TMI Blog2014 (7) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... out why huge advances have to be given to this party at all times, therefore in our opinion, the commercial expediency can not be inferred in this case - Decided against assessee. - ITA No. 480/Chd/2014 - - - Dated:- 24-7-2014 - T.R. Sood and Sushma Chowla , JJ. For Appellant: Vijay K. Garg For Respondents: J.S. Nagar ORDER T.R. Sood , 1. This appeal is directed against the order dated 5.3.2014 of the Ld. CIT(A)-II, Ludhiana. 2. In this appeal the assessee has raised the following grounds: That the Ld. CIT(A) erred in confirming the addition of ₹ 349760/- made by the Assessing Officer u/s. 36(1)(iii) of the Act. 2. That the Ld. CIT(A) erred in not consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee partners had not been paid any interest on their capital. Opening capital on 01.04.06 of partners was 169.98 lacs and closing capital on 31.03.2007 was ₹ 168.61 lacs and these were Trade advances. Hence no disallowance of interest is called for particular, it was business advance. In this connection we place reliance on Hon'ble Supreme Court decision in the case of Munjal Sales Corpn. Vs. CIT ANR. reported at: (2008) 215 CTR (SC) 105 wherein it has been held that deduction u/s. 30 to 38 are subject to limitations u/s. 40(b)(iv) therefore, even it is entitled to deduction for interest payment exceeding the rate prescribed in section 40(b)(iv), once it was found that interest free loans granted by assessee to its si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT V. Jugal Kishore, 265 CTR 215. 5. The Ld. CIT(A) after examining the submissions did not find force in the same and observed that in the light of binding precedent in case of CIT V. Abhishek Industries (supra) the disallowance has to be maintained and accordingly the appeal was dismissed. 6. Before us the Ld. Counsel for the assessee reiterated the submissions made before the Assessing Officer and the Ld. CIT(A). He further stated that the assessee has purchased goods from Jay Ess Exports and in this connection he referred to a copy of the account filed at page 5 to 7 of the paper book. He vehemently contended that once the goods were being purchased, therefore clearly advances were in the nature of trading advances and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following important observations were made in that case itself at para 25, 29 35 which are as under: In our opinion, the High Court as well as the Tribunal and other income-tax authorities should have approached the question of allowability of interest on the borrowed funds from the above angle. In other words, the High Court and other authorities should have enquired as to whether the interest free loan was given to the sister company (which is subsidiary of the assessee) as a measure of commercial expediency, and if it was, it should have been allowed. In the present case, neither the High Court not the Tribunal nor other authorities have examined whether the amount advanced to the sister concern was by way of commercial exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to give in the context of deduction under sections 30 to 38 to be read with the limitation prescribed under section 40. Since there was some confusion with regard to the status of section 40, particularly, after the enactment of the Finance Act, 1992, we have explained the law in the context of deductions under Chapter IV-D of the 1961 Act. We have accepted the submissions advanced by the learned Additional Solicitor General in that regard. However, the assessee succeeds in this batch of civil appeals on the peculiar facts of this case. The question was whether any limitation could be raised for allowing of an expenditure in Sec. 30 to 38 in terms of Sec. 40 which deals with remuneration paid to the partners etc. Therefore this decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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