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TMI Blog2018 (4) TMI 1796X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The only issue in these appeals is with regard to disallowance of portion of the interest paid on secured loans from banks as proportionate interest pertaining to personal drawings made by the partners. 4. Since the facts are common in all these appeals, we consider the facts as emanating from the appeal for the assessment year 2009-10. The Assessing Officer while making the assessment had gone into the details of drawings made by various partners from the firm and the secured loan taken by the assessee by bringing out the working of interest on debit balance and drawings in respect of three partners. Interest chargeable on their withdrawals was worked out by the Assessing Officer as:- i) Shri Fisel : Rs. 4,08,649/- ii) Shri Siyaj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds available with the assessee as contended in the submissions made. 5.1 In this connection, the CIT(A) observed that the assessee furnished a copy of its bank statement to show that the various payments were made from the credit balance received from sales etc., which were received just before making these advances to the partners. However, the CIT(A) did not justify the explanation of the assessee as it was seen that the bank statement of assessee is a continuous over draft facility where balance on any particular day in the whole year in the bank statement was more than a 2 crores debit figure. Thus according to the CIT(A), even if a payment is received from the business transactions/sales, the same goes into the bank account and it onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,00,000/- only had the effect of reducing overdraft facility of more than 2 crores, and hence for the payment of Rs. 7,00,000/- to Shri Fisel, interest bearing funds was utilized. The CIT(A) found that it was exactly the same pattern that was repeated for all the payments to these partners. Thus according to the CIT(A) it was established that the payments to the partners have been made for non-business purposes from interest bearing funds. Hence, according to the CIT(A), the assessing officer was right in working out the interest on debit balances and total drawings in respect of these partners and making the disallowance u/s. (1)(iii) of the IT Act and confirmed the same. 5.3 Further, the CIT(A) noticed that in the additional ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g funds in the relevant year was not controverted by the authorities below. 6.1 The Ld. AR relied on the judgments of the Supreme Court to contravene the disallowance: 1) S.A. Builders vs. CIT (288 ITR 1) (SC) 2) CIT vs. Hotel Savera (239 ITR 795) (Mad.) 3) Chanchal Katyal vs. CIT (298 ITR 182) (All) 4) CIT vs. Prem heavy Engineering Works (P) Ltd. (285 ITR 554) (All) 5) ONGC vs. DCIT (262 ITR 648) (Uttaranchal) 6) CIT vs. Raghuvir Sythetics Ltd. (36 Taxman.com 275) (Guj) 7) CIT vs. Reliance Utilities & Power Ltd. (178 Taxman 135) (Bom) Therefore, by applying the ratios of the above mentioned judgments, it was submitted that since the assessee had common funds both interest bearing and non interest bearing and the same was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon by the assessee. The Ld. DR submitted that the facts in the case of CIT vs. Hotel Savera (supra) are that the advance was made with assessee-firm's own funds and interest paid on borrowed capital was deductible. Similarly, according to the Ld. DR, the facts in the case of Chanchal Katyal vs. CIT (supra) is different since the assessee in that case had sufficient funds other than borrowed money. The facts in the case of CIT vs. Prem Heavy Engineering Works (P) Ltd. (supra), according to the Ld. DR are different as in that case, the assessee had sufficient interest free funds. Similarly, it was submitted that the facts in the case of ONGC vs. CIT are different since the issue in that case was reopening of the assessment u/s. 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. AR made an argument that only the withdrawals of the present assessment years is to be considered for computation of interest expenditure and the earlier old balance of advance in the name of the partners which was carried forward from the earlier years cannot be considered. In our opinion, this argument of the assessee's Counsel has no merit as the assessee is paying interest on such carried forward opening balance and incurred interest expenditure on it. Therefore, the total advance outstanding in the name of the partners is to be considered for computation of interest disallowance in the case of the assessee-firm. Accordingly, we do not find any infirmity in the orders of the lower authorities. This common ground for all the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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