TaxTMI 
TaxTMI 
2007 (9) TMI 23
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.... the harvesting transport contractors was in the nature of business interest of the respondent and not a diversion of borrowed funds for non-business purposes, even though such advance was not made in the normal course of business and was made without any specific contractual obligations and such payments were made out of the borrowings on which the respondent was paying higher interest to the financial institutions? (B) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that bakshish payment made by the respondent to the harvesting and transport labourers was out of the commercial expediency, when in fact such payments are purely voluntary, based on sweet will of the respondent and the said p....
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....ent and the H and T contractors after extensive bargaining. Once the rate and commission payable to the H and T contractors is determined, there is no business expediency to make any advance payment to the H and T contractors. He submitted that in the absence of any clause in the tripartite agreement requiring the assessee to give advances, it was not obligatory for the assessee to advance loans to the H and T contractors at a lower rate of interest. Thus, the advance payment made to the H and T contractors was nothing but diversion of borrowed funds. Since the assessee had borrowed funds at a higher rate of interest and had advanced it to the H and T contractors at a lower rate of interest without there being any obligation to do so, the A....
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....he State of Maharashtra for several decades and such expenditure has been consistently allowed as business expenditure not only in the case of the assessee but also in the case of several other sugar factories. In support of the above contention, Mr. Inamdar tendered two affidavits annexing thereto the assessment orders relating to the assessment years 1988-89, 1989-90, 1990-91 and 1991-92 in the case of the assessee and the assessment orders relating to the assessment years 1985-86, 1986-87, 1987-88, 1988-89, 1989-90 and 1990-91 in the case of Rajarambapu Sahakari Sakhar Kharkhana Ltd. wherein similar claims have been allowed by the respective Assessing Officers and the said assessments have attained finality. 9 Mr. Inamdar further submit....
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....rest of the individual, the expenditure incurred by giving advances to H and T contractors and giving bakshish to the employees of the H and T contractors with a view to receiving prompt supply of harvested sugarcane is an expenditure incurred on account of commercial expediency and accordingly, the order passed by the Tribunal is liable to be upheld. 11 We have carefully considered the rival submissions. As per the tripartite agreement, H and T contractors transport the harvested sugarcane to the factory at the rate and commission mutually agreed, between the parties. During the year, if the H and I contractors due to some financial difficulty seek loan, then the assessee advances some amount to them at a nominal rate of interest. The amo....
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.... the finding to recorded by the Tribunal that giving some amount in advance to the H and T contractors was in the business interest of the society cannot be faulted. 12 The fact that the asses see has given such advances to the H and T contractors at a lower rate of interest cannot be a ground to hold that the borrowed funds have been diverted for non-business purposes. As noted earlier, the assessee has not advanced any amount in excess of the amount payable to the H and T contractors under the tripartite agreement. The amount advanced to the H and T contractors is in fact adjusted from the total amount payable by the assessee to the H and T contractors. The amounts that too on interest are advanced to ensure that the H and T contractors ....
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...., the finding recorded by the Tribunal that the bakshish payment is a necessary incidence of the assessee's business cannot be faulted. 14 It is contended by the Revenue that during the course of assessment, in spite of repeated requests, the assessee has failed to furnish particulars of the amount given as bakshish. There is no merit in this contention because neither in the assessment order nor in this appeal the Revenue has doubted the genuineness of the payments of Rs. 200 to Rs. 250 made by the assessee to the labourers employed by the H and T contractors depending upon category of each labourer. According to the assessee, particulars of payment made to each labourer has been filed before the Assessing Officer and the same has not bee....