TaxTMI 
TaxTMI 
1992 (11) TMI 133
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.... the assessee to go to the Court of law since that would not serve any useful purpose and the assessee in fact was advised to take up the matter with Motion Pictures Association. It appears that the said Association later on passed resolutions directing some of the debtors to make payments to the assessee. The AO also took note of the fact that most of the claims related to the period 1981 to 1983 and these were not legally barred. Being of the view that the assessee should have filed cases in Civil Courts against various parties he in the ultimate analysis allowed all those items which were below Rs. 3,000 and proceeded to add back the rest amounting in the said assessment year viz. 1984-85 to Rs. 3,86,288. On more or less the same line of reasoning he disallowed a sum of Rs. 2,70,109 in asst. yr. 1985-86 allowing in the process small items below Rs. 10,000. 4. Being aggrieved with the decision of the AO the assessee came up in appeal before the CIT(A) for both the assessment years. During the course of the hearing detailed arguments were advanced with reference to the material on record and these being in the direction of contending that most of the amounts written off pertain....
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.... at some length in respect of the specific common ground raised in the Revenue's appeals for both the years. In our opinion, no interference is warranted on our part at this stage inasmuch as the matter has been restored back to the file of the AO to analyse each item and to decide thereafter whether the same is allowable as a business loss or as a bad debt. The matter is wide open before the AO and the same can be decided on merits as directed by the CIT(A). The first common ground in both the appeals is accordingly rejected. 7. The only other common ground in both these appeals is the one pertaining to the disallowance/addition made out of interest paid on the ground that funds borrowed on interest had been diverted to "connected concerns" interest-free. The AO made a disallowance of Rs. 89,350 in asst. yr. 1984-85 and Rs. 96,490 in asst. yr. 1985-86 vis-a-vis the amount advanced to M/s Gymkhana Service Station and M/s Jyoti Shipping (P) Ltd. the assessee being a partner in the first and a Director in the latter. In making the aforesaid additions/disallowance the AO followed his order for asst. yr. 1983-84 wherein also the aforesaid two parties were involved. On further appeal....
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.... fresh amounts had been advanced and it was the amount of Rs. 1,40,000 brought forward from asst. yr. 1983-84 and which according to the learned counsel had been given from the existing ban account. The further submission on the part of the learned counsel was that inasmuch as no nexus had been established by the AO vis-a-vis the funds borrowed and those advanced there was no basis to make any disallowance/addition. The further argument which was advanced was that the amounts outstanding against the aforesaid two parties were the opening balances brought forward from asst. yr. 1983-84 and these in any case could not be the subject-matter of disallowance. The alternative submission in respect of the amount advanced to M/s Gymkhana Service Station was that since that was a firm in which the assessee was a partner, the claim for deduction on account of interest paid was tenable under s. 67(3) of the IT Act, 1961. In support of the various arguments reliance was placed on the following decisions: (i) CIT vs.CoimbatoreSalem(Transport) (P) Ltd. (1966) 61 ITR 480 (Mad); (ii) CIT vs. R.K. Metal Works 1977 CTR (P&H) 99 : (1978) 112 ITR 445 (P&H); (iii) CIT vs. Alok Paper Industries....
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....is once again misplaced, since the facts in that case were that in the past years the assessee's claim for deduction of interest paid was allowed on the ground that amounts advanced were not out of borrowed funds. The tax authorities in one of the subsequent assessment years and which was the subject-matter of the question referred to the Hon'ble High Court took the view that the entire amount outstanding on the last day of the year which included the opening balance was liable to be taken into account for computing the disallowance. The Tribunal took the view that the opening balance was not liable to be included since the view taken in the preceding assessment year was that funds advanced were not out of those which had been borrowed at interest and it was only the fresh borrowals during the assessment year under consideration which were liable to be included. The decision of the Tribunal was upheld by the Karnataka High Court. This decision in fact supports the Revenue's case since in asst. yr. 1983-84 in the assessee's case the Tribunal has given a categorical finding that amounts advanced to the connected concerns came out of the borrowed funds taken on interest. The Departmen....