TMI Blog2009 (8) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... partner's account/interest-free loans which have been accepted by the Tax Department itself in the course of scrutiny assessment proceedings for the preceding years. 2(B). That the learned CIT(A) as well as AO have grossly erred on facts and in law by totally ignoring the fact that out of the debit capital amounting to Rs. 54,95,844.03 in the capital account of Smt. Sudarshan Manchanda, the sum of Rs. 48,23,459.13 pertains to the preceding year and similarly all the interest-free loans and advances amounting Rs. 3,22,574.30 given as on 31st March, 2004 pertain to the preceding years, wherein it was accepted by the Tax Department itself in course of scrutiny assessment proceedings that the bank borrowings have not been diverted for making payment on account of capital to partners or interest-free loans since no disallowance was made by Tax Department on account of interest on bank borrowings for non-business purpose in the course of scrutiny assessment proceedings for the preceding years. 2(C). That the learned CIT(A) as well as AO have erred in facts and in law by ignoring the fact that the net capital of all the partners including the debit capital of Smt. Sudarshan Manchanda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. 5. It is submitted by learned Authorised Representative of the assessee that if the balances in the capital accounts of all the partners are considered together, there is net credit balance in partners' capital account i.e., Rs. 12,18,064 and hence no disallowance can be made for this reason because the assessee firm is not paying any interest on partner's capital account. It is also submitted that during this year, the assessee has received an amount of Rs. 209.90 lakhs on account of export sales which have been admitted by the AO in the assessment order and all such realization has been deposited in the same bank account. It was submitted that under these facts, the issue in the present case is squarely covered in favour of the assessee by the Tribunal decision rendered in the case of CIT vs. Mira Industries (2004) 86 TTJ (Ahd) 309 : (2003) 87 ITD 475 (Ahd). 6. It was also submitted that the issue in the present case is also covered by the judgment of Hon'ble jurisdictional High Court, i.e., Allahabad High Court rendered in the case of CIT vs. Radico Khaitan Ltd. (2005) 194 CTR (All) 451 : (2005) 274 ITR 354 (All), wherein it was held that where the assessee had sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal, no disallowance of interest can be made in the present case on account of debit balance in the name of one of the partners. 9. Now, we examine the applicability of judgment of Hon'ble jurisdictional High Court rendered in the case of CIT vs. Radico Khaitan Ltd. In that case, it is observed by the Hon'ble Allahabad High Court that the Tribunal has recorded a finding that there were sufficient funds available with the assessee in the form of share capital, share application money, reserve and surplus other than the borrowed money for diverting a sum of Rs. 17.18 lakhs. Under these facts, it was held that it cannot be said that the, amount of loan advanced to a sister concern was out of borrowed funds. In the present case also, the assessee firm is having credit balance in the capital account of the partners to the extent of Rs. 67.13 lakhs and there are interest-free unsecured loan of Rs. 7.51 lakhs total Rs. 74.64 lakhs whereas debit balance in capital account of one of the partners is of Rs. 54.95 lakhs and other interest-free advance are of Rs. 3.22 lakhs only and hence in the present case also, interest-free funds available with the assessee are more than the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of the expenses in relation of: Foreign tour expenses Rs. 43,390 Car running and maintenance expenses Rs. 32,173 Depreciation Rs. 21,686 3(A). That the disallowance of expenses made by the AO and confirmed by the CIT(A) has been totally on ad hoc basis and on surmises and suspicion without any adverse finding in this regard. 14. The learned Authorised Representative of the assessee submitted that only issue regarding disallowance of foreign tour expenses of Rs. 43,390 is pressed and remaining two disallowances are not pressed. Accordingly, that part of the ground is rejected as not pressed. 15. Regarding disallowance of foreign tour expenses of Rs. 43,390, brief facts of the case are that it is noted by the AO on page No. 2 of the assessment order that the assessee has claimed foreign tour expenses of Rs. 4,54,166. The AO made disallowance of 10 per cent of the same on the allegation that part of the expenses incurred were of personal nature. It is further noted by the AO that this sum includes foreign exchange of Rs. 4,33,902. The AO was of the opinion that to the extent of 10 per cent of the foreign exchange expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal by observing that for the assessment year it is noted that the AO has not identified any of the expenditure, for which details were submitted as related to personal entertainment. As against this, in the present case, no details about expenses incurred out of foreign currency expenses have been brought on record by the assessee before the authorities below or before us. Under these facts, this Tribunal decision also does not favour the assessee in the present case. 20. Since in the present case, the assessee has not furnished the details of foreign currency expenses of Rs. 4,33,920 out of total expenses of Rs. 5,54,165, we are of the considered opinion that some expenses of personal nature out of foreign exchange expenses cannot be ruled out and in the absence of proper details and vouchers and supporting evidence, the AO cannot pinpoint the exact amount of such expenses and therefore estimated the disallowance on this account and we find no fault in the same. Considering all the facts and circumstances of the present case, we uphold the disallowance on this account. This ground of the assessee is rejected. 21. In the result, the appeal of the assessee stands partly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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