2001 (10) TMI 58

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....ustified in granting deduction of the amounts paid by way of interest referable to the amounts which the assessee had lent to various parties as mentioned in the Tribunal's order? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the withdrawals were for the construction of a shop building for the assessee's business?" The assessee is a registered partnership firm dealing in piece goods. During the accounting years, relevant for these three assessment years, the assessee has paid bank interest for the borrowings made for business purposes. However, the Assessing Officer found that the assessee has transferred sizable amounts to the personal accounts of the partners, and also a....

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....ontended that there is no finding that the borrowings or part of it were advanced to the partners, their relatives and the sister concerns of the assessee. According to him, there were cash balances available with the firm for such advances, and until it is established that the borrowed amount is advanced to the partners, their relatives and the sister concerns, disallowances cannot be made. We are inclined to accept the argument raised by counsel for the Revenue, because the advances to the partners, their relatives and the sister concerns are not for business purposes and the assessee has not derived any benefit out of the same. Admittedly, no interest was charged on these advances. The Tribunal appears to have placed reliance on the f....