9911796707
TMI Blog1998 (1) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... a partnership firm carrying on business in rubber and hill products. The only ground raised in this appeal by the assessee is that the CIT(A) erred in confirming the disallowance of Rs. 75,351 out of the claim of interest on borrowed funds. In the course of the assessment proceedings the AO noticed that the assessee was having transactions with a sister-concern by name Chandysons Latex and that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO that there was diversion of borrowed funds for the use of the sister-concern and so there was a case for disallowing the interest on proportionate basis. Aggrieved with the finding of the CIT(A) the assessee has filed this appeal before the Tribunal. 3. On behalf of the assessee, S. Mahadevan C.A. submitted before us that the AO as also the CIT(A) was not correct in holding that borrowed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such instance as diversion of borrowed funds by the assessee. Arguing on the above lines, Mahadevan urged us to delete the disallowance of the interest amount. 4. The Departmental Representative, Kuruvilla M. George, on the other hand, supported the order of the CIT(A) and submitted that it was clearly brought on record by the AO that there was diversion of borrowed funds by the assessee to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e regarding the cash payments by the assessee there was no merit in the claim that the diversion of the funds by the assessee was for the purpose of its business. 5. We have considered the rival submissions and also gone through the transactions between the assessee-firm and the sister-concern, Chandysons Latex. No doubt, the assessee was having running account with the other concern but the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess purposes. There is thus justification for disallowance of the interest on the basis of the total sum of Rs. 12,32,921 which was found to be due from Chandysons Latex as on 31st March, 1982. In view of the fact that out of the outstanding amount, Rs. 6,88,426 represented business transactions, interest is to be disallowed only on the basis of the amount of Rs. 5,45,000 only. The AO is directed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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