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TMI Blog2007 (9) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 The appeal is admitted on the following substantial questions of law: (A) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the advances paid to the harvesting transport contractors was in the nature of business interest of the respondent and not a diversion of borrowed funds for non-business purposes, even though such advance was not made in the normal course of business and was made without any specific contractual obligations and such payments were made out of the borrowings on which the respondent was paying higher interest to the financial institutions? (B) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that bakshish paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le by the assessee to the H and T contractors for harvesting and transporting sugarcane from the field to the factory, are decided by the tripartite agreement entered into by and between the assessee, the State Government and the H and T contractors after extensive bargaining. Once the rate and commission payable to the H and T contractors is determined, there is no business expediency to make any advance payment to the H and T contractors. He submitted that in the absence of any clause in the tripartite agreement requiring the assessee to give advances, it was not obligatory for the assessee to advance loans to the H and T contractors at a lower rate of interest. Thus, the advance payment made to the H and T contractors was nothing but div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on behalf of the respondent, on the other hand, submitted that making advance payment to the H and T contractors and giving bakshish to the employees of the H and T contractors has been the general practice prevailing in the State of Maharashtra for several decades and such expenditure has been consistently allowed as business expenditure not only in the case of the assessee but also in the case of several other sugar factories. In support of the above contention, Mr. Inamdar tendered two affidavits annexing thereto the assessment orders relating to the assessment years 1988-89, 1989-90, 1990-91 and 1991-92 in the case of the assessee and the assessment orders relating to the assessment years 1985-86, 1986-87, 1987-88, 1988-89, 1989-90 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 261 and the decision of this court in the case of Tata Sons Ltd. v. CIT [1950] 18 ITR 460, Mr. Inamdar submitted that in the context of the current socio economic thinking which places general interest of the community above personal interest of the individual, the expenditure incurred by giving advances to H and T contractors and giving bakshish to the employees of the H and T contractors with a view to receiving prompt supply of harvested sugarcane is an expenditure incurred on account of commercial expediency and accordingly, the order passed by the Tribunal is liable to be upheld. 11 We have carefully considered the rival submissions. As per the tripartite agreement, H and T contractors transport the harvested sugarcane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or otherwise, not giving such advances will not be in the interest of the assessee's business. Due to paucity of funds if the he contractors are unable to transport the sugarcane promptly, then the sufferer would be the assessee. In these circumstances, the finding to recorded by the Tribunal that giving some amount in advance to the H and T contractors was in the business interest of the society cannot be faulted. 12 The fact that the asses see has given such advances to the H and T contractors at a lower rate of interest cannot be a ground to hold that the borrowed funds have been diverted for non-business purposes. As noted earlier, the assessee has not advanced any amount in excess of the amount payable to the H and T contractors un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o such job work. It is held that with a view to induce the labourers to continue with the work during the summer months, bakshish ranging from Rs. 200 to Rs. 250 is given to the labourers employed by the H and T contractors. In these circumstances, in our opinion, the finding recorded by the Tribunal that the bakshish payment is a necessary incidence of the assessee's business cannot be faulted. 14 It is contended by the Revenue that during the course of assessment, in spite of repeated requests, the assessee has failed to furnish particulars of the amount given as bakshish. There is no merit in this contention because neither in the assessment order nor in this appeal the Revenue has doubted the genuineness of the payments of Rs. 200 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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