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TMI Blog2010 (8) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... /- on account of interest free loans and advances without considering the facts and circumstances. 1.2 Your appellant submits that your appellant has given the full explanation regarding non-charging of interest on the advances made to various parties. The Assessing Officer ought to have accepted the contention of your appellant regarding non-charging of interest and ought not to have added the sum of ₹ 86,80,915/-. 3. The assessee is a partnership firm. It is engaged in the business of dealing in import licenses. It is also an importer of various commodities. On perusal of the profit and loss account the AO noticed that the assessee had debited a sum of ₹ 86,80,915/- as interest payment. The balance sheet revealed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Priya Blue Ind. Pvt. Ltd. even if charged could not be recovered because of loss and discontinuance of business. The Assessing Officer was of the view that funds borrowed were not utilized for the purpose of assessee s business, he therefore held as follows :- Therefore, considering the above discussion, the material on record and the totality of the circumstances of the case, proportionate interest (calculated @ 12% of the outstanding balance) on the above advances needs to be disallowed from the interest paid by the assessee. This comes to ₹ 1,06,89,202/- .Since, the assessee has debited only an interest of ₹ 86,80,915/- which is less than the disallowable interest, whole of the interest payment of ₹ 86,80,915/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not raised by the assessee either before the Assessing Officer or before learned CIT(A). It is not clear as to what is the nature of business that sister concerns of the assessee were engaged in. Even availability of surplus funds for giving interest free loan has not been examined. With a view to give the assessee an opportunity to prove his case, we set aside the order of learned CIT(A) and remand the issue to the Assessing Officer for fresh consideration. The Assessing Officer will consider if the interest free loan is given out of commercial expediency and also verify if there were enough interest free surplus funds. The assessee will establish both the aforesaid aspects and the Assessing Officer will examine the claim of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances, the Assessing Officer disallowed the claim for deduction of the aforesaid sum. On appeal by the assessee, learned CIT(A) confirmed the order of the Assessing Officer. 8. Before us, learned counsel for the assessee reiterated the submissions made by the Assessing Officer. He has not filed any evidence to show that foreign traveling expenses were incurred in connection with the business of the assessee. As rightly held by the Assessing Officer explanation and justification given by the assessee is very vague and it cannot be accepted in the absence of any reliable evidence. The burden lies on the assessee to establish that expenses claimed as deduction is wholly and exclusively incurred for the purpose of business of the Assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of getting any payment, the appellant wrote off the amount. On this fact, the appellant satisfies one part of requirement of section 36(2) of the I.T. Act. The reason cited by the appellant is sufficient to treat the debt as bad. It is because the issue of recovery has to be seen from assessees point of view. But, the appellant has to fulfill another requirement of the section i.e. the amount should have been shown as income in some assessment year. The appellant was asked to file details on this. The appellant only filed dates of bills of high seas purchases and sales. The appellant did not give any details to show whether the sales shown were part of income disclosed earlier or not. This is because the appellant is an indenting agent. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of the assessee should be accepted. However, we find that learned CIT(A) has held that amounts written off as bad debts was not offered as income in the previous year or earlier previous year. This also one of the conditions to be fulfilled as laid down in section 36(2) of the Act. However, we find that the Assessing Officer in the order of assessment has not made the disallowance on this ground. In these circumstances, we set aside the order of learned CIT(A) and remand the issue to the Assessing Officer for fresh consideration to verify and examine regarding satisfaction of condition mentioned in section 36(2) of the Act. 13. In the result, appeal of the assessee is partly allowed for statistical purposes. Order was pronounced o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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