TMI Blog2014 (12) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the assessee. - DB Income Tax Appeal No.147/2004 - - - Dated:- 10-12-2014 - MR. SUNIL AMBWANI, ACTING CHIEF AND MR. J.K. RANKA, JJ. For The Appellant : Mrs. Parinitoo Jain, counsel For The Respondent : Mr. Sanjay Jhanwar, counsel BY THE COURT (Per Hon'ble Ranka, J.): 1. This Income Tax Appeal by the appellant-revenue u/s 260A of the Income Tax Act (for short, IT Act ) is directed against the order dt.12/01/2004, passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, ITAT ) in ITA No.1296/JP/96 by which the ITAT has partly allowed the appeal filed by the respondent-assessee. It relates to assessment year 1992-93. 2. The appeal was admitted on the following substantial question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest on the debtors as well as creditors, came to the conclusion that out of the total claim of interest of ₹ 11,67,756/-, which has been claimed to have been paid to RIICO, RFC and Bank and interest bearing loans have been diverted to non-business purposes accordingly disallowed an amount of ₹ 5,80,215/-. 4. The disallowance was challenged in appeal by the respondent-assessee before the Commissioner of Income Tax (Appeals) [for short, CIT(A) who also agreed with the findings of the AO and approved the disallowance made by the AO. 5. On a further appeal before the ITAT, the ITAT, after analyzing the evidence on record, particularly, in view of the fact that the assessee was having its own sufficient funds and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In support of his submission, counsel for the respondent-assessee relied upon judgments in the case of CIT Vs. Navyug Oil Dal Mills: (2001) 251 ITR 535 (Raj.); CIT Vs. Banswara Fabrics Ltd.: (2004) 267 ITR 398 (Raj.); CIT Vs. Prem Heavy Engineering Works (P) Ltd.: (2006) 150 Taxman 90 (All); CIT Vs. Indo Kopp Ltd.: (2008) 167 Taxman 172 (Del); Elmer Havell Electrics ors Vs. CIT: (2005) 277 ITR 549 (Del); CIT Vs. Tin Box Co.: (2003) 260 ITR 637 (Del) and Munjal Sales Corporation Vs. CIT: (2008) 298 ITR 298 (SC) and while relying upon the aforesaid judgments, contended that the Hon'ble Apex Court and this Court as well as other High Courts, in such facts and circumstances, have come to the conclusion that once the assessee has its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. 10.1 The Hon'ble Apex Court further observed in the above judgment as under:- To consider whether one should allow deduction under Section 36(1)(iii) of interest paid by the assessee on amounts borrowed by it for advancing to a sister concern, the authorities and the courts should examine the purpose for which the assessee advanced the money and what the sister concern did with the money. That the borrowed amount is not utilized by the assessee in its own business bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the loan given in August/September, 1991, the assessee advanced interest-free loan to its sister concern amounting to ₹ 5 Lacs. According to the Tribunal, there was nothing on record to show that the loans were given to the sister concern by the assessee-firm out of its own funds and, therefore, it was not entitled to claim deduction under Section 36(1)(iii). This finding is erroneous. The opening balance as on April 1, 1994, was ₹ 1.91 crores whereas the loan given to the sister concern was a small amount of ₹ 5 Lakhs. In our view, the profits earned by the assessee during the relevant year were sufficent to cover the impugned loan of ₹ 5 Lakhs. 12. Allahabad High Court in the case of CIT vs. Radico Khaitan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of business; the findings arrived at by the learned Tribunal were not perverse; the entire expenditure was made from the mixed account; therefore, there would be a presumption that the amount was made out of the own fund of the assessee and not from the borrowed capital; that there were sufficient funds and that the advance were made from the mixed account. Therefore, the Commissioner (Appeals) and the learned Tribunal both were right in presuming that the advance was made out from the assessee's own fund eligible for the benefit of section 36(1)(iii). 15. The Allahabad High Court in the case of CIT vs. Motor Sales Ltd. (2008) 304 ITR 123 (Allahabad) has held that it was finding of fact as found in the case that re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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