TMI Blog1991 (1) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... n the current year only ? " The relevant accounting year of the assessee-firm ended on March 31, 1978. During this accounting year, the assessee had advanced certain sums to Nalanda Enterprises, Bangalore ("Nalanda", for short) ; the balance outstanding from Nalanda was Rs. 2,55,750 as on March 31, 1978 ; no interest was charged against this advance. The assessee had borrowed from third parties and had been paying interest thereon ; this, interest was claimed as a deduction out of the assessee's income. Some of the partners of the assessee and Nalanda were common and they had business links inter se ; in these circumstances, the assessing authority disallowed the deduction claimed by the assessee to the extent of interest-free advances st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the interest-free advance was necessitated by business considerations." The Appellate Tribunal affirmed this order. The Tribunal found that, during the past years, there was no such disallowance when moneys have been advanced to Messrs. Nalanda Enterprises. Therefore, the Appellate Tribunal held: "Since no additions have been made in the earlier years, we hold that the opening balances cannot be considered in this year and the enquiry has to be limited only to the increase in this year. As arguments have been advanced on both the sides by referring to abstract accounts, we find that it will not be a satisfactory way of deciding the issue. It is no doubt true that the firm may have interest-free loans on partners' accounts, but the ..... 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 in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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