JEYENKAY PETROGELS, MUMBAI V. ITO 22(1)(2), MUMBAI

ITA 624/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78918 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 27-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 23-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Corroborative evidences
• Section: 143(3); 10(10D); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BEN CH, MUMBAI JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZZ JH JKTSUNZZ JH JKTSUNZZ JH JKTSUNZZ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K / ITA NO.624/MUM/2013 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2006-07 JEYENKAY PETROGELS 410, KANARA BUSINESS CENTRE, LAXMI NAGAR, OFF. ANDHERI LINK ROADK, GHATKOPAR EAST, MUMBAI- 400 075. VS. INCOME TAX OFFICER 22(1)-2 MUMBAI. PAN:-AABFJ4278N APPELLANT RESPONDENT ASSESSEE BY / FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS SHRI MEHUL SHAH REVENUE BY/ JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS SHRI MAURYA PRATAP ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30.10.2012 OF CIT FOR THE A.Y. 2006-07. THE ASSESSEE HAS RAISE D FOLLOWING GROUNDS IN THIS APPEAL:- BEING AGGRIEVED BY THE ORDERS OF THE ASSESSING OFFI CER 22 (1) - 2 MUMBAI, AND LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) - 1 9, MUMBAI THIS APPEAL PETITION IS FILED ON THE FOLLOWING AMONGST OTHER GR OUNDS OF APPEAL, WHICH IT IS PRAYED MAY BE CONSIDERED WITHOUT PREJUDICE TO ONE A NOTHER. DATE OF HEARING 27.05.2014 DATE OF PRONOUNCEMENT 30.05.2014 JEYENKAY PETROGELS 2 | P A G E 1. ON THE FACTS, AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) ERRED IN UPHOLD ING ACTION OF THE ASSESSING OFFICER IN DISALLOWING PARTNERSHIP INSURA NCE PREMIUM AMOUNTING TO RS. 2,300,000 ON THE GROUND THAT THE U NDERLYING POLICIES WERE NOT ISSUED UNDER TERM PLAN BUT UNDER UNIT LINK ED INSURANCE PLAN; AND THUS SUCH POLICES COULD NOT QUALIFY AS KEYMAN INSUR ANCE POLICIES. 2. ON THE FACTS, AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) ERRED IN UPHOLD ING ACTION OF THE ASSESSING OFFICER IN DISALLOWING TRANSPORT CHARGES AMOUNTING TO RS. 38,078 BEING @ 20% OF RS. 190,391 WITHOUT APPRECIAT ING THAT THE RELEVANT DETAILS WERE SUBMITTED AT THE TIME OF ASSE SSMENT AS WELL AS APPELLATE PROCEEDINGS. 3. ON THE FACTS, AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) ERRED IN UPHOLD ING ACTION OF THE ASSESSING OFFICER IN DISALLOWING INTEREST ON VEHICL E LOAN AMOUNTING TO RS. 15,040 WITHOUT GIVING ENHANCEMENT NOTICE AND WITHOU T APPRECIATING THAT INTEREST ON VEHICLE LOAN WAS ALLOWED UNDER SECTION 36 (1) (III), AND WAS NOT HIT BY THE RIGOR OR PROVISIONS OF SECTION 38 (2 ) OF THE INCOME-TAX ACT 1961. 2. GROUND NO. 1 IS REGARDING DISALLOWANCE OF PREMIU M PAID ON KEYMEN INSURANCE POLICY. THE AO NOTED THAT THE ASSESSEE HA S DEBITED AN AMOUNT OF RS. 23,00,000/- TOWARDS INSURANCE PREMIUM PAID UNDER KE YMEN INSURANCE PREMIUM. THE AO FOUND THAT ASSESSEE HAS PAID PREMIUM TO THE VARIOUS INSURANCE COMPANIES UNDER KEYMEN INSURANCE POLICY TAKEN IN THE NAME OF TWO MAJOR PARTNERS OF THE FIRM. THE AO WAS OF THE VIEW THAT THE POLICY IN QUESTION ARE UNIT LINKED INSURANCE PLANS AND NOT TERM PLAN, THEREFORE, THESE ARE NOT LIFE I NSURANCE POLICY ON THE LIFE OF KEYMEN. THE AO WAS OF THE OPINION THAT THE PREMIUM WAS PAYABLE ON THE KEYMEN POLICY OUT OF THE PROFIT OF THE FIRMS ONLY, WHEREAS IN THE CASE OF THE ASSESSE THE FIRM IS IN LOSS EVEN AFTER REDUCING THE PREMIUM OF KEYME N INSURANCE. ACCORDINGLY THE AO DISALLOWED THE CLAIM OF RS. 23,00,000/- TOWARDS PREMIUM OF KEYMEN INSURANCE POLICY. JEYENKAY PETROGELS 3 | P A G E 3. ON APPEAL, CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY AO ON SIMILAR REASONING. 4. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE INSURANCE HAS BEEN TAKEN ONLY IN RESPECT OF TWO PARTNERS WHO ARE ACTIVE PARTNERS OF THE FIRM, THEREFORE, THE EXPENDITURE IN THE SHAPE OF PREMIUM ON KEYMEN INSURANCE POLICY IS AN ALLOWABLE EXPENDITURE U/S 37 OF THE INCOME TAX A CT. HE HAS FURTHER SUBMITTED THAT IN THE EARLIER YEAR NO DISALLOWANCE HAS BEEN M ADE BY THE AO IN RESPECT OF PREMIUM ON KEYMEN POLICIES AND ONLY IN THE YEAR UND ER CONSIDERATION, THE CLAIM OF THE ASSESSEE HAS BEEN DISALLOWED. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. B.N. EXPORTS (323 ITR 227) AS WELL AS DECISION OF THIS TRIBUNAL IN THE CASE OF PHARMA SEARCH VS. ASSISTANT COMMISSIONER OF INCOME TAX (21 TAXMANN.CO M 44 (MUMBAI. TRIB). HE HAS ALSO REFERRED THE LETTER OF LIC DATED 02-9-200 8 PLACED AT PAGE 15 OF THE PAPER BOOK AND SUBMITTED THAT THE LIC HAS STATED IN THE S AID LETTER THAT THE POLICY ISSUED UNDER THE PARTNERSHIP INSURANCE, PREMIUM PAID IS AL LOWED AS BUSINESS EXPENDITURE. 5. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TH E ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE FINDING OF FACT HAS BEEN GIV EN BY THE AO AND CIT(A) THAT THE POLICIES IN QUESTION ARE NOT THE TERM POLICY ON THE LIFE OF THE PARTNERS OF THE FIRM BUT THESE ARE UNIT LINKED POLICIES AND, THEREFORE, CANN OT BE REGARDED AS KEYMEN INSURANCE POLICY. HE HAS FURTHER SUBMITTED THAT THE BENEFIT OF THE POLICIES IS AVAILABLE TO THE PARTNERS AND NOT TO THE ASSESSEES FIRM, HENCE THE PREMIUM IS NOT ALLOWABLE AS BUSINESS EXPENDITURE. JEYENKAY PETROGELS 4 | P A G E 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA S PAID THE PREMIUM OF RS. 23,00,000/- TO THE VARIOUS INSURANCE COMPANIES UNDE R THE POLICY TAKEN IN THE ANME OF ITS TWO PARTNERS NAMELY MR. NILESH K. PATEL AND MRS. JIGNA N. PATEL. THE DETAILS OF PREMIUM PAID BY THE ASSESSEE ARE GIVEN IN PARA 2 .3 OF THE ASSESSMENT ORDER AS UNDER:- SL. NO NAME OF THE INSURANCE COMPANY AMOUNT OF PREMIUM 1. BAJAJ ALLIANZ RS. 4,00,000 2. BAJAL ALLIANZ RS. 4,00,000 3. ICICI PRUDENTIAL RS. 5,00,000 4. ICICI PRUDENTIAL RS. 5,00,000 5. LIC JEEVAN PLUS RS. 3,00,000 6. LIC JEEVAN PLUS RS. 2,00,000 TOTAL RS. 23,00,000/- 7. THE AO HAS DOUBTED THE VERY NATURE OF THE POLICY TAKEN BY THE ASSESSEE AND DENIED THE CLAIM ON THE GROUND THAT THESE ARE UNIT LINKED POLICY AND NOT TERM POLICY ON THE LIFE OF KEYMEN. SIMILAR VIEW WAS TAKEN BY TH E CIT(A) WHILE CONFIRMING THE DISALLOWANCE MADE BY THE AO. BEFORE US, THE LD. AR OF THE ASSESSEE VEHEMENTLY CONTENDED THAT THESE ARE THE KEYMEN POLICY AND THE PREMIUM PAID TOWARDS THE POLICY IS AN ALLOWABLE CLIMA U/S 37(1). THERE IS NO QUARREL ON THIS ISSUE THAT THE PREMIUM PAID BY A PARTNERSHIP FIRM ON ACCOUNT OF KE YMEN POLICY TAKEN ON THE PARTNERS WHO ARE INEVITABLE TO THE BUSINESS OF THE ASSESSEES FIRM. THUS THE OBJECT AND PURPOSE OF THE KEYMEN INSURANCE POLICY IS TO PR OTECT THE BUSINESS OF THE ASSESSEE AGAINST THE FINANCIAL SET BACK DUE TO PREM ATURE DEATH OF THE KEYMEN/PARTNERS OF THE ASSESSEES FIRM. THIS ISSUE HAS BEEN CONSIDERED AND JEYENKAY PETROGELS 5 | P A G E DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. B.N. EXPORTS (SUPRA) AND HELD IN PARA 9 AS UNDER:- 9. THE EFFECT OF SECTION 10(10D) IS THAT MONIES WHICH ARE RECEIVED UNDER A LIFE INSURANCE POLICY ARE NOT INCLUDED IN THE COMPUTATIO N OF THE TOTAL INCOME OF A PERSON FOR A PREVIOUS YEAR. HOWEVER, ANY SUM RECEIVED UNDE R A KEYMAN INSURANCE POLICY IS TO BE RECKONED WHILE COMPUTING TOTAL INCOME. FOR THAT PURPOSE, A KEYMAN INSURANCE POLICY MEANS A LIFE INSURANCE POLICY TAKE N BY A PERSON ON THE LIFE OF ANOTHER PERSON WHO IS OR WAS IN EMPLOYMENT AS WELL AS ON A PERSON ON WHO IS OR WAS CONNECTED IN ANY MANNER WHATSOEVER WITH THE BUS INESS OF THE SUBSCRIBER. THE WORDS IS OR WAS CONNECTED IN ANY MANNER WHATSOEVER WITH THE BUSINESS OF THE SUBSCRIBER ARE WIDER THAN WHAT WOULD BE SUBSUMED UN DER A CONTRACT OF EMPLOYMENT. THE LATTER PART MAKES IT CLEAR THAT A K EYMAN INSURANCE POLICY FOR THE PURPOSES OF CLAUSE (10D) IS NOT CONFINED TO A SITUA TION WHERE THERE IS A CONTRACT OF EMPLOYMENT. CLAUSE (10D) RELATES TO THE TREATMENT F OR THE PURPOSE OF TAXATION OF MONEYS RECEIVED UNDER AN INSURANCE POLICY. IN THIS APPEAL, THE COURT HAS TO DETERMINE THE QUESTION OF EXPENDITURE INCURRED TOWA RDS THE PAYMENT OF INSURANCE PREMIUM ON A KEYMAN INSURANCE POLICY. THE CIRCULAR WHICH HAS BEEN ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES CLARIFIES THE POSITIO N BY STIPULATING THAT THE PREMIUM PAID FOR A KEYMAN INSURANCE POLICY IS ALLOWABLE AS BUSINESS EXPENDITURE. IN THE PRESENT CASE, ON THE QUESTION WHETHER THE PREMIUM W HICH WAS PAID BY THE FIRM COULD HAVE BEEN ALLOWED AS BUSINESS EXPENDITURE, TH ERE IS A FINDING OF FACT BY THE TRIBUNAL THAT THE FIRM HAD NOT TAKEN INSURANCE FOR THE PERSONAL BENEFIT OF THE PARTNER, BUT FOR THE BENEFIT OF THE FIRM, IN ORDER TO PROTEC T ITSELF AGAINST THE SET BACK THAT MAY BE CAUSED ON ACCOUNT OF THE DEATH OF A PARTNER. THE OBJECT AND PURPOSE OF A KEYMAN INSURANCE POLICY IS TO PROTECT THE BUSINESS AGAINST A FINANCIAL SET BACK WHICH MAY OCCUR, AS A RESULT OF A PREMATURE DEATH, TO THE BUSINESS OR PROFESSIONAL ORGANIZATION. THERE IS NO RATIONAL BASIS TO CONFINE THE ALLOWABILITY OF THE EXPENDITURE INCURRED ON THE PREMIUM PAID TOWARDS SUCH A POLICY ONLY TO A SITUATION WHERE THE POLICY IS IN RESPECT OF THE LIFE OF AN EMPLOYEE. A KEYMAN INSURANCE POLICY IS OBTAINED ON THE LIFE OF A PARTNER TO SAFEGUARD THE FIRM AGAINST A DISRUPTION OF THE BUSINESS THAT MAY RESULT DUE TO THE PREMATURE DEATH OF A PARTNER. THEREFORE, THE EXPENDITURE WHICH IS LAID OUT FOR THE PAYMENT OF PR EMIUM ON SUCH A POLICY IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. 8. THUS THERE IS NO AMBIGUITY ON THE ISSUE OF ALLOW ABILITY OF THE CLAIM, SO FAR AS THE PREMIUM PAID TOWARDS THE KEYMEN INSURANCE POLIC Y BY FIRM ON THE LIFE OF THE PARTNERS. THE DISALLOWANCE MADE IN THE CASE IN HAND BY THE AUTHORITIES BELOW ON THE GROUND THAT THE POLICIES IN QUESTION ARE NOT KE YMEN POLICIES BUT THESE ARE UNIT LINKED POLICIES TAKEN BY THE FIRM IN THE NAME OF TH E PARTNERS AND THE BENEFIT OF THE JEYENKAY PETROGELS 6 | P A G E POLICY WILL GO TO THE PARTNERS AND NOT TO THE FIRM. IT IS PERTINENT TO NOTE THAT NEITHER THE AO NOR THE CIT(A) HAS DULY EXAMINED THE TERMS A ND CONDITIONS OF THE POLICY IN QUESTION AND PARTICULARLY THE BENEFIT CLAUSE UNDER WHICH THE BENEFIT OF THE POLICY IS AVAILABLE WHETHER TO THE ASSESSEE FIRM OR TO THE PA RTNERS. BEFORE US, THE ASSESSEE HAS FILED ONLY THE RECEIPT OF PREMIUM PAID TOWARDS THESE POLICIES AND IN THE ABSENCE OF POLICY DOCUMENTS IT IS NOT POSSIBLE TO GIVE A CO NCLUSIVE FINDING WHETHER THE POLICIES IN QUESTION ARE TRULY KEYMEN POLICIES OR N OT. IT MAKES NO DIFFERENCE IF THE POLICIES ARE KEYMEN POLICY AT THE TIME WHEN IT WAS TAKEN AND SUBSEQUENTLY IF THE POLICIES ARE ASSIGNED IN THE NAME OF KEYMEN/PARTNER S. IN SUCH A SITUATION THE BENEFIT RECEIVED BY THE PARTNERS WILL BE TREATED AS INCOME IN THE HANDS OF THE PARTNERS OTHERWISE THE BENEFIT RECEIVED BY THE FIRM IS ALWAYS TAXABLE AND THAT IS WHY THE EXPENDITURE OF PREMIUM PAID TOWARDS THE KEYMEN POLICY IS ALLOWABLE U/S 37(1) OF THE INCOME TAX ACT BEING THE EXPENDITURE INCURRE D FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. SINCE THE RELEVANT RECORD I.E. POL ICY DOCUMENT HAS NOT BEEN PLACED BEFORE US, THEREFORE, WE REMIT THIS ISSUE TO THE RE CORD OF THE CIT(A) TO EXAMINE THE POLICY DOCUMENTS AND THEN DETERMINE THE TRUE NATURE OF THE POLICY WHETHER THESE POLICIES ARE KEYMEN POLICIES OR NOT. AS REGARDS, NO DISALLOWANCE IN THE EARLIER YEAR, WHEN THERE IS NO ASSESSMENT U/S 143(3) THEN ACCEPTI NG THE CLAIM U/S 143(1) IS IMMATERIAL. 9. GROUND NO. 2 IS REGARDING DISALLOWANCE OF TRANSP ORT CHARGES AT THE RATE OF 20%. THE AO NOTED THAT THE ASSESEE HAS PAIDRS, 1,90 ,391/- IN CASH AND ACCORDINGLY DISALLOWED 20% OF THE SAID EXPENDITURE MADE IN CASH AMOUNTING TO RS. 38,078/-. 10. ON APPEAL, THE DISALLOWANCE MADE BY AO HAS BEEN CONFIRMED BY CIT(A). JEYENKAY PETROGELS 7 | P A G E 11. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMI TTED THAT THE AO HAS DISALLOWED 20% OF THE RS. 1,90,391/- ON THE ASSUMPT ION THAT THE SAID PAYMENT WAS MADE TO ONE PARTY NAMELY M/S ANIL BULK MOVER INDIA PVT. LTD., WHEREAS THESE EXPENSES ARE PAID TO THE NUMBER OF PERSONS AND INDI VIDUAL AMOUNTS PAID ARE VERY SMALL AND ONLY THE AGGREGATE AMOUNT OF ALL THESE EX PENDITURE COMES TO RS. 1,90,391/- OUT OF THE TOTAL TRANSPORTATION EXPENDIT URE OF RS. 25,78,895/-. THUS THE LD. AR HAS SUBMITTED THAT THE AO HAS DISALLOWED THE SE EXPENDITURE UNDER WRONG ASSUMPTION OF FACTS. HE HAS REFERRED THE DETAILS OF THE EXPENDITURE AT PAGE NO. 114 OF THE PAPERBOOK AND SUBMITTED THAT THESE EXPENDITU RE IS NOT TOWARDS THE PAYMENT TO M/S ANIL BULK MOVER INDIA PVT. LTD BUT THESE EXP ENDITURE ARE COMPRISING OF VARIOUS SMALL PAYMENTS TO THE NUMBER OF PARTIES/PER SONS. 12. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON T HE ORDER OF AUTHORITIES BELOW AND SUBMITTED THAT THESE EXPENSES ARE MADE IN CASH AND, THEREFORE, IN THE ABSENCE OF ANY SUPPORTING EVIDENCE THE AO IS JUSTIFIED IN D ISALLOWING 20% OF THE SUCH EXPENSES. 13. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE FIND THAT THE AO HAS DISALLOWED 20% OF T HE EXPENSES MADE IN CASH TO ONE PARTY NAMELY M/S ANIL BULK MOVER INDIA PVT. LTD . ON CAREFUL EXAMINATION OF RECORDS, WE FIND THAT THE ASSESSEE HAS PLACED THE D ETAILS OF TRANSPORT EXPENSES PAID TO M/S M/S ANIL BULK MOVER INDIA PVT. LTD AND NO SUCH CASH PAYMENT WAS MADE TO THIS PARTY. ALL THE PAYMENTS WERE MADE TO THIS PARTY AFTER DEDUCTION OF TDS. THEREFORE, THE AO HAS DISALLOWED 20% OF THESE EXPENSES UNDER WRONG ASSUMPTION OF FACTS, WHEREAS THESE EXPENSES PERTAIN S TO THE PAYMENT MADE TO JEYENKAY PETROGELS 8 | P A G E VARIOUS PARTIES IN SMALL AMOUNTS RANGING FROM FEW H UNDREDS TO THOUSAND. IN VIEW OF THE FACT AND CIRCUMSTANCES AS DISCUSSED ABOVE, WE D ELETE THE ADDITION OF RS. 38,078/- ON ACCOUNT OF TRANSPORT EXPENSES. 14. GROUND NO. 3 IS REGARDING DISALLOWANCE OF INTER EST ON VEHICLE LOAN OF RS. 15,040/-. THE AO NOTED THAT THE ASSESSEE HAS PAID I NTEREST OF RS. 75,206/- ON THE LOAN TAKEN FOR CAR. THE ASSESSEE ITSELF HAS DISALLO WED 20% OF THE RUNNING EXPENSES OF THE CAR ON ACCOUNT OF PERSONAL USE. THE AO HAS A CCORDINGLY DISALLOWED 20% OF THE INTEREST EXPENSES ON ACCOUNT OF PERSONAL USE AM OUNTING TO RS. 7,282/-. 15. ON APPEAL, THE CIT(A) NOTED THAT THE DISALLOWAN CE MADE BY THE AO IS INCORRECT AS THE CORRECT AMOUNT OF LOAN WAS NOT TAK EN INTO CONSIDERATION AND ACCORDINGLY THE CIT(A) HAS ENHANCED THE DISALLOWANC E BY CONFIRMING DISALLOWANCE OF 20% OF THE INTEREST EXPENSES OF RS. 75,206/- WHI CH COMES TO RS. 15,040/- MADE BY THE AO. 16. BEFORE US, THE LD. AR OF THE ASSESSEE CONTENDED THAT WHEN THE ASSESSEE ITSELF HAS DISALLOWED 20% OF THE RUNNING EXPENSES O F THE CAR AND THE INTEREST EXPENDITURE DOES NOT COME UNDER THE CATEGORY OF RUN NING EXPENSES, THEREFORE, THE SAME CANNOT BE DISALLOWED ON ACCOUNT OF PERSONAL US E. THUS THE LD. AR HAS SUBMITTED THAT THE DISALLOWANCE OF INTEREST EXPENDI TURE ON ACCOUNT OF PERSONAL USE IS NOT JUSTIFIED. 17. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE O RDERS OF AUTHORITIES BELOW. JEYENKAY PETROGELS 9 | P A G E 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. WE ARE OF THE VIEW THAT INTEREST EXPENDITUR E ON LOAN FOR PURCHASE OF CAR IS AN ALLOWABLE BUSINESS EXPENSES. THE INTEREST EXPENS ES ON LOAN IS RELATING TO THE PURCHASE OF CAR AND NOT ACTUAL USE OF CAR. THE EXPE NSES WHICH ARE FOR THE PURPOSE OF ACQUIRING A BUSINESS ASSET AND NOT INCURRED FOR ACTUAL USE OF THE ASSET AS IT REMAINED CONSTANT IRRESPECTIVE OF THE FACT WHETHER THE BUSINESS ASSET IS ALSO USE FOR PERSONAL PURPOSES. WHEN THE CAR IS A BUSINESS A SSET AND THE INTEREST EXPENDITURE IS INCURRED FOR ACQUIRING THE BUSINESS ASSET THEN THE INTEREST EXPENDITURE CANNOT BE ATTRIBUTED TO THE ELEMENT OF PERSONAL USE OF CAR. THE ASSESSEE HAS ALREADY DISALLOWED THE OTHER RUNNING E XPENSES OF THE CAR AT THE RATE OF 20% ON ACCOUNT OF PERSONAL USE AND, THEREFORE, THE DISALLOWANCE OF 20% OF THE INTEREST PAID ON THE LOAN TAKEN FOR ACQUISITION OF CAR CANNOT BE DISALLOWED ON ACCOUNT OF PERSONAL USE OF THE CAR BECAUSE THE INTE REST EXPENDITURE IS PRE DETERMINED AND IT DOES NOT VARY BY THE REASON OF AC TUAL USE OF CAR. ACCORDINGLY, WE DELETE THE ADDITION MADE ON ACCOUNT OF INTEREST EXP ENSES ON LOAN FOR PURCHASE OF CAR. 19. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED.. ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 3 0-05-2014 SD/- SD/- ( RAJENDRA ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 30 -05-2014 SKS SR. P.S,