TMI Blog1993 (1) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... ody Building (P.) Ltd. and one of the partners of M/s B. F. Industries. The assessee had paid interest on loans amounting to Rs. 22,742 during the year. The parties to whom the interest was paid were as follows:---- 1. Krishna Kumar Agarwal Rs. 1,930 2. V.K. Saraf Rs. 9,000 3. Navin Kumar Agarwal Rs. 1,875 4. Nitish Kumar Agarwal Rs. 1,170 5. V. Dayal Khuntelal Rs. 8,676 ------------------------ Rs. 22,742 ----------------------- The payment of these interest was claimed as deduction from income earned by the assessee. The Assessing Officer disallowed the claim as according to him the claim does not satisfy the conditions of section 57(iii). He had given various reasons which can shortly be described as follows:----- He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prasad v. CIT [1972] 84 ITR 15 (All.), Memraj Manmal Ruia v. CIT [1972] 84 ITR (Bom.) (sic) and he specially pointed out that in the case of Smt. Viramati Ramkrishna v. CIT [1981] 131 ITR 659 (Guj.)(App.). His Lordships Mr. Justice Desai after considering all the judicial pronouncements on the subject laid down very clear and ambiguous conditions for allowability of expenditure incurred under section 57(iii) of the Act. His Lordships opined----- " The purpose of making or earning such income should be the sole purpose for which the expenditure must have been incurred that is to say, the expenditure should not have been incurred for such purpose as also for another purpose or for a mixed purpose. " (Emphasis supplied) After quoting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 57(iii) and disallowed the same. For the remaining part of the interest which was paid to Krishna Kumar Agrawal and Nitish Kumar Agrawal was for loans of Rs. 1,65,500. This was invested in M/s BEBCO. Out of this Rs. 1,20,000 was adjusted against the cost of shares and the balance remained with M/s BEBCO. It was argued that the Assessing Officer misconceived himself about the entries made in the account. It was pointed out that unless the amount was converted to shares no entry as share capital account can be made. It was also argued that the Assessing Officer wrongly applied the decision of the Supreme Court in Rajendra Prasad Moody's case. It was submitted that there was no mixed purpose for obtaining the loan. If the entire amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee argued that the above order of the CIT (Appeals) cannot be accepted. No reasons whatsoever had been projected by him in his order, to support the order of the Assessing Officer and reject the submission of the assessee. He argued that the entire claim of the assessee should be considered in the correct perspective and deduction should be allowed. The ld. DR, on the other hand, submitted that the reasons given by the Assessing Officer were proper and his order was rightly confirmed by the ld. CIT (Appeals). As the reasons given by the Assessing Officer were exhaustive the lD. CIT (Appeals) did not repeat the reasons in support of the order of the Assessing Officer. 5. I have considered the rival submissions, facts and the materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should also be allowed. No materials have been brought on record to show that there is any attempt of tax avoidance by introducing the loan in the books of the company through the assessee either by the assessee or by the company. If the company needed money it could have directly obtained the loan and claimed interest. There was no need of Director assessee to obtain loan on interest to advance the same to the company. From the Director's Meeting it is evident that large no. of shares were not issued. As a Director of a Company therefore, it cannot be denied that he had knowledge that unissued shares will be issued in future. It is, therefore, not usual for the director assessee to obtain the loan and deposit the same in the company waitin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. He pointed out that this amount was invested by the assessee and partly available in cash. In view of this matter, he argued that the order of the Assessing Officer should be confirmed. The ld. counsel argued that when the income has been declared as income from other sources, the same cannot be treated as unexplained investment and unexplained cash under sections 69 and 69A. 8. I have considered the rival submissions, facts and the materials on record. At the outset I may say that the CIT (Appeals) was not justified in deleting Rs. 15,430 from the computation of income. It can be seen that the income was declared by the assessee and it is not disputed that this was offered for taxation. The deletion of Rs. 15,430 is, therefore, revers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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