1998 (1) TMI 103

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..... yr. 1987-88. 2. The assessee is a partnership firm carrying on business in rubber and hill products. The only ground raised in this appeal by the assessee is that the CIT(A) erred in confirming the disallowance of Rs. 75,351 out of the claim of interest on borrowed funds. In the course of the assessment proceedings the AO noticed that the assessee was having transactions with a sister-concern....

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....t appeal the CIT(A) concurred with the AO that there was diversion of borrowed funds for the use of the sister-concern and so there was a case for disallowing the interest on proportionate basis. Aggrieved with the finding of the CIT(A) the assessee has filed this appeal before the Tribunal. 3. On behalf of the assessee, S. Mahadevan C.A. submitted before us that the AO as also the CIT(A) was n....

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....he AO was not correct in considering such instance as diversion of borrowed funds by the assessee. Arguing on the above lines, Mahadevan urged us to delete the disallowance of the interest amount. 4. The Departmental Representative, Kuruvilla M. George, on the other hand, supported the order of the CIT(A) and submitted that it was clearly brought on record by the AO that there was diversion of ....

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.... contended that in view of the evidence regarding the cash payments by the assessee there was no merit in the claim that the diversion of the funds by the assessee was for the purpose of its business. 5. We have considered the rival submissions and also gone through the transactions between the assessee-firm and the sister-concern, Chandysons Latex. No doubt, the assessee was having running acc....