TMI Blog2014 (5) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... to what would be the course of action that needs to be taken in a given situation. In the instant case the assessee explained the reasons for permitting group concerns long term credits. Merely because the Assessing Officer views its otherwise, expenditure incurred for the purpose of business cannot be disallowed, particularly in the light of the decision of Hon'ble Apex Court in the case S.A. Builders Ltd. (2006 (12) TMI 82 - SUPREME COURT ). The tax authorities have not made out any case for disallowance of 25% of the total claim. The Assessing Officer is directed to allow the claim in its entirety - Decided in favour of assessee - I.T.A. No. 6846/Mum/2013 - - - Dated:- 27-5-2014 - Shri D.Manmohan (VP) For the Respondent: S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... major amount was receivable from its sister concern, it was shown as outstanding and no effort was made to collect the amount. The total amount of debtors, as per balance-sheet is ₹ 71.06 lakhs which includes amount due from group concerns in earlier years which is substantial as compared to the turnover of around of ₹ 30 lakhs annually for the last many years. The fund-flow statement from the balance-sheet indicates that the partner s capital and current account at the beginning of the year was ₹ 6.92 lakhs and at the end it was ₹ 7.68 lakhs. There were sundry creditors outstanding at the beginning of the year to the tune of ₹ 28.36 lakhs and at the end of the year it was ₹ 24.39 lakhs. There were unsec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted loans to other group concern of the assessee. It was further noticed that the loans were advanced for more than ten years and interest received is balanced against the interest paid showing nominal net income. The Assessing Officer also noted that the provisions of section 40A(2b) do not come into play under these circumstances; but he was of the opinion that substance of transaction is to be looked into. In otherwords, if there is no business exigency for such long term credits offered to its group concern especially when it is operating on substantial borrowed funds, the only remedy available is to apply decision of Hon'ble Apex Court in the case of Mcdowell Co. Ltd. (154 ITR 148) to appreciate as to whether it is a colorabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avail benefit of obtaining services from the assessee on credit. At the same time, when called upon by the Bench to explain as to when the loan was taken and whether it was utilized for the purpose of business at that point of time, he fairly admitted that there is no dispute with regard to loans having been taken for business purposes but on account of the fact that the assessee permitted the sister concerns long term credit even at the cost of paying interest, the Assessing Officer was justified in applying decision of Hon'ble Apex Court in the case of Mcdowell Co. Ltd. (supra). 8. I have carefully considered the submissions of learned Departmental Representative and perused the record. It is not in dispute that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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