TMI Blog1994 (2) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... for assessment year 1980-81 Rs. 13,71,080 for assessment year 1981-82. 2. The Assessing Officer disallowed/added Rs. 41,722 for assessment year 1979-80, Rs. 4,89,857 for assessment year 1980-81 and Rs. 13,71,080 for assessment year 1981-82 as according to him, the assessee did not charge or take any interest from its subsidiary companies and various other parties to whom it advanced substantial loans/advances; whereas the assessee made a claim as and by way of deduction in each of the years under appeal in respect of interest paid on the loans/borrowings taken by it for business purposes for each of the years under appeal. The argument of the assessee before the lower authorities was that it had taken loans from various parties and ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and loans advanced free of interest to its subsidiary companies and others. Arguing further the assessee's counsel submitted that the Assessing Officer has not established that the assessee-company did receive interest from its subsidiary companies and others in respect of loans advanced and did not offer the same for the purpose of taxation under the provisions of the Income-tax Act. It is not the case of the Assessing Officer that the loans were advanced by the assessee-company out of borrowings and, therefore, proportionate disallowance could not be made in respect of interest payments. In the absence of any such finding based on evidence, the proportionate disallowance for each of the years under appeal by the Assessing Officer was w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee's counsel. We are not convinced with the elaborate reasons given by the Assessing Officer in his orders for all the three years under appeal for making proportionate disallowance of interest claimed by the assessee-company. According to the provisions of section 36(1)(iii) of the Act, an assessee is entitled to deduction of interest payment in respect of capital/amount borrowed for the purpose of business. On going through the orders passed by the Assessing Officer for all the three years, we do not find that the Assessing Officer noticed that the loans obtained by the assessee-company from various parties for which interest was paid were not utilised for the purpose of business. It is an admitted fact that the assessee-com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness. In the absence of any such finding or evidence, the disallowance of proportionate interest by the Assessing Officer cannot be upheld. 5. Besides, it is also not the case of the Assessing Officer that the assessee-company had charged or earned income from its subsidiary companies and others but has not accounted for in its accounts. The finding of the Assessing Officer in all these years is that the assessee-company has not charged interest on receivables from its subsidiary companies and others. It is neither the case nor the finding of the Assessing Officer that the assessee had bargained for interest or had collected interest on such receivables and, therefore, it was liable to be taxed. The Assessing Officer cannot fix a noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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