TMI Blog2015 (10) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee having regard to the business consideration (the assessee's explanation is that the assessee had no bank account at Cuttack and seller was insisting for cash payments. The payments had been made to the seller because of that reason. The genuineness of the purchases had not been doubted by the Assessing Officer. Under such circumstances, we are of the opinion that the disallowance of these expenses by applying to section 40A(3) would not be justified. - Decided in favour of assessee. Charge of interest on interest-free loan to another business concern - Held that:- If the assessee is able to substantiate its claim, that the advance was given out of its own funds, then no addition is called for. It is well-settled law that if the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , making following disallowances : 1. Disallowance under section 40A(3) : ₹ 55,157 2. Charge of interest on interest-free loan : ₹ 2,01,991. 4. The learned Commissioner of Income-tax (Appeals), while partly allowing the assessee's appeal confirmed the aforementioned two disallowances. Being aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the assessee is in appeal before us. 5. Apropos ground No. 1, brief facts of the case are that on verification of cash book, the Assessing Officer noticed that following payments were made against purchase of traded goods exceeding ₹ 20,000 : Date Amount To whom paid 9-6-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso below section 40A(3) clearly takes into consideration the nature of expenses, banking facilities, consideration of business expediency and other relevant factors. Rule 6DD in intent and purpose takes into consideration all these aspects for prescribing various exceptional circumstances. Therefore, rule 6DD cannot be mechanically applied and we have to consider the overall explanation of the assessee having regard to the business consideration (the assessee's explanation is that the assessee had no bank account at Cuttack and seller was insisting for cash payments. The payments had been made to the seller because of that reason. The genuineness of the purchases had not been doubted by the Assessing Officer. Under such circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's submission pointed out that though the assessee was closely related in personal life but there was no business nexus between the two business concerns. He, accordingly, computed the interest at 12 per cent. as applicable for cash credit loans and made disallowance amounting to ₹ 2,01,991. 12. Before the learned Commissioner of Income-tax (Appeals), the assessee reiterated the submissions made before the Assessing Officer. The learned Commissioner of Income-tax (Appeals) confirmed the addition, inter alia, observing that there was no commercial expediency in respect of such interest-free advance. He relied on the decision of the hon'ble Kerala High Court in the case of CIT v. Accelerated Freeze Drying Co. Ltd. [2010] 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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