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2016 (9) TMI 67 - ITAT DELHI

2016 (9) TMI 67 - ITAT DELHI - TMI - Allowable business expenditure - directors remuneration - Held that:- As regards directors remuneration debited in the profit and loss account we find that it was for the purpose of business. The directors remuneration is authorized by Article of Association of Company which is within the limit. The statutory auditor of the company has not commented against this expenditure. It is a part of administrative expenditure. Without using the services of the directo .....

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the figures of balance sheet as compared to the previous year except schedule-9 relating to loans and advances (advances recoverable in cash or in kind), which has been increased by ₹ 8,44,28,188/- in asset side of the balance sheet and in schedule 2, secured loans has been enhanced by ₹ 8,17,55,868/- at liability side in the balance sheet. The company has paid interest & processing charges on this loan to the bank. The interest paid is allowable u/s. 36(1)(iii) of the IT Act for pur .....

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there is no question of its use for the purpose of business. Only advancing the money for acquisition of asset does not qualify the deduction of interest unless the said asset is acquired by the assessee company and is put to use by it for the purpose of business. In the instant case, no such circumstances exist. Therefore, in these peculiar facts and circumstances, in our considered opinion, the assessee is not entitled to get deduction of interest and processing charges on the impugned loan as .....

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That the Ld. CIT(A) has gone wrong in confirming the erroneous order passed by the A,O. sustaining addition of ₹ 1,28,61,717/- made to be returned income. (b) That the entire expenditure comprising of three amounts of ₹ 96,67,557/- ₹ 25,00,000/- and ₹ 6,94,359/- claimed by the appellant as deduction in computing its income chargeable to tax for the accounting period in question was allowable as business expenditure. The amount in question was incurred to wholly and exclu .....

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iness expediency and no part of it required to be disallowed. 2(a) That the Ld. CIT (A) has further gone wrong in upholding the addition of ₹ 47,500/- made by the Ld. A.O. by invoking Section 14A read with Rule 8 D of the Income Tax Rules, 1962. (b) That the appellant having not incurred any expenditure for earning exempted income, no addition was called for, The addition of ₹ 47,500/- made to the returned income therefore, deserves to be deleted. 3. That the appellant denies to the .....

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ficer noted that there were no any purchase and sale done during the year. Only opening and closing balances have been shown during the year. A sum of ₹ 33750/- has been capitalized himself towards pre-operative expenses and it has been added into the closing stock/WIP. The resultant figure of closing stock, thus, comes to ₹ 12,91,42,197-50. On perusal of profit and loss account, the Assessing Officer found that the assessee has claimed expenses in the profit and loss account of dire .....

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#8377; 43,58,380/-. As per records, this interest has been received by the assessee and the FDRs were used for the purpose of taking bank guarantee for obtaining license from HUDA. The AO noticed that the assessee had credited interest income on FDR in its profit and loss account which has been claimed as business income by the assessee. But the plea of the assessee has not been accepted by the AO treating it as income from other sources. 4. The Assessing Officer also noted that the assessee has .....

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se from HUDA for the development of certain lands. The Director of Town and Country Planning Haryana Chandigarh required 25% of bank guarantee for the internal and external development purpose for the allotted land. Therefore, the appellant has prepared fixed deposits for ₹ 145.48 lacs and 347.14 lacs which were pledged with Punjab National Bank for issuing bank guarantee in favour of the aforesaid party. The interest has been received on this fixed deposit as stated above. License was gra .....

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He, therefore contended that the authorities below are not justified to disallow the similar claim of assessee during the year under consideration. He also placed reliance on the decision of Hon ble Delhi High Court in the case of CIT vs. Jaypee DSC Ventures Ltd., 335 ITR 132 (Del.) wherein it was held that the interest income earned by the assessee on FDR was business income. The FDR given for obtaining the license from HUDA as per their requirement, therefore, cannot be deemed for the purpose .....

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ated. Therefore, the expenditure incurred by the company is business expenditure. He has relied on the decision of Bokaro Steels 236 ITR 315. With regard to disallowance u/s. 14A, the ld. AR relied on the decision of Hon ble High Court in his own case for the assessment year 2008-09 as noted above. 7. The ld. DR relied on the orders of the authorities below. He further submitted that there was no any business activity on the part of the assessee during the year. On perusal of profit & loss a .....

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he ld. CIT(A). 8. After hearing both the parties and perusing the material available on record, we find that the ld. AR placed reliance on the order of Hon ble jurisdictional High Court in its own case for the assessment year 2008-09, which squarely covers the issue for this year except the three heads of expenditure, which has been claimed by the assessee as new items during this year : (i). Directors remuneration Rs.3,60,000/- (ii). Interest on Bank loans Rs.96,67,557/- (iii). Processing charg .....

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be taken. Therefore, it is essential to give remuneration as per Rules and Regulations of the company. In view of this, this expenditure is allowable as business expenditure. 10. In respect of interest on bank loans of ₹ 96,67,557/- and processing charges on such loans of ₹ 25,00,000/-, the ld. AO has disallowed these expenditure because no any business activity has been done. The appellant has claimed it as revenue expenditure and debited it into the profit and loss account. After p .....

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any has been given advance. The appellant has taken term loan from Union Bank of India, which is clear from paper book page 21. This advance has been given to DD Township Ltd. for purchase of land. The appellant has filed before the Assessing Officer the source of loan and its utilization, in which he has clearly stated that the loan has been given for the purchase of land whereas no land has been purchased during the year. The term loan has been taken from Union Bank of India and the same has n .....

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The company has paid interest & processing charges on this loan to the bank. The interest paid is allowable u/s. 36(1)(iii) of the IT Act for purchase of asset only when such assets are first put to use in the business. It is clear from the audited accounts of the company and submissions made before the lower authorities that the aforesaid term loan has been given as advance for purchase of land. However, the record reveals that no such land stood purchased by the assessee company. Therefore .....

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