TMI Blog2013 (7) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... State bank of India C.C account and ICICI bank car loan. Further there is interest payment to the tune of about Rs.1.95 lakhs to two other persons. These factual aspects show that the assessing officer has only calculated notional interest on the interest free loans and advances. In the case law relied upon by the assessee viz., Highways Construction Pvt. Ltd. Vs. CIT (1992 (11) TMI 86 - GAUHATI High Court) if the assessee had not bargained for interest, or had not collected interest, one fails to see how the IT authorities can fix a notional interest as due, or collected by the assessee. Since the assessing officer is not entitled to assess interest on notional basis direct AO to delete the impugned addition. Disallowance of a portion of Phamplets expenses - Held that:- Since these expenses were supported by self made vouchers, AO disallowed a portion of the expenditure claim and the same was confirmed by CIT(A). As before us no material was placed to rebut the findings given by AO thus no reason to interfere with his decision on this issue. - ITA No.85 , 86 /Vizag/2009 - - - Dated:- 3-5-2013 - D Manmohan and B R Baskaran, JJ. For the Appellant : Shri G V N Hari, Adv. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lorries are booked by the supplier or the assessees herein. He further submitted that the transport bills/receipts by themselves constitute a contract and hence the assessee is under obligation to deduct tax at source on the freight charges paid by it. 6. We have heard the rival contentions on this issue and carefully perused the record. We agree with the view expressed by Ld CIT(A) that the transport bills/vouchers by themselves constitute a contract. However, the question that arises here is whether there was a contract between the assessees herein and the transport contractors in the facts and circumstances of the present case. According to the assessees, the suppliers themselves dispatch the goods to them by engaging the lorries at their end. Thus, according to the assessees, the contract is between the suppliers and the transport contractors and not between him and the transport contractors. 7. In our view, the parties to a contract have to be determined on the basis of conduct of the parties. Mere payment of freight charges, by itself, cannot constitute contractual payments so as to attract the provisions of sec. 194C of the Act. Similarly, the fact that the supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have not rebutted the claim of the assessees herein that they have not instructed the suppliers to dispatch the goods by a particular agency. It was also not brought on record that the assessees herein have only requested the suppliers to dispatch the goods by lorries. Under these facts and circumstances, in our view, it cannot be said that mere payments of lorry freights, by itself, constitute a contract between the assessees herein and the transport agencies. Accordingly, in our view, the provisions of sec. 40(a)(ia) cannot be invoked in the facts and circumstances of these cases. Accordingly, we set aside the orders passed by Ld CIT(A) on this issue and direct the assessing officer to delete the impugned addition in both the cases. 9. The next issue relates to the assessment of interest on loans and advances. The AO noticed that the assessees herein have paid interest free loans and advances to certain parties with whom they did not have business dealings. Accordingly, the assessing officer calculated interest @ 15.75% and assessed the same in the case of both the assessees. The Ld CIT(A) also confirmed the same. 10. The Ld Counsel for the assessee submitted that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na Bros (General Bazaar) (ITA No.86/V/2011) Rs.7,81,988/- The interest paid by these two concerns, as noticed from the profit and loss account filed by them, is Rs.3,86,560/- and Rs.7,82,378/- respectively. We notice that both the assessees have availed loans from State Bank of India and according to the assessee, it represents cash credit loan. We further notice that the closing stock held by these two parties is more than the cash credit loan, meaning thereby the cash credit loan has been fully utilized for the purpose of business. M/s Chandana Bros (General Bazar) has availed car loan and there should not be any dispute that the car loan could not have been diverted. We also notice that both the assessees are having sufficient amount of interest free funds. Hence there is a force in the contention of the assessee that the interest free advances have been given out of interest free funds. 13. In the case of Chandana Bros (Ameerpet), the interest assessed by the assessing officer is far more than the interest expenditure claimed by the assessee. In the said case, the interest expenditure represented only the interest paid to M/s State Bank of India towards the cash credit lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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