TMI Blog1994 (12) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... rtners' account of the firm. According to the Assessing Officer, the assessee had diverted a sum of Rs. 3,13,546 out of the loans raised from the bank, LIC and Shri Jatinder Singh for the personal purposes of the partners. This according to him called for a disallowance out of the interest of Rs. 1,37,017. He accordingly disallowed a sum of Rs. 37,624. The learned CIT(A) confirmed the disallowance. 3. Shri Sudhir Sehgal, the learned counsel for the assessee, submitted that out of the 8 partners of the assessee-firm, only five partners had opening debit balances. Drawing our attention to the charge given at page 52 and 53 of the assessee's compilation, it was submitted that apart from the withdrawals for payment of tax, etc., there were very nominal withdrawals for purposes of personal use by the partners. It was also submitted that no fresh loans had been raised by the assessee from the Union Bank, the LIC and Shri Jatinder Singh. Our attention was drawn to pages 1 to 10 of the assessee's compilation to demonstrate that the loans from the aforesaid persons/parties had been raised in the earlier years and no fresh loans were taken in the year under consideration. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 3/80-83, the assessee had claimed interest on royalty of Rs. 4,78,347 and interest on sales-tax of Rs. 3,35,091, aggregating to Rs. 8,13,438. Similarly, it was noticed that the assessee had claimed interest on royalty of Rs. 1,06,326 and interest on sales-tax of Rs. 14,354, aggregating to Rs. 1,20,680 in respect of lot No. 10/79-82. Thus the total interest claimed by the assessee came to Rs. 9,34,118 in respect of the aforesaid lots. The Assessing Officer, however, was of the opinion that the assessee had calculated interest on royalty and sales-tax on a higher side. According to him, the excess interest claimed as deduction by the assessee came to Rs. 1,54,833 in respect of lot No. 3/80-83 and at Rs. 60,258 in respect of lot No. 10/79-82. The total excess interest claimed by the assessee, according to the Assessing Officer, thus worked out to Rs. 2,15,090. This, according to him, was not allowable at all because the assessee made a mistake in calculating its interest liability. 7. Another point made by the Assessing Officer was that even otherwise, the interest was not allowable because it was on account of branch of contract and was penal in nature. So the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyalty. It was submitted that only 15% interest payable was claimed as a deduction and as such there was no dispute. According to the learned counsel for the assessee, the dispute was in respect of lot No. 10/79/-82. According to the Assessing Officer, the interest payable was only 10% whereas the assessee had claimed interest at the rate of 15%. It was vehemently argued that the interest had been correctly claimed at the rate of 15% in view of cl. (19) of the agreement mentioned above. It was, therefore, submitted that there was no discrepancy in the amount of interest claimed as payable by the assessee. As regards the claim as such, the learned counsel for the assessee submitted that there was no breach of the contract and there was no penalty imposed on the assessee. On the contrary, the submission was that the assessee had utilised the funds for business purposes and had, therefore, paid interest on account of less sales-tax payment and less royalty payments. It was vehemently argued that there was no breach of law and the payments was not penal in nature. It was also submitted that in the case of the assessee's sister concern, namely M/s. Rama Nand and Co. for asst. yr. 1983-8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of one and a half per cent per month till the default continues." This section provides for the payments of interest when the amount of sales-tax is not paid in time. Initially the interest is payable at the rate of 12% per annum but afterwards, at the rate of 18% per annum. The assessee had, therefore, in our opinion correctly calculated interest payable under Himachal Pradesh General ST Act, and the Assessing Officer was not justified in allowing only 10% interest as admissible. As regards the calculation of interest on unpaid royalty, the learned counsel for the assessee has pointed out that the discrepancy is only in respect of lot No. 10/79-82 in which the interest has been charged at the rate of 15% by the assessee as against the interest of 10% considered by the Assessing Officer. We find that for lot No. 3/80-83, the assessee itself has claimed interest at the rate of 10% but for another lot No. 10/79-82, interest has been claimed at the rate of Rs. 15% as per cl. (19) of the agreement between the assessee and the Department of Forest Farming and Environment Comservation, Government of Himachal Pradesh. There is, thus no mistake in the calculation of interest and so t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer whereas for the year under consideration, the shortage was only 2.3% which had unfortunately attracted an adverse notice of the Assessing Officer. 17. As regards the alleged loss of 1,070 scants, it was submitted that no such loss had been claimed by the assessee, that these scants were lying in the jungle and were part of the closing stock, that the evidence had been produced by the assessee before the first appellate authority to that effect and that the first appellate authority had accepted the same as correct. It was, therefore, submitted that the learned CIT(A) had correctly deleted the addition of Rs. 2,32,580. 18. After carefully considering the submissions of both the parties, we are of the opinion that the learned CIT(A) has correctly deleted the addition of Rs. 2,32,580. It has been pointed out before us, as it was pointed out before the learned CIT(A), that there was no shortage of 1,070 scants as alleged by the Assessing Officer. These scants were lying in the jungle and were part of the closing stock of the assessee of 2,383 scants. The only shortage was of 1,313 scants which in a trade of this type is natural because riverine loss of scants ..... X X X X Extracts X X X X X X X X Extracts X X X X
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