AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (6) TMI 1079
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Commissioner (Appeals) ought not to have upheld disallowance the interest amounting to Rs. 15,74,077, as the Appellant had paid the interest of Rs. 15,74,077 to the bank and other, which fact has not been disputed. 1(b) The Hon'ble Commissioner (Appeals) ought to have appreciated that, the funds had been withdrawn by the Partners of the Appellant, as per the provisions of the Partnership Deed and was required to be done so, for the purpose of carrying out the business. 2. The Hon'ble Commissioner (Appeals) ought to have considered the facts of the case and deleted the addition of Rs. 1,20,579 made by the Assessing Authority, as per the provisions of Section 69C of the Income-tax Act, 1961. 3. The Hon'ble Commissioner (Ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 36(1)(iii) of the Act to the partners which was worked out to Rs. 15,74,077/- out of total interest of Rs. 40,61,336/- paid on borrowed funds and charged to Profit & Loss Account. The CIT(A) confirmed the action of the Assessing Officer. 3.2 The Ld. Authorized Representative (AR) for the assessee Shri Shrenik Gandhi reiterated the facts placed before the Revenue authorities and contended that there is no warrant for disallowance of interest against debit balances of the partners. He submitted that outstanding balances of all the partners when clubbed together has credit balance at the beginning of the year as well as at the end of the financial year. While balances attributable to some partners reflects debit balance, credit avail....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee during the year has obtained fresh borrowed funds from ICICI Bank. Similarly, we notice that there is a positive combined capital of partners stands at Rs. 224.07 lacs at the beginning of the financial year on 01.04.2007. The combined partners capital at the end of the financial year on 31.03.2008 stands at positive amount of Rs. 74.51 lacs. It is the case of the Assessing Officer that some of the partners have overdrawn the capital during the year which has resulted in negative capital in their respective hands. He thus concluded that the borrowed funds have been utilized for the personal usage of the partners and other family members. In this context, we take note of the facts that some of the partners carried credit balance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the assessee's appeal is allowed. 4. Ground No.2 relates to disallowance of Rs. 1,20,579/- by invoking section 69C of the Act. 4.1 The relevant facts concerning the issue are that the Assessing Officer inter-alia observed that the assessee has incurred expenditure of Rs. 6,69,180/- attributable to M/s Shantoli Corporation, Ahmedabad towards payment of commission to the aforesaid party. The Assessing Officer observed from the books of account that a commission of Rs. 5,53,604/- is shown as payable at M/s Shantoli Corporation. He simultaneously noted that assessee has paid/credited Rs. 6,69,180/- as commission to the above party as per the TDS certificate. He, accordingly, treated the differential amount of Rs. 1,20,579/- as unexplai....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... allow the payment if the difference is reconciled and disallow if it is not reconciled. The learned AO is also directed to ascertain as to whether the payment is made out of the accounted funds or not and also find out as to whether the Appellant has claimed deduction in the profit and loss account or not. If the Appellant has made payment from its accounted funds without making TDS and debited to profit and loss account then the payment will be disallowed u/s 40(a)(ia). The learned AO is directed to allow or disallow the payment in accordance with the directions contained in this paragraph." 4.2 We note that the CIT(A) has directed the Assessing Officer to reconcile the difference between the entries made in the books of account qua th....