TMI Blog2020 (10) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... seller of the car. Inasmuch as the loan was for the purpose of business and no question of diversion of such funds had taken place, merely because the assessee placed his own funds and also the interest free loans for some other purposes, is not open for the Ld. Assessing Officer to disallow the interest on the amount taken for business purpose. We, therefore, direct the Assessing Officer to delete this addition. Software Expenses - AO has disallowed the claim of the assessee of treating software expenses as revenue expenses and treated it as capital expenditure and depreciation @ 60 % was allowed and 40% of the expenses were disallowed on account of software expenses being capital in nature - HELD THAT:- The issue of depreciation of the software and the computer accessories has been adjudicated a number of cases by this Tribunal wherein depreciation @60 % has been allowed - since the AO and the ld. CIT ( A) have categorically mentioned that the assessee did not produce the relevant evidences for the purchase of software, we, accordingly, set aside the orders of the authorities below and restore this issue to the file of AO with direction to re-decide the issue after giving an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the income which does not form part of the total income despite the fact that the appellant has specifically submitted that no expenditure has been earned for earning the exempt income. 2. That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in sustaining a disallowance of ₹ 2,22,649 /- on account of interest expenses claimed on car loan. 2.1 That in doing so, the learned Commissioner of Income Tax (Appeals) has failed to appreciate the fact that requisite documents/evidences were filed and explanation were tendered before the learned ACIT explaining the aforesaid expenditure, but the learned ACIT based his decision purely on suspicion, surmises and conjectures and as such, the disallowance so made should be deleted. 3. That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in sustaining a disallowance of ₹ 1,92,186 /- on account of software expenses. 3.1 That in doing so, the learned Commissioner of Income Tax (Appeals) has failed to appreciate the fact that requisite documents/evidences were filed and explanation were tendered before the learned ACIT explaining that the software expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,08,180/- u/s 14A of the Act read with Rule 8D(2 )(iii) of the Act. The AO noted that assessee has earned income exempt from tax amounting to ₹ 21,26,012 /- from dividends. The assessee was asked to give details and justify the claim in view of section 14A read with Rule 8D with reference to the dividend income. The assessee submitted that he has not claimed any expenses against earning of the said income. Therefore, above provisions are not applicable in the case of the assessee. The assessee relied upon the following decisions: 1. CIT vs. Wimco Seedlings ITA No. 1367/2008, 1368/2008 ITA No. 1391/2008 ; 2. ACIT vs. Sun Investments Pvt. Ltd. (2011 ) 48 SOT 159 ( Delhi); 3. Relaxo Footwear Ltd. vs. Addl. CIT, Range-15, New Delhi (2012 ) 50 SOT 102 ( Delhi). 14. The AO, however, noted that the basic object of section 14A is to disallow the direct and indirect expenditure incurred in relation to income which does not form part of the total income. AO referred to judgment of the Supreme Court in the case of CIT vs Walfort Share and Stock Brokers P. Ltd. 326 ITR 1. The AO also noted that AO has to adopt a reasonable basis or method consistent with all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses were already directed by the operators and a certificate to that extent was submitted before the Ld. Assessing Officer. Further, the instructions are that the dividend income will be directly credited to the bank account of the assessee so that no probable expenditure at the end of the assessee for deposit of the dividend in bank could have occurred. Having regard to this set of facts and circumstances involved in this matter, we are of the considered opinion that instead of making a sweeping enumeration of the probable expenses involved in investment process, Ld. Assessing Officer could have taken legal exercise to verify the correctness or otherwise of the certificate that was issued by the asset management companies or the Citibank in this respect. We, therefore, find that there is no proper record of satisfaction as to the expenses incurred by the assessee for earning the exempt income. By following the decision reported in CIT vs. Taikisha Engineering India Ltd. 275 CTR (Del.) 316 and Joint Investments (P) Ltd. vs. CIT 372 ITR 694 (Del.), we are of the opinion that the AO at the first instance should have examined the correctness of the statement made by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio squarely applicable to the year in question. The relevant part of the said order is as under: After considering the rival submission, we are of the view that addition is wholly unjustified. 9. Ld. Counsel for assessee pointed out that the AO noted in the assessment order that issue is similar as has been considered in AY 2009-10. He has submitted that assessee preferred appeal before ITAT D Bench in AY 2009-10 and appeal of assessee has been allowed on the similar ground, vide order dated 15.11.2018 in which the Tribunal in para 6 held as under: 6. Ld. AR submitted that this car loan was the only interest- bearing loan that was taken by the assessee during the year and all the other funds are either interest free loans or the balance of capital account available with him. We find force in the submission of Ld. AR that the car loan of ₹ 50 lacs is no match against the amounts advanced during the year under consideration which are to the tune of ₹ 2 .98 crores by the assessee. Further, it is not the case of the Ld. Assessing Officer that the car loan was diverted for any other purpose, because there isno denial of the statement of the assessee tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vouchers produced on this issue. This ground is allowed for statistical purposes. Disallowance of Personal Expenditure: 16. Ground No. 4 : The AO noted that assessee has claimed telephone and telex, vehicle running and maintenance expenses and depreciation on vehicle in profit and loss account. The total expenses are amounting to ₹ 34,93,780 /-. The AO noted that the personal element of these expenses cannot be ruled out. Hence, 1 /10th of these expenses was disallowed u/s 37 (1) being of personal nature. The AO, therefore, made addition of ₹ 3,49,378 /-. The Ld. CIT(A) gave a remission of ₹ 86,890 /- and confirmed disallowance of ₹ 2,62,484/-. A similar matter has also been adjudicated in the case of the assessee for the assessment year 2011-12. 17. After considering the rival submission, we are of the view that the entire addition is wholly unjustified. The AO has not pointed out on which items personal element was involved in claiming the aforesaid expenses. AO has not pointed out any specific item which is used by the assessee for personal purposes. It is ad hoc addition made by the AO by disallowing 1/10th out of these expenditures. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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