TMI Blog2013 (4) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... es given. In the case under consideration, the assessee has satisfied all the conditions that the borrowed fund was used for the purpose of business as prescribed under section 36(1)(iii). Also, it was not the case of the A.O. that the borrowed fund was not utilised for the purpose of business of the assessee. A.O.'s view regarding loss in interest account on account of different rates charged by the assessee - Held that:- Refering the case of CIT vs. Dhanrajgirji Raja Narasingirji (1973 (3) TMI 6 - SUPREME COURT) wherein held that it is not open to the department to prescribe what expenditure an assessee should incur and in what circumstances he should incur that expenditure. In the case under consideration, the A.O. and the CIT(A) pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paying interest rate from 9 to 21% on the borrowing made by it, but the assessee is not charging interest at the same rate on loans and advances rather charging interest at lesser rate which has resulted into loss of Rs.24,76,779/-. The A.O. disallowed the assessee's claim of interest expenditure under section 36(i)(iii) of the Act to that extent. The A.O. has also observed that some part of interest out of the said interest may be disallowed under section 40A(2)(b) of the Act. The A.O. made addition of Rs.24,76,779/-. 5. The CIT(A) found that some of the loans and advances were given in earlier year. On the direction of CIT(A), the A.O. has collected the details of interest rate from State Bank of Saurashtra and noticed that till July 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant firm and its sources, I find that only an amount of Rs.2,83,302/- is to be disallowed as discussed above. Therefore, I restrict the addition on account of disallowance u/s 36(1)(iii) at Rs.2,83,302/- and hence, the appellant gets a relief of Rs.21,93,477/-. Therefore, all the grounds taken by the appellant from Ground no.1 to ground no.7 disputing the addition of Rs.24,76,779/- is partly allowed. While making the above decisions, I have considered all the case laws cited by the AO as well as the appellant and upheld disallowance of only that part of interest which was paid diverting the fund of the appellant firm from its O.D. account by paying interest at higher rate but charging interest at lower rate on loan given to a rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) of the Act. Also, as stated above, it was not the case of the A.O. that the borrowed fund was not utilised for the purpose of business of the assessee. As regards the A.O.'s view regarding loss in interest account on account of different rates charged by the assessee, we would like to refer the observation of the Apex Court which was made in the case of CIT vs. Dhanrajgirji Raja Narasingirji, 91 ITR 544 (SC). It was observed by the Apex court that "it is not open to the department to prescribe what expenditure an assessee should incur and in what circumstances he should incur that expenditure. Every businessman knows his interest best". In the case under consideration, the A.O. and the CIT(A) put their legs to the shoes of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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