1997 PLP (Trib (PTD)

2. We have heard the parties and examined the record.

3. In this appeal, the learned A.R. appearing for the assessee contends that the confirmation of the disallowance at Rs.6,73,870 in respect of the financial charges claimed in the Profit and Loss Account as erroneous and unwarranted. It is further agitated that the add-backs in respect of the Entertainment' at Rs.15,

000. Other Expenses' at Rs.10,000, Travelling Expenses' at Rs.7,000 and Vehicle Running Expenses' at Rs.13,000 are unjustified.

4. The learned D.R. on the other hand, defends the impugned order. It is stated that the addition of the aforestated amount in respect of the financial charges has rightly been made on the basis of allocating the capital work in progress.

5. The impugned order deals with the financial charges in the following terms: "The major add-back in the profit and Loss Account pertains to the financial charges and an amount of Rs.6,73,8 70 has been add-back out of the claimed financial charges of 60,52,

765. It has been observed by the I.T.O. that the loan on which the financial charges arise is being utilized both against work in progress disclosed at Rs.1,08,13,303 as well as capital work in progress disclosed at Rs.9,71,26,

092. He has, therefore, devised a formula to allocate the financial charges and the same was allocated to capital work in progress amounting to Rs.6,73,870 has been added-back. According to the appellant, the I.T.O' s treatment of the matter is not in accordance with law. After due consideration of the matter. I find that treatment accorded by the I.T.O. is justified by the operative circumstances and the formula devised and applied is in order. Amount of Rs.6,73,870 is correctly allocated to capital work in progress and curtailment of financial charges by equivalent amount is found to be justified. Hence maintained."

6. The bare reading of the above treatment shows that the impugned order has failed to discuss as to the reasons for the inadmissibility of the claim in respect of the financial charges. The formula devised by the I.T.O. has not been stated or discussed in the impugned order. Allocation of the claimed financial charges to capital work in progress and work in progress has not been thrashed. The legality of this treatment has not been shown or established on the record.

7. We have noticed that the claim of the financial charges made by the appellant has not been doubted as being incorrect. There appears no legality in the so-called formula talked about in the impugned order. The financial charges are the liabilities of the appellant, the payment of which has not been shown to be unverifiable. In these circumstances, there appears no justification either for the bifurcation, allocation or the division of this claim when the claimed amount is not proved on the record to be unverifiable or proved to be not the entitlement of the assessee. It cannot be refused in this view of the matter. We are not inclined to support the impugned order to this effect. The claim being legal entitlement of the appellant has to be allowed as its verifiability is never disputed. We, therefore, recall the impugned order to this effect and allow the entire claim in respect of the financial charges in the profit and loss account.

8. Regarding the claim of the assessee in respect of the affore-stated other three items, we confirm the add-backs in respect of entertainment' other expenses' and travelling expenses as being reasonable. The claim of the appellant in respect of Vehicle Running Expenses' has been disallowed to the extent of Rs.30,

000. The addition appears to be excessive. We, therefore, reduce this addition to Rs.10,000.

9. In view of the aforestated reasons, we allow the appeal to the extent and the manner indicated above. C.M.S./336/Trib. Order accordingly.