TaxTMI 
TaxTMI 
TaxTMI 
2010 (2) TMI 918
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....ting the disallowance of Rs.50,000/- made out of business promotion expenses. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs.37,86,528/- made out of interest on borrowed capital." 3. The assessee is a partnership firm consisting of 2 partners namely Shri Vikram Mittal, S/o Shri Ashok Mittal and Smt. Nirupama Mittal, W/o Shri Ashok Mittal. The assessee firm is engaged in the business of manufacturing and sale of marble items. The assessee declared gross profit of Rs.84.75 lakh on total sales of Rs.446.46 lakh. Total income of Rs.21,68,320/- was declared in the return of income. 4. As regards ground Nos.1, 2 and 3 the learned CIT(A) deleted the addition on the ground that though the assessee appeared from time to time and the details were filed, without pointing out any expense as not pertaining to business, the disallowance was made on ad hoc basis. This is not permissible in law. Therefore, the disallowance was deleted. 5. We are in agreement with the finding of the learned CIT(A). Though the assessee appeared from time to time and filed the required details, without discus....
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.... be considered to be for the purpose of business. The Assessing Officer excluded the advances outstanding as on the first day of the Financial Year and also excluded the capital balance in the partners' account from the total advances shown. The Assessing Officer held that amount of Rs.10.96 crores is advanced to sister concern without charging interest and which is not for the purpose of business and hence proportionate interest is to be disallowed. This resulted into disallowance of Rs.37,86,628/-. The learned CIT(A) held that the facts are not correctly appreciated by the Assessing Officer. The learned Commissioner (Appeals) also called for the copy of MOU/Agreement entered into between Ashok Mittal and Bellamy Investment and Trading Co. Pvt. Ltd. as well as M/s. Chandler Investment Trading Co. Pvt. Ltd. wherein Shri Ashok Mittal had majority share holding. The learned Commissioner (Appeals) on appreciation of the reply of assessee as well as MOU/Agreement and applying the decision of Hon'ble Supreme Court in the case of Madhav Prasad Jatia vs. CIT, 118 ITR 200 held- "17. Applying the above test, it will be beneficial to appreciate the facts of the case. There is no disp....
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....blished that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonably expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profit. This decision has been approved by the Hon'ble Supreme Court in S.A. Builders Ltd. (2007) 288 ITR 1. Therefore, it is held that this interest free advance was for commercial expediency in furthering the business interest of the assessee and for the purpose of business. 19. The other issue is with regard to contended advance to Shri Nand Kishore Chaturvedi to the tune of Rs.40,00,000/-. Out of this Rs.40,00,000/-, an amount of Rs.15,00,000/- was given through Global Trust Bank, vide issuance of a cheque. However, as rightly held by the learned AR, this cheque of Rs.15,00,000/-, though issued, was never encashed. In fact, the ledger account as filed as part of the paper book and which was also before the learned AO, clearly shows....
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....d Trading Co and Chandler Investment and Trading Co. 9. We have considered the rival submissions. The trail of the money borrowed and utilized can be summarized as under- The sum and substance of the entire transaction to the tune of Rs.17,90,00,000/- is that an amount was allegedly given as security deposit to Shri Ashok Mittal. This was done out of the loan of Rs.18,33,54,200/- obtained from American Express Bank. The amount of Rs.17,90,00,000/- which was given to Shri Ashok Mittal can be broker in two parts. Rs.13,90,00,000/- was given to Ashok Mittal and Co. and Rs.4,00,00,000/- to Carara Marble and Granite Co., both of which are proprietary concerns of Shri Ashok Mittal. This amount was further given to Chandler Investment and Trading Pvt. Ltd. and Bellamy Investment and Trading Co. Pvt. Ltd. In Chandler Investment and Trading Co. Pvt. Ltd., Shri Ashok Mittal has 9990 shares as on 31.03.2004, out of total equity shares of 10000. Similar was the position in Bellamy Investment and Trading Co. Ltd. The money was further advanced to two companies, which was totally in the control of Shri Ashok Mittal. This money had further been paid to the State Government of Maha....