9911796707
TMI Blog1983 (11) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... ermination of this issue are as under. The assessee is a co-operative society engaged in various business activities. However, entire business of the assessee is a composite one, as is clear from its profit and loss account and the balance-sheet filed. The assessee had obtained for its business a loan of Rs. 3,42,400 from the Markfed. The loan was obtained for the purpose of advance under the head 'Paddy'. During the course of assessment proceedings for the year under consideration, the assessee claimed a sum of Rs. 64,632 being interest paid on this capital relating to asst. yrs. 1978-79 and 1979-80. The ITO disallowed this entire claim on the ground that during the year under appeal the assessee had not utilised the said amount of loan fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue that u/s 36(1) (iii) of the IT Act, 1961, it is for the assessee to prove that money borrowed was used for business purposes because deduction is claimed by the assessee. It was further submitted that in view of the judgment of the Madras High Court in the case of Mir Mohd. Ali vs. CIT (1960) 38 ITR 413 (Mad) confirmed by the Supreme Court in the case of Mir Mohammad Ali (1964) 53 ITR 165 (SC) along with the judgment of the Supreme Court in the case of Madhav Prasad Jatia vs. CIT (1979) 10 CTR (SC) 375 : (1979) 118 ITR 200 (SC) even if loan was taken for the purpose of business of the assessee but the amount was later on diverted for non-business purposes, interest could not be allowed. 6. After careful consideration of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of the Supreme Court in the case of Maharashtra Sugar Mills Ltd. was not available. Later on, though the Supreme Court confirmed the judgment of the Madras High Court in the case of Mr. Mohd. Ali, yet it has to be noted that the issue of interest did not travel to the Supreme Court and as such, it cannot be said that the judgment of the Madras High Court on the issue of deduction of interest stands confirmed by the Supreme Court. On the other hand there is a clearly laid down law by the Supreme Court in the case of Maharashtra Sugar Mills Ltd. which has been followed by the Punjab and Haryana High Court in the case of Markfed. As such, there is no case whatsoever for confirming the order of the AAC. Reliance of the revenue on the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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