TMI Blog2017 (5) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... wance in the impugned year can be made in view of the decision of Hon’ble Karnataka High Court in the case of Sridev Enterprises [1991 (1) TMI 52 - KARNATAKA High Court] wherein held that a debt which had been treated by the Revenue as a good debt in a particular year cannot subsequent be held by it have become bad prior to that year. - Decided in favour of assessee - ITA No.6293/Del/2016 - - - Dated:- 25-4-2017 - SHRI B.P. JAIN, ACCOUNTANT MEMBER For The Assessee : S/Shri Gautam Jain, Adv. and P.K. Kamal, Adv. For The Revenue : Ms. Bedobani Chaudhuri, D.R. ORDER This appeal of the assessee arises from the order of learned CIT(A)-I, Gurgaon, vide order dated 14.10.2016 for the assessment year 2013-14. 2. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussed as under:- (i) Most of the advances were given during the year out of interest free advance and therefore no disallowance on this account is called for. As regards this issue, keeping in view the facts of the case, the appellant's submissions and the case laws relied upon by the appellant, the A.O is directed to give credit for the interest free advances received by the appellant during the year and recompute the disallowance u/s 36(1)(iii) accordingly. (ii) Some of the advances were given in the earlier years and as such no disallowance can be made with regard to the advances given in the earlier years. The appellant's contentions on this issue is legally not tenable. Reliance in this regard is also placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. 5. I have heard the rival contentions and perused the facts of the case. It was argued by the learned counsel for the assessee, Mr. Gautam Jain, Adv. that the decision of Hon ble Punjab and Haryana High Court in the case of CIT vs. Abhishek Industries Ltd. reported in 286 ITR 1 (P H) is no longer a good law in view of the decision of Hon ble Supreme Court in the case of Hero Cycles Pvt. Ltd. vs. CIT reported in 379 ITR 347. The relevant decision in the case of Hero Cycles Pvt. Ltd. is reproduced hereinbelow: A perusal of the order passed by the High Court would reveal that the High Court has not at all discussed the aforesaid facts which were established on record pertaining to the interest free advance given to M/s. Hero F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some sentimental or personal reasons and not on the ground of commercial expediency, the interest thereon could not have been allowed under section 36(1 )(iii) of the Act. In Madhav Prasad s case [1979 (118) ITR 200 (SC)], the borrowed amount was donated to a college with a view to commemorate the memory of the assessee's deceased husband after whom the college was to be named, it was held by this court that the interest on the borrowed fund in such a case could not be allowed, as it could not be said that it was for commercial expediency. 28. Thus, the ratio of Madhav Prasad Jatia's case [1979 (118) ITR 200 (SC)] is that the borrowed fund advanced to a third party should be for commercial expediency if it is sought to be all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of tills case as already noted above, it is manifest that the advance to M/s. Hero Fibres Limited became imperative as a business expediency in view of the undertaking given to the financial institutions by the assessee to the effect that it would provide additional margin to M/s. Hero Fibres Limited to meet the working capital for meeting any cash loses 6. The decision in the case of Munjal Sales Corpn. vs. CIT reported in 298 ITR 298 was also relied upon the decision of Hon ble Supreme Court of India and relevant decision in paragraph 17 is reproduced hereinbelow: 17. One aspect needs to be mentioned during the assessment year 1995-96, apart from the loan given in August/September 1991, the assessee advanced inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood outstanding on the last day of the previous accounting year and, therefore, its nature and status cannot be different on the first day of the current accounting year from its nature and status as on the last day of the previous accounting year. Regarding the past years, the assessee's claims for deduction were allowed in respect of the sums advanced during those years; this could be only on the assumption that those advances were not out of borrowed funds of the assessee. This finding during the previous years is the very basis of the deductions permitted during the past years, whether a specific finding was recorded or not. A departure from that finding in respect of the said amounts advanced during the previous year would result i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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