1989 (9) TMI 94

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....und that the assessee had borrowed moneys from different persons in the previous years relevant to the assessment years 1967-68 and 1968-69 on interest and that a part of the money so borrowed was advanced to its sister concerns free of interest. The sister concerns are All Steel and Asian Industries, in which the partners of the assessee-firm are also partners. It is also common ground that the interest to the extent it was payable on the moneys borrowed and diverted to sister concerns free of interest was disallowed in those years. For the year under reference, the assessee stated that it had not advanced any moneys to its sister concerns. On the contrary, substantial amounts were recovered from them. It was pointed out that unsecured ....

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....pital. However, the amounts standing to the credit of the various sundry creditors representing the value of the goods purchased would not be available for the purpose of advancing money to the sister concerns as the assessee must have likewise sold goods on credit free of interest. Accordingly, he computed the amount available to the assessee out of its capital on an average basis and the loans advanced to the sister concerns on interest at the rate of 4 per cent. The computation is given in paragraph I 1 of his order. On such computation, he reduced the disallowance of interest to Rs. 18,722 from Rs. 27,771 made by the Income-tax Officer. The Tribunal accepted the assessee's entire claim. According to the Tribunal, the fact that the as....