TMI Blog2019 (5) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... Treating such expenses as personal in nature, the AO made disallowance - CIT(A) restricted the addition to 50% - HELD THAT:- The assessee in the instant appeal is a private limited company. There is no dearth of judicial precedents holding that there cannot be any disallowance of expenses in the hands of company on account of personal use even by its directors. The Hon ble Gujarat High Court in Sayaji Iron and Engineering Company vs. CIT [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] has held that there cannot be any disallowance of personal expenses for cars on account of personal use by the director. It has been further held that no disallowance can be made even by treating such expenditure as not having been incurred for the business purpose. CIT(A) was not justified in sustaining the disallowance at 50%. The addition is deleted. Addition for foreign tour of director - personal expenses OR business expenses - AO disallowed 50% of the expenditure - HELD THAT:- Referreing to letter from Larsen and Toubro addressed to Mr. Nitish Shastri requesting him to visit the Switchgears plant in Malaysia. It is pursuant to this letter that Mr. Nitish Shastri visited Malaysia. As such, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company is engaged in manufacturing of switchgears. On going through the Balance sheet of the assessee company, the Assessing Officer (AO) observed that it had given loans and advances to Hekre Developers (advance for property ₹ 11.00 lakh); Mohit kumar Narang (advance for property ₹ 5.00 lakh); Shri Ganesh Apartment (flat ₹ 15,000/-); and Shubhada Ranadive (Company guest house ₹ 2,50,000). The AO applied notional interest rate of 12% and made addition of ₹ 2,23,800/-. The ld. CIT(A) deleted the addition of interest in respect of advance for property given to Hekre Developers at ₹ 11.00 lakh. For the remaining amounts, he confirmed the addition at ₹ 91,800/-, against which the assessee has come up in appeal before the Tribunal. 4. I have heard both the sides and gone through the relevant material on record. The Balance sheet of the assessee is available at page 83 of the paper book. It can be seen that the assessee s share capital along with Reserves and Surplus as on 31-03-2010 stands at ₹ 2,45,73,871/-. As against this, the amount of advance on which the disallowance of interest has been confirmed stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately depicted that there were enough interest free funds at its disposal for making investment. The ld. CIT(A) got convinced with the assessee s submissions and deleted the addition. Before the Tribunal, it was contended on behalf of the Revenue that the shareholders funds were utilized for the purchase of its assets and hence the assessee was left with no reserve or own funds for making investment in the sister concern. Thus, it was argued that the borrowed funds had been utilized for the purpose of making investment in the sister concern and the disallowance of interest was rightly called for. The Tribunal, on appreciation of facts, recorded a finding that the assessee had sufficient funds of its own for making investment without using the interest bearing funds. Accordingly, the order of CIT(A) was upheld. When the matter came up before the Hon ble High Court, it was contended by the Department that the shareholders funds stood utilized in the purchase of fixed assets and hence could not be construed as available for investment in sister concern. Repelling this contention, the Hon ble High Court observed that : In our opinion, the very basis on which the Revenue had sought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled upon to explain the nature of expenses incurred through such credit card. The assessee produced ledger extract and credit card bills, monthly statements from which it was shown that the expenses related to hotel, purchase of cloth, travelling, petrol etc. Treating such expenses as personal in nature, the AO made disallowance of ₹ 6,70,318/-. The ld. CIT(A) restricted the addition to 50%. 8. I have heard both the sides and gone through the relevant material on record. I find that the assessee in the instant appeal is a private limited company. There is no dearth of judicial precedents holding that there cannot be any disallowance of expenses in the hands of company on account of personal use even by its directors. The Hon ble Gujarat High Court in Sayaji Iron and Engineering Company vs. CIT (2002) 253 ITR 749 (Guj) has held that there cannot be any disallowance of personal expenses for cars on account of personal use by the director. It has been further held that no disallowance can be made even by treating such expenditure as not having been incurred for the business purpose. Similar view has been taken by the Delhi Bench of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company and proof of salary, advance etc. given to him. 14. I have heard both the sides and gone through the relevant material on record. In so far as the loan from Mr. Krupali Shastri is concerned, the assessee could not file any evidence to substantiate the genuineness of transaction except confirmation despite specific requisition of the AO. Neither any return of income, balance sheet, wealth tax return of Mr. Krupali Shastri was filed nor any other evidence to show the genuineness of the transaction. Similar position prevails up to the Tribunal level as well. As such, I am satisfied that the addition of ₹ 1,50,000/- has been rightly confirmed. 15. As regards the remaining amount of loan of ₹ 1.00 lakh from Mr. Sonar Subhas, it is seen that the assessee claimed to have received this amount from his employee. It was submitted that an advance of ₹ 2-2.5 lakh was given to him, out of which ₹ 1.00 was received in cash. No evidence in respect of giving of the loan to the employee in the past has been tendered before the Tribunal. The ld. AR could not show even the existence of the loan in the assessee s balan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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