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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘D’
Before: SHRI RAJPAL YADAV & SHRI N.K. BILLAIYA
आदेश/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
Assessee is in appeal against order of ld.CIT(A)-13, Ahmedabad dated 4.3.2015 passed for the Asstt.Year 2010-2011.
In ground no.1, the assessee has pleaded that the ld.CIT(A) has erred in confirming disallowance of interest amounting to Rs.59,449/- which was disallowed by the AO with the aid of section 36(1)(iii) of the Income Tax Act, 1961.
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With the assistance of the ld.represntatives, we have gone through the record carefully. It emerges out from the record that the ld.AO has disallowed this interest amount on the ground that the assessee has made addition to the fixed assets amounting to Rs.147,34,908/-. This asset was acquired in the month of February, 2010 and it was shown under the head “under Installation/Erection”. The AO was of the opinion that this asset was not put to use, and therefore, interest attributable for acquisition of these assets deserves to be disallowed under section 36(1) of the Income Tax Act. Appeal to the ld.CIT(A) did not bring any relief to the assessee.
Before us, the ld.counsel for the assessee has raised two fold submissions. In his first fold of contentions, he submitted that the interest under section 36(iii) could be disallowed if the asset is acquired for expansion of the business or profession. The assessee neither expanded business nor concerned asset has been acquired for the purpose of expansion of existing business. Hence, proviso to section 36(iii) is not applicable. In his alternative contentions, he submitted that when the assessee acquired asset it has Rs.2,30,86,166/- interest free amounts with it. Therefore, it cannot be alleged that the assessee has used interest bearing fund for acquiring this asset. In support of the contentions, he relied upon the following decisions:
“CIT Vs Torrent Power Ltd., 363 ITR 474 (Guj) CIT Vs. Suzlon Energy Ltd., 354 ITR 630 (Guj) CIT Vs. Gujarat Power Corporation Ltd., 352 ITR 583 (Guj)
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CIT Vs. Hitachi Home & Life Solutions India ltd., 41 taxmann.com 540 (Guj) CIT Vs. Reliance Utilities & Power Ltd., 313 ITR 340 (Bom) Munjal Sales Corporation Vs. CIT, 298 ITR 298 (SC)
The ld.DR on the other hand relied upon the orders of the Revenue authorities.
We have duly considered rival contentions and gone through the record carefully. It emerges out from record that the assessee has sufficient interest free funds which can take care of the alleged investment in the assets. Therefore, no interest ought to have been allocated by the AO for making a disallowance under section 36(1)(iii) of the Act. We allow first ground of appeal and delete disallowance.
In the first ground of appeal, grievance of the assessee is that the ld.CIT(A) has erred in confirming the disallowance of Rs.3,67,291/- which was disallowed by the AO with the aid of under section 14A of the Act.
Brief facts of the case are that the assessee had made investment of Rs.2.00 crores in Reliance Utility Fund and shown dividend income of Rs.1,22,231/-. The ld.AO has invoked section 14A and made disallowance of Rs.3,67,291/-. Appeal to the ld.CIT(A) did bring any relief to the assessee.
The ld.counsel for the assessee contended that the assessee has made investment on seven occasions during the year. On every day, there was credit balance in the overdraft account. The
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assessee has not used interest bearing fund. Hence, no disallowance out of interest ought to be made. Alternatively, he contended that disallowance cannot exceed the exempt income i.e. Rs.1,22,231/-. In respect of his contentions, he relied upon the order of the ITAT passed in ITA No.1715/Ahd/2011. On the other hand, the ld.DR relied upon the orders of the ld.CIT(A).
On due consideration of the facts and circumstances, we find that the assessee has made first investment on 14.5.2009. The balance in the bank account prior to the investment was Rs.29,91,287/-. The assessee has made investment of Rs.20 lakhs. This position has been shown by the assessee on page no.89 of the paper book. Similar is the position with regard to other investment made during the year. It shows that the assessee has sufficient interest free funds. However, we are of the view that on account of administrative expenses and other expenses similar disallowance ought to have been made by the assessee. Therefore, considering the order of the ITAT in the case of Madhusudan Industries Ltd. quantum of investment made by the assessee, and resultant exempt income, the disallowance be restricted to Rs.1,00,000/- out of total disallowance made by the AO and confirmed by the ld.CIT(A).
In the next ground of appeal, grievance of the assessee is that the ld.CIT(A) has erred in confirming disallowance of Rs.3,08,043/- out of aggregate amount of Rs.18,48,261/-.
It emerges out from the record that the assessee has debited an aggregate amount of Rs.18,48,261/- towards vehicles expenses to the profit and loss account. The assessee was asked
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to substantiate its claim by providing details like log book etc., as in the opinion of the AO, personal element of the expenses cannot be ruled out. However, the assessee could not submit the same, and therefore, the AO restricted the expenses equivalent to one- six of the total expenses i.e. Rs.3,08,043/-. This disallowance was confirmed by the ld.CIT(A). Before us also, the assessee could not bring material to support the claim of the assessee so as to convince us to take a different view than that of the Revenue authorities. Therefore, we are not included to disturb order of the Revenue authorities on this issue, which is confirmed and the disallowance is confirmed.
In the result, appeal of the assessee is partly allowed. Order pronounced in the Court on 9th October, 2017.
Sd/- Sd/- (N.K. BILLAIYA) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER