TMI Blog2013 (7) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... ahesh Kumar, D.R. ORDER Per N. K., Saini:- This is an appeal by the assessee against the order dated 26/06/2012 of CIT(A), Jodhpur. The only effective ground raised in this appeal reads as under: "1. The learned CIT(A) has erred on facts and in law in confirming disallowance of Rs.4,66,762/- out of interest payment claimed u/s 36(1)(iii) by holding that no commercial expediency was involved in giving interest free advances to Shri Arun Jain, Rishab Agencies Surabhi J.K.S.A.V. Kendra Pali." 2. The facts related to this case, in brief, are that the Assessing Officer during the course of assessment proceedings noticed that the assessee had given loan to the following persons/concerns and had not charged interest: 1. Shri Arun Jain Rs.35,32,620/- 2. M/s Rishabh Agencies (A) Pali Rs. 57,000/- 3. M/s Surabhi J.K.S.A.V. Kendra Pali Rs. 2,50,000/- Rs.38,39,620/- 2.1 The Assessing Officer further observed that as per the details available in Schedule-10 of the audit report, the assessee had paid total interest of Rs.5,78,220/- to the relatives, bank and other. The Assessing Officer asked the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons: "1. Apart from partner in M/s Marudhara Fab Tex, Shri Arun Jain is neither proprietor nor partner in any other concern and M/s Rishabh Felt Finishing Works has advanced loan to Shri Arun Jain in his individual capacity and not to the firm in which he is partner. 2. In the Audit Report of M/s Rishabh Felt Finishing Works, the amount given to Shri Arun Jain has been shown as loan to the relative and not as security deposit with M/s Marudhara Fab Tex. 3. In the statement Shri Arun Jain denied of having accepted security deposit or loan from other concerns from whom processing of grey cloth was got done by the firm M/s Marudhara Fab Tex in which he is one of the partners. 4. M/s Marudhara Fab Tex is also engaged in processing of cloth. But the said concern has not advanced any amount as security deposit to any of the party from whom grey cloth has been received for job work. 5. Above all, in the partnership deed Shri Arun Jain or other partners have not been authorized to accept any loan or security deposit on behalf of the firm from outside parties." 2.3 The Assessing Officer was of the view that if the expenditure incurred was ostensibly for the business but in rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that Shri Arun Jain while replying to question no. 7, stated that the assessee had not advanced any amount as security deposit to any of the other parties. The learned CIT(A) was of the view that there was no system to advance the amount as security deposit and that there was no such agreement where any such type of condition was given that the assessee will deposit the security for business. The learned CIT(A) was of the view that the assessee failed to prove any business expediency and that the advances were given for any business purpose. Accordingly, the learned CIT(A) held that the Assessing Officer was justified in making the disallowance. 4. Now the assessee is in appeal. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee also received interest free loan out of which interest free advances/loans were given, which were accepted by the Department. It was further stated that the assessee made the deposits to various persons, the details of which was furnished in the audited financial statements. The reference was made to page No. 10 of the assessee's compilation and our attention was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee claimed that it was a security deposit and no interest was received on the said deposit. In this regard Shri Arun Jain, vide affidavit dated 13/10/2010, affirmed that he was having the deposits from the assessee since substantial goods were lying with the assessee for job work and no interest was paid on the said security deposit. The same thing was stated in the statement recorded on 09/10/29010 while giving the reply to question No. 5, copy of which is placed at page No. 23 of the assessee's compilation wherein it was stated that they have taken deposit from the assessee only for the reason that the substantial goods given for job work were lying with the assessee. In the present case the assessee received about 30% of the total job receipts from the firm M/s Marudhara Fab Tex in which Shri Arun Jain is having 50% share. Therefore, there was no reason to disbelieve that the assessee had given interest free security to Shri Arun Jain, partner of M/s Marudhara Fab Tex from whom a sum of Rs.1,45,39,177/- as job charges was received by the assessee. Therefore, the learned CIT(A) was not justified in confirming the disallowance made by the Assessing Officer on account of n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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