TaxTMI 
TaxTMI 
2012 (7) TMI 1117
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....e aggrieved by the decision of the Ld. CIT(A) in respect of the following two issues: a) Disallowance of proportionate interest paid on borrowed capital. b) Valuation of closing stock of 'rejected quality' of kernels. 3. The facts relating to the above said issues are stated in brief. The assessee is engaged in the business of processing and export of cashew kernels. The assessment for the assessment year 2007-08 was completed by the Assessing Officer by making an addition of Rs. 15,58,820/- on account of disallowance of interest relating to funds diverted for non-business purposes and Rs. 8,71,680/- on account of difference in valuation of the closing stock. The Ld. CIT(A) partly allowed the appeal filed by the assesse....
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....band of the assessee and also the amounts Quilon medical trust and Travancore realtors from out of her capital. The Assessing Officer accepted the contentions of the assessee with regard to bank guarantee deposit of Rs. 14 lakhs stated above. He, however, treated the balance amount of Rs. 1.63 crore as diversion of interest bearing funds for non-business purposes. Accordingly, he worked out interest relating to funds so diverted at Rs. 15,58,820/- and disallowed the same. In the appellate proceedings, the Ld. CIT(A) held that the following payments/investments are for business purposes: a) South Indian Bank FD Rs. 59,43,822/- b) South Indian Bank FD Jamal Rs. 1,68,831/ c) South Indian Bank shares Rs. 8,68,000/- The Ld. ....
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....ormally make deposits in the Bank which usually fetches lower interest, by using the loan funds on which he is liable to pay interest at a higher rate, unless there is some business compulsion for doing so. It is also well established principle that the tax authorities cannot sit on the chair of the businessman and dictate the manner of carrying on the business. Further, in our view, the question of diversion of funds shall arise only if money was taken away from the concern of the assessee and was given to another concern for non-business purposes without charging interest at reasonable rates. This is not so in the instant case. Hence, we do not find any infirmity in the decision of the Ld. CIT(A) in holding that the funds deposited in the....
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....gly, we are of the view that the issue of diversion of funds in respect of these amounts require re-consideration. Accordingly, we set aside the order of the Ld. CIT(A) on this issue and restore the same to the file of the Assessing Officer for examination of the matter afresh in accordance with law. The assessee is also directed to furnish the details that may be called upon by the Assessing Officer in this regard. The order of the Ld. CIT(A) is accordingly modified. 9. Both the parties relied upon various case laws in support of their respective contentions. Since, we have decided the issues on facts, we do not find it necessary to discuss about those case laws. 10. The next issue relates to the valuation of rejected quality of kern....
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.... per kg. There was only one sale in local market on 17.3.2007 of 200 kgs. @ Rs. 6/- per kg. As the bulk of rejection kernels were sold in interstate Market, the rejection kernels were valued at Rs. 4.41 per kg. against the average price of Rs. 4 per kg. which was the value realized in interstate Market for the rejection kernels. These facts were placed before the Joint commissioner, who did not accept the contentions of the appellant and adopted Rs. 6/- as realizable value for the rejection kernels which resulted in an addition of Rs. 8,71,680/- to the total income returned by the appellant During the asst. year 2006-07, the assessment u/s. 143(3) was completed enhancing the value of closing stock to the extent of Rs. 5,35,811/- which was t....