9911796707
TMI Blog1982 (11) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the total income of the previous year ended 31-3-1978 corresponding to the assessment year 1978-79, the assessee had claimed deduction of Rs. 94,889 paid on such deposits. The ITO found the amount borrowed as deposits exceeded the limit prescribed in rule 3 of the Companies (Acceptance of Deposits) Rules, 1975, read with section 58A of the Companies Act, 1956. He was of the opinion that the borrowal was, therefore, irregular and illegal and the interest on such borrowal exceeding the limit could not be allowed as a deduction unless the assessee was carrying on an illegal business which was not the case. He, accordingly, disallowed a sum of Rs. 80,120. On appeal, the Commissioner (Appeals) accepted the contention of the assessee that even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sits received in contravention of the Acts and the Rules. There is no direct provision for surcharging the persons managing the company for the payment of such interest and until any person incharge of the affairs of the company is required to reimburse the expenditure incurred, this expenditure has to be treated as the expenditure of the company and admittedly it has been so taken into account in casting audited profit and loss account as required by the Companies Act. Therefore, the question with which we are really concerned is whether the interest taken into account for ascertaining the profit of the company could still be disregarded only on the ground that the capital borrowed was in contravention of certain regulations in the Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicle for the purpose of transporting his goods, loading and unloading it at his shop, can it be said that infraction of the law was in a capacity other than a trader or that the expenditure incurred because of that infraction falls on him in any other capacity ? In our mind, such an infraction cannot but be recognised as springing directly from the carrying on of business and incidental to it and the expenditure incurred would be an expenditure laid out for the purpose of business. The vital question is whether the infraction of law was a normal incident of the business of the assessee. From that point of view, the borrowal of funds in excess of the ceiling prescribed is certainly incidental to the business of the assessee since those fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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