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TMI Blog2015 (4) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the fact that the assessee filed its return of income in the status of AOP and the assessment in this case was also completed in the states of AOP. 3. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in holding that the charging of interest in this case would be determined by the express clauses of the "Partnership Deed" or that its allowability would be governed by provisions of section 40(b) of the Income Tax Act, 1961, without appreciating the fact that the assessee was not a "firm assessable as such" but an AOP which was constituted under a Memorandum of Association, as distinguished from a "Partnership Deed". 3. Brief facts are that it was noted by the Assessing Officer in the assessment order that there were negative balances of the members of the AOP which were almost same at the beginning of the year and also at the end of the year. The Assessing Officer noted that there is no clause in the memorandum of association that the interest would be charged or paid on the negative or positive balances of the members but there is no clause in the memorandum that no interest would be charged from any member of the AOP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of CIT vs. Reliance Utilities & Power Ltd. 313 ITR 340, if there are mixed fund then presumption should be there that any investment or withdrawal is out of interest free own funds. In the present case, it is seen that on 01/04/2007 there was net credit balance of members of AOP to the extent of Rs. 313.98 lacs and as on 31/03/2008 also, there is net credit balance of all the members taken together to the extent of 366.27 lac. Even the net transaction during the year is also in positive to the extent of Rs. 292.66 lacs. As per these facts, we are of the considered opinion that the presumption has to be there that even excess withdrawal by some members was out of credit balance of other members in their capital. Under these facts, no disallowance out of interest expenditure is justified as per this judgment of Hon'ble Bombay High Court and hence, we decline to interfere in the order of CIT(A) on this issue. Accordingly, these three grounds of the Revenue are rejected. 7. Ground No. 4 & 5 of the Revenue's appeal are as under: "4. That the Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in restricting the addition on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced bills and vouchers and thereafter, he has given a finding that when he proceeded to examine the same on test check basis, he found that some of the bills and vouchers were not available and some bills and some expenses were debited on self-made vouchers. The Assessing Officer also noted that there is decrease in the total turnover of the assessee during the year under consideration but there is increase in the freight inward for which the assessee did not have any explanation. As per the profit & loss account of the assessee for the present year available on page No. 38 of the paper book, we find that there was sale of 10314.87 lacs in the present year and purchase of Rs. 8884.86 lacs in the present year. As per the profit & loss account for preceding year available on page No. 81, we find that the sale in the preceding year was 13531.03 lacs whereas purchase was to the extent of 12776.81 lacs. From the above comparative figures of sales and purchase of the present year and preceding year, it is seen that there is decline in both sales and purchases. It is also seen that there is decline in the expenses incurred on account of freight outward but there is increase in the expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to show that any expenditure was of capital nature or of non business nature, such ad hoc disallowance is not justified. Therefore, we delete the entire disallowance out of shop repair & maintenance expenses. ground No. 4 & 5 are partly allowed. 11. In the result, the appeal of the Revenue is partly allowed. 12. Now we take up the Cross Objection of the assessee in which the following grounds have been raised: "1. That the ld. Commissioner of income tax (appeals)-II, Kanpur was correct in holding that a sum of Rs. 5775444.00 being disallowance out of interest was not disallowance for the reasons mentioned in the appeal order based on submissions of the assessee as well as facts on record, which decision was made after considering that status of the assessee; availability of interest free funds to the assessee, no nexus between interest bearing fund and advances as well as other relevant factor. 2. That the ld. Commissioner of income tax (appeals)-II, Kanpur has erred in confirming the disallowance of Rs. 50000.00 out of freight inward & outward; Rs. 100000.00 out of shop expenses; Rs. 50000.00 out of office expenses; Rs. 400000.00 out of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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