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TMI Blog2009 (10) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. Besides carrying on the business, the com-pany is a partner in several partnerships which are controlled by the same group. In the course of assessment under the Income-tax Act for the year 2004-05, the Assessing Officer noticed that the assessee borrowed massive amounts from banks and advanced the same to sister concerns, namely, the partnership firms in which it was a partner, without collecting any interest. The Assessing Officer, after verifying the interest bearing borro-wals from banks and the interest-free advances made from the beginning to the end of the relevant previous year, found that the interest expenses attributable for the interest-free loans advanced to the firms of which it was a partner worked out to Rs. 31,21,599 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not made payments before the due date for filing the return under section 139(1) read with the first proviso to section 43B, is not disallowance of the amount of Rs. 34,70,040 pay-able by the assessee but not paid valid and in accordance with law ?" 3. The contention of the appellant is that the finding of the Assessing Officer that funds advanced by the respondent to sister concerns which are partnership firms are out of borrowed funds on which interest is paid by the assessee, is not found against by any of the appellate authorities including the Tribunal. According to him, advancing of loan by the respon-dent-company to a firm of which it is partner is not a business expenditure and, therefore, interest paid for borrowing funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan to the firm does not constitute income of the respondent under section 10(2A) of the Income-tax Act. Since the share income from the firm does not cons-titute part of the taxable income of the assessee, section 14A(1) applies which prohibits deduction of any expenditure incurred in relation to income not includible in total income. The said section reads as under : "14A.(1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act." 4. Standing counsel appearing for the appellant contended that the Asses-sing Officer has not expressly referred to section 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case cannot stand because the decision of the Supreme Court followed by them does not apply to the facts of the case. Even though the Assessing Officer has referred to section 14A, the Tribunal has not referred to the section, but allowed the claim just following the decision of the Supreme. A remand for the purpose of considering eligibility for deduction based on commercial expediency, if at all the same exists, is not called for in this case because section 14A(1) expressly bars allowance of any expen-diture for earning income which does not constitute part of the total income of the assessee. It is the admitted position that the advancing of interest-free loan is made by the respondent-assessee only to partnership firms of which it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return, even though such payment was not made before the end of the previous year. Standing counsel for the appellant referred to the finding of the Assessing Officer that payment was not made before the date of filing the return. Strangely the Tribunal allowed the claim without verifying whether the remittance was made before filing the return by the assessee. Since this is a controversial fact, we give one more opportunity to the assessee to prove before the Assessing Officer with details of the pay-ment of premium to the LIC and if payments were made before filing of the return, then the same should be allowed in terms of the order of the Tribunal or otherwise, the claim should be disallowed with right to the assessee to claim the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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