TaxTMI 
TaxTMI 
1997 (2) TMI 171
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....wance made by the AO on the ground that the same had not been incurred in connection with the business of the company, but was more in the nature of personal expenditure of the directors. On further appeal, the CIT(A) confirmed the disallowance on more or less identical grounds. 3. Before us the learned counsel, at the outset, stated that he was pressing the ground only in respect of an expenditure of Rs. 4,606 as detailed on p. 26 of the paper-book. According to him the payments were no doubt to individuals, but those who were intimately connected with the company in one capacity or the other. A perusal of the details shows that some of them are related as advertisers, others as bankers and one of them in the position of a statutory aud....
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.... two amounts which were not accepted and entries to that effect reversed in the books of accounts. 5. The only other ground in the assessee's appeal pertains to the disallowance of a sum of Rs. 4,32,865 being the interest on "agents securities". The AO made the impugned disallowance on the short ground that the amount in question had not been provided for in the books of accounts. On further appeal the CIT(A) confirmed the action of the AO observing in the process as under: "Interest on Agents Security :-A claim of Rs. 4,32,865 was made on account of interest payable on agents security in the year under consideration. The AO did not allow this claim observing perusal of the auditor's report shows that a sum of Rs. 4,32,865 on this acc....
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....theCo.from time to time." From the language of this sub-clause it is clear that rate of interest for payment of security is to be fixed by the company from time to time. Accordingly, the liability for payment of interest would arise only when such rate of interest is fixed for a particular period and the interest is provided in the books of account. Normally the payment of interest in such circumstances is authorised through a Board's Resolution at the end of the accounting period. Thereafter the rate of interest to be given to the agents on their security deposit is fixed. As regards this claim of Rs. 4,32,865 there is no information on record as to when the rate of interest was fixed and how this liability has been ascertained. The fac....
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....d as would be apparent from the chart appended at p. No. 1 of the compilation. It was pointed out that in asst. yr. 1986-87 interest had been provided at 18 per cent whereas in asst. yr. 1987-88 the rate was 20 per cent but in the year under appeal only 4 per cent had been provided. The learned counsel also invited our attention to the copy of Board's resolution pertaining to asst. yr. 1987-88 for the proposition that such a resolution was passed and the rate of interest fixed only after ascertaining the financial position of the company towards the end of the previous year in question. 7. In support of the argument that similar claims had been allowed in the two preceding assessment years, the learned counsel invited our attention to th....
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.... support of the various arguments advanced, the learned counsel placed reliance on the following decisions: (i) Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC); (ii) CIT vs. Indian Metals & Carbide Ltd. (1992) 101 CTR (Ori) 297 : (1992) 198 ITR 444 (Ori) and (iii) ITO vs. Andhra Pradesh Paper Mills Ltd. (1991) 38 ITD 1 (SB). 9. The learned Departmental Representative, on the other hand, strongly supported the orders passed by the tax authorities and the subsequent arguments advanced by her were a reiteration of the reasons recorded by the said authorities in rejecting the assessee's claim. 10. After considering the rival submissions, we are of the view that there is substantial merit in the arguments advanced by t....
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.... for deduction on the same account as would be apparent once again from the same statement. 11. In view of the discussion aforesaid and in the light of the decisions cited which we respectfully follow the disallowance on account of interest is deleted. 12. In the Revenue's appeal, the following two effective grounds have been raised: 1. On the facts and in the circumstances of the case learned CIT(A) has erred in allowing relief of Rs. 6,966 out of the total addition of Rs. 8,862 made on account of disallowances of entertainment expenses by relying upon the decision of Tribunal order dt.26th June, 1991for the asst. yr. 1984-85 which has not been accepted by the Department. 2. "On the facts and in the circumstances of the case th....