TMI Blog2022 (2) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... ons made by Ld.AR and have gone through the forms which were filed by the recipients of interest which shows that these forms were filed specifically for assessment year 2014-15. The informations submitted before us indicate all the relevant informations required to make the claim of interest without deducting tax at source. We do not see any reason to reject of the claim of the assessee. Therefore, we direct the assessing officer to allow the claim of the assessee to the extent the amounts are mentioned in the above said form 15G / 15H. Accordingly ground raised by the assessee is allowed. Allowability of Expenditure incurred towards purchase, labour and site expenses - HELD THAT:- We observe that assessee has claimed the expenditure in the year of actual addition to the cost of the project. However, the bills were raised in the next assessment year i.e. in F.Y. 2014-15 (AY 2015-16). As a prudent method of accounting adopts the income and expenditure on matching principle. The cost is incurred but the actual bills were raised in the subsequent year. It does not change the character of the expenditure but only timing to record the bills. In actual, all the costs incurred are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bit of scope of Section 37(1) of the Income Ta\ Act, 1961 since they are not incurred for wholly and exclusively for the business purpose. Section 37(1) of the Income Tax Act, 1961 states that Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and Gains of Business or Profession . The funds so borrowed are used to make payment against purchases, BMC expenses, finance expenses, admin expenses, etc. Keeping in mind the nature of business of appellant, it can be seen that the funds have been borrowed and utilized wholly and exclusively for the purpose of business. Therefore, it fulfills the criteria of allowability of expenses as business expenditure as per section 37(1) of the Income Tax Act, 1961. In response to the above, we would like (o slate that nowhere in the section 40A(2) the rate of interest is specified as 12% nor the rate higher than 12% is mentioned excessive or unreasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 265ITR 77 (AIL) (High Court) Based on the above facts, we pray your honor to delete the disallowance of the interest paid to persons specified u/s 40A(2)(b) in excess of 12% amounting to ₹ 26,88,640/-. 5. After considering the detailed submissions of the assessee, the Ld.CIT(A) observed that the assessee s contention has merit and the unsecured loans carry higher risk for the lenders and therefore, rate of interest charged is higher than the rate of interest charged on secured loans. Accordingly, held that the rate of interest @15% would be reasonable. Accordingly, he allowed the interest payment to Hemali Gada whereas with regard to interest payment to Dura Tech, he held that rate of interest @15% p.a. is reasonable and accordingly, he disallowed 2% excessive payment to Dura Tech. Accordingly, he partly allowed the ground raised by the assessee. 6. Aggrieved, assessee is in appeal before us. 7. The learned AR brought to our notice the above facts on record and submitted that Ld.CIT(A) has not given any finding and he brought to our notice page 41 of the paper book to submit that assessee has paid interest to non specified parties during assessment year 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complied with the above conditions, he disallowed the amount of ₹ 7,64,567/- under section 40(a)(ia) of the Act. Aggrieved, assessee preferred appeal before CIT(A) and before CIT(A), assessee filed form 15G / 15H in respect of six recipients of interest. After considering the submissions of the assessee, Ld.CIT(A) observed that assessee submitted copies of form 15G / 15H which were submitted by the persons to whom the interest was paid. He observed that on going through those forms, he found that forms were defective inasmuch as many of the columns were not filled up. He, therefore, held that the case of the recipients of the interest were not covered by section 197Aof the Act. Accordingly, he sustained the addition made by the assessing officer. Aggrieved, assessee is in appeal before us. 11. At the time of hearing, learned AR brought to our notice form 15G / 15H filed by recipients of interest which are placed at pages 43 to 45 of the paper book and prayed that addition may be deleted. 12. On the other hand, learned DR relied on the findings of Ld.CIT(A). 13. Considered the rival submissions and perused the materials placed on record. We observe from the record an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and directly for the Appellant's business. The above expense is the normal business expenditure Incurred in the course of running the business. No particular expenses has been pointed out which does not relate to the business of the appellant, Merely expenses are not verifiable cannot be a ground for disallowance or additions. Further it was held by Hon'ble Supreme Court in the case of CIT Vs. DhanrajgiriNarain Singh Girji 91 ITR 544 that it is not open to the department to prescribe what expenditure an assessee should incur and in what circumstances he should incur that expenditure. Every businessman knows his interest best Ad hoc addition without pointing out nature of discrepancies is not proper. The addition made by Learned Assessing officer has been made in a most arbitrary and casual manner without any basis. Therefore, any addition on the ground of unverifiable expenses does not seem to be appropriate and hence the ad-hoc disallowance in this case needs to be deleted. 15. After considering the submissions of the assessee, learned CIT(A) observed that assessing officer has not pointed out any specific instance where supporting evidences were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the disallowance of site expenses of Rs, 54,22,325/-. 16. At the time of hearing, learned AR brought to our notice the facts on record. He brought to our notice the submissions made before learned CIT(A) which is placed on record at page 56 of the paper book. He brought to our notice pages 61 to 64 of the paper book and other bills filed in the paper book. He prayed that the expenses incurred for the purpose of business and the purchases which includes site expenses are part of total project cost and will be included in the valuation of closing stock. He further submitted that tax authorities cannot make adhoc disallowance and prayed that the disallowance may be deleted. 17. On the other hand, learned DR relied on the findings of learned CIT(A). 18. Considered rival submissions, perused material placed on record. We observe from the record that assessee is in the construction business and the cost involved are relating to purchase of raw materials, site development and other construction expenses. It is a fact on record that there might be certain expenses in relation to site development for which assessee may have to generate self made vouchers. The cost incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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