TMI Blog2011 (1) TMI 1476X X X X Extracts X X X X X X X X Extracts X X X X ..... his appeal of assessee is against the order of CIT(A) in confirming the disallowance of interest of ₹ 14,92,707/-. For this, assessee has raised the following effective grounds No.2-3:- The appellant is a partnership firm and engaged in the business of processing/trading of tobacco. It had filed its return of income on 28.10.2005 declaring total income of ₹ 24,036/-. 2. During the course of assessment proceedings, the A.O. noticed that the appellant had paid interest exp. of ₹ 38,41,241/-, but no interest was charged in respect of dues of ₹ 86,49,215/- from its sister concern M/s. R.M. Patel. The appellant vide its reply dt.3.12.2007 contended hat the party was a trade debtor and it was its business prac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors and on the same principle, no interest was charged from M/s. R.M. Patel also. The AO on verification of balancesheet observed that no non-interest bearing funds were available with the assessee to make advance to any person. The ledger account of M/s.R.M.Patel showed receipt of ₹ 86.49 lakh from the assessee, which was subsequently transferred to M/s.Bhailal Kuberdas Shah, a shroff, for repayment of loan taken by M/s R.M.Patel and the nature of transaction was therefore to repay the loan was taken by M/s. R.M. Patel from M/s. Bhailal K Shah, interest burden of which was borne by the assessee. For this reason and in the absence of any documentary evidence, the AO found that the loan is not for business purpose. The AO accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of trading transactions is not acceptable. Appellant s contention that the money was advanced for purchases in future is also snot substantiated, since sales and purchases during the next year, i.e. F.Y. 2005-06 were ₹ 29,50,000/- and ₹ 43,73,073/- respectively. The time gap between advance of money during June to October,2004 and purchases in the next year is also more than 6 months and thus the money advanced in F.Y. 2004-05 could not be said to be advanced for purchases. Moreover, appellant already had credit balance of ₹ 60,12,808/- as on 1.4.2004, which itself was sufficient to finance purchases of ₹ 5,66,927/- during F.Y. 2004-05 as well as the net purchases (i.e. difference of sales and purchases) in F. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see came in second appeal before us. 4. We have heard rival contentions and gone through the facts and circumstances of the case. We find from the above facts and arguments of both the sides that assessee has advanced a sum of ₹ 86,49,250/- to M/s. R.M. Patel a sister concern as a trade debtor and books of account of assessee particularly ledger account of M/s. R.M. Patel showed a receipts of ₹ 86.49 lakh from the assessee which was transferred to M/s.Bhailal Kuberdas Shah, a shroff for repayment of loan taken by M/s. R.M.Patel and the nature of transaction was is in the shape of repayment of loan taken by M/s. R.M. Patel from M/s.Bhailal Kuberdas Shah, a shroff. It is also a fact, as discussed by lower authorities to the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial expediency is one of wide import and 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 business expenditure if it was incurred on grounds of commercial expediency. Decisions relating to section 37 will also be applicable to section 36(1)(iii) because in section 37 also the expression used is for the purpose of the business . For the purpose of business includes expenditure voluntarily incurred for commercial expediency, and it is immaterial if a third party also benefits thereby. The expression for the purpose of business is wider in scope than the expression for the purpose of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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