TaxTMI 
TaxTMI 
2015 (4) TMI 674
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.... accounts of assessee itself the amount given to M/s. Aarti Impex has been shown as Loan and Advance, Hence, the contention of the assessee that it is debtor is not acceptable. Further, no any business purpose was explained with regard to advance given to other two parties. The assessee has not explained the availability of interest free funds on the date of transactions. The assessee has only given total of interest free funds of Rs. 199 lacs. However, the assessee has not explained whether these funds were available as bank balance on the date of advancing these loans. Hence, the assessee has not proved that no borrowed funds were utilized for advancing interest free loans. Interest on borrowed capital is allowed as a deduction from business only if it satisfies the condition that it is for the purpose of business or profession. Where the money borrowed was derived for giving interest free loans to others, the proportionate interest attributable to such loans could be legitimately disallowed by the Assessing Officer. It was so held in S.A. Builders Ltd. v. CIT (2004) 269 ITR 535 (P&H). Further, this view was accepted in CIT v. H.R. Sugar Factory Pvt. Ltd. [1971] 187 ITR 363 (All....
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....llate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to the assessee by observing as under: "3.3 I have considered the facts of the case; assessment order and appellant's submission. Assessing officer disallowed interest on the ground that appellant made interest free advances. However appellant submitted that borrowings were specifically made from the bank for purchase of office premise and motor car. There is direct nexus between borrowings and utilisation of funds therefore it cannot be said that interest-bearing borrowed funds were diverted for non-business purpose. This issue was decided in appeal order dated 03-03-2011 in the appellant's own case for assessment year 2007-08. The relevant extract of this order is quoted below- "Assessing officer disallowed the interest on the ground that the same was paid on the capital borrowed which was utilized in giving interest free advances. However offer going through the details submitted by the appellant it is clear that the interest was paid for the loans taken from ICICI bank for the purpose of purchasing car and office premise. Appellant submi....
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....n 40 (a) (ia) is reproduced hereunder for ready reference. "40. Amounts not deductible Notwithstanding anything to the contrary in section 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession".- (a) in the case of any assessee.. ...(ia) any interest, commission or brokerage, rent, royalty fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out, any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVIIB and such fax has not been deducted or, after deduction, has not been paid during the previous year or in the subsequent year before the expiry of the time prescribed under subsection (1) of section 200. Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under subsection (1) of section 200, such sum shall be allowed as a deduct/on in computing the income o....
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....e restored. On other hand, learned Authorized Representative supported the order of CIT(A). 3.2 After going through rival submissions and material on record, we find that assessee did not deduct TDS on reimbursements made to C&F Agent on separate bills of reimbursement on account of freight and other payments made on behalf of assessee. ITAT, Ahmedabad Bench in case of M/s. Om Satya Exim Private Ltd. in ITA No. 1335/Ahd/2010 dated 13.05.2011 has held as under: "We have considered rival submissions and perused the material on record and going through the orders of the authorities below and the judgement cited by the ld counsel of the assessee. We have also considered board circular dated 8-8-1995, copy of which has been submitted by D R of the revenue. In the present case, it has been submitted before us by A R that the commission agent has raised separate bills for reimbursement of the expenses. With all these facts, when we consider the board circular number 715 dated 8-8-1975, we find that this board circular cannot be made applicable to the present case because in the present case, there is no composite bill raised by the commission agent and as per the AR of the assessee sepa....