TMI Blog2011 (1) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the case of Sayaji Iron & Engg. Co. v. CIT (2001 -TMI - 13175 - GUJARAT High Court) wherein, it was held that no disallowance on account of personal use of the vehicles/telephone by the directors/officials could be made in the hands of a company. - Decided in favor of assessee. - ITA NO. 3960 (MUM.) OF 2009 - - - Dated:- 7-1-2011 - SHRI N.V. VASUDEVAN, AND SHRI PRAMOD KUMAR, JJ Represented By: Shri Sanjiv M. Shah for the Appellant. Shri Jitendra Yadav for the Respondent. Shri Pramod Kumar, - By way of this appeal, the assessee has called into question the correctness of the Commissioner of Income-tax (Appeals)'s order dated April 16, 2009, in the matter of assessment under section 143(3) of the Income-tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter concern to use funds without charging any interest and the assessee has paid interest on borrowing the funds, the interest paid on borrowings is to be disallowed. Aggrieved, the assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals) but without any success. The Commissioner of Income-tax (Appeals) confirmed the action of the Assessing Officer and observed as follows : "5. I have carefully considered the reasoning of the Assessing Officer as well as submission of the appellant as made before me. First of all there is no merit in the contention of the appellant to the extent the appellant has made submission that the Assessing Officer has failed to prove the nexus of this fund diverted for non business pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iency after analysing the basic and factual position as appearing in that case but in the present case, the appellant had not been able to show commercial expediency which warranted financing of interest-free advances after borrowing the interest-bearing funds. The Assessing Officer in the assessment order has clearly brought out that the closing balance at the end of the year was to the extent of Rs. 75,60,446 and the peak credit also did not exceed the aforesaid amount. The rate of interest at which the appellant has paid interest is at 18 per cent. and the interest on the peak credit has been worked out at Rs. 13,60,880. Since the appellant has debited interest only to the extent of Rs. 11,22,551 and as such the Assessing Officer restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been disallowed is that interest-bearing funds, in the Assessing Officer's opinion, having been diverted to the assessee's sister concern but none of the authorities below have taken into account factors relating to the commercial expediency of such transaction. It is also not in dispute that in earlier year period, the assessee had taken monies from Tej Sons and had not paid any interest thereon. A perusal of the copies of account which are placed before us in the paper book shows that non-charging of interest is a common factor whether the monies given by the assessee or received by the assessee from the said sister concern. We find that an identical question came up for consideration before the hon'ble Delhi High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its sister concern were justified on the ground of commercial expediency, the very foundation of disallowance ceases to be sustainable in law. We, therefore, deem it fit and proper to direct the Assessing Officer to delete the impugned disallowance. The assessee gets relief accordingly. This ground is allowed. 6. In ground No. 2, the assessee is aggrieved by the Commissioner of Income-tax (Appeals)'s action in approving the additions in respect of transport, octroi and freight charges Rs. 1,54,276, telephone expenses Rs.29,993 and miscellaneous expenses Rs. 46,971. 7. We have heard the rival contentions and perused the material on record. We find that in respect of transport, octroi and freight charges, telephone expenses and miscellane ..... X X X X Extracts X X X X X X X X Extracts X X X X
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