from 3 ft. to 18 ft. have been shown in various names on different dates. From the details submitted by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax (Appeals) called the remand report from the Assessing Officer on the submission of the assessee. At the time of remand proceedings two persons were produced wherein they claimed that 85 looms have been erected/constructed. The Commissioner of Income-tax (Appeals) held that only on the basis of sample survey, verification of 100 per cent. expenses on looms erected cannot be accepted. However, the Commissioner of Income-tax (Appeals) found that the assessee is in the business of manufacturing of carpet and the looms are essential machinery. Therefore, construction/erection of looms by the assessee at the site of weavers cannot be denied. It is also observation of the Commissioner of Income-tax (Appeals) that such expenditure can be accepted only to the extent of evidence produced by the assessee. The Commissioner of Income-tax (Appeals) on the basis of evidence produced by the assessee held that at the most expenditure incurred on construction/erection of looms can be accepted for 110 looms for which expenditure can be estimated at ₹ 5,00,000. The Commissioner of Income-tax (Appeals) accordingly held that expenditure on construction/erection of the looms can be accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,695 is confirmed. The assessee gets relief of ₹ 18,50,000 out of addition of ₹ 22,62,695. 6. The third ground is in respect of disallowance of interest expenses. During the assessment proceedings the Assessing Officer noticed that the assessee has claimed interest expense of ₹ 2,45,337 on account of interest. The Assessing Officer further noticed that an amount of ₹ 9,03,331 has been shown as outstanding under the head advance in the name of Shri Kunal Jain. Shri Kunal Jain is the son of one of the partners Shri Lalit Jain. The Assessing Officer noticed that no interest recovery on account of advance given to Shri Kunal Jain has been shown. The nature of advance is a personal advance given by the firm to Shri Kunal Jain. The firm has borrowed loan for its business purpose on which the interest has been paid whereas at the same time the fund has been advanced to a person related to its partner without any charge of interest. The Assessing Officer calculated the amount of addition applying 12 per cent. rate of which calculation comes to ₹ 1,08,360 which has been confirmed by the Commissioner of Income-tax (Appeals). 7. The learned authorised repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g evidence that the car was purchased in the name of partner Shri Lalit Jain and it was used for the purpose of business. The assessee has failed to furnish any evidence in this regard. Once it is found that the car was not used for the purpose of business, depreciation is not allowable. The assessee has failed to furnish any evidence to show that the car was used for the purpose of business. In the light of the fact, we do not find any infirmity in the order of the Commissioner of Income-tax (Appeals). The order of the Commissioner of Income-tax (Appeals) is confirmed on the issue. 12. The fifth ground of appeal is in respect of disallowance of expenses of ₹ 92,276 out of food and beverages. During the assessment proceedings, the Assessing Officer noticed that the assessee has claimed ₹ 4,61,381 on account of food and beverages. The Assessing Officer disallowed 20 per cent. of such expenditure to cover under the provisions of fringe benefit tax. On perusal of records, the Assessing Officer noticed that on referring to the details of working of fringe benefit tax attached along with audit report, such expenditure have not been considered there also. The Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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