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2018 (4) TMI 1796 - ITAT COCHINDisallowance of portion of the interest paid on secured loans from banks as proportionate interest pertaining to personal drawings made by the partners - Addition u/s. 36(1)(iii) - HELD THAT:- In this case, the partners of the assessee-firm had withdrawn amount from the assessee-firm only for personal purpose. The assessee has been paying interest on borrowed funds. The withdrawals made by the partners was not utilized for the purpose of business and the assessee-firm has not derived any business advantage from such withdrawals by the partners. The assessee-firm has not charged any interest on the withdrawals made by the partners by way of paying interest on its borrowings. However, at the same time, the assessee has incurred interest expenditure on the borrowals made by the partners of the assessee-firm. The main contention of assessee is having sufficient cash balance to meet the withdrawals made by the partners. In our opinion, if the cash balance is available, it should be meant for the business purpose of the assessee-firm and not for the personal purpose of the partners of the assessee-firm. The assessee with liquidity cannot claim that it could give such cash balance for the benefit of the partners of the assessee-firm. Such advance made by the partners has not been used for the business purpose but for the personal benefit of the respective partners. Had the assessee-firm used such cash balance for the business purpose or for payment of borrowals made by the partners of the assessee-firm, it could have saved interest expenditure. AR made an argument that only the withdrawals of the present assessment years is to be considered for computation of interest expenditure and the earlier old balance of advance in the name of the partners which was carried forward from the earlier years cannot be considered. In our opinion, this argument of the assessee’s Counsel has no merit as the assessee is paying interest on such carried forward opening balance and incurred interest expenditure on it. Therefore, the total advance outstanding in the name of the partners is to be considered for computation of interest disallowance in the case of the assessee-firm. Accordingly, we do not find any infirmity in the orders of the lower authorities. - Decided against assessee.
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