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TMI Blog2022 (2) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... sister concerns of the assessee. From the perusal of the ledger account of the concerned parties, he noted that the assessee has effected purchase/sales during the year from those parties. He noted that the assessee has not charged interest from debtors at Rs. 96,20,818/-. He, therefore, asked the assessee to explain as to why the interest has been paid to creditors whereas no interest was charged from the debtors. It was explained by the assessee that the assessee sells auction goods to M/s Samjhai Nath Industries and Saraswati Ginning Pressing & Oil Mills and trading goods has been purchased from these parties. Interest has been paid to them at prevailing market rate as Vyapar Mandal Association. Interest has also been paid to the above parties against their credit balance and TDS has been duly deducted and TDS return filed. So far as the non-receipt of interest from debtors is concerned, it was submitted that the main business of the firm is that of commission agent. The assessee has made payments to the farmers/Jamindars within time and no interest is charged from them and in lieu of that they received commission from the farmers amounting to Rs. 26.78 lakhs which is duly cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He submitted that the assessee has received interest and also paid interest @ 15%. For the above proposition, the ld. counsel drew the attention of the Bench to the following details:- 6. He submitted that the observation of the AO that the assessee has not charged interest from business debtors is factually incorrect since the assessee has received interest and also has paid interest on debit and credit balance with above parties at the same rate i.e., @ 15% per annum. He submitted that it is the settled proposition of law that the burden is on the AO to satisfy conditions u/s 40A(2)(b) of the Act and until and unless the Revenue establishes the same, the disallowance made is untenable. For the above proposition, the ld. counsel relied on the decisions of the Hon'ble Delhi High Court in the case of CIT vs. United Hotels Ltd., 177 Taxman 417 and Hive Communication (P) Ltd. vs. CIT, 201 Taxman 99. He also relied on the following decisions:- High Court of Bombay i) 310 ITR 306 (Mum) CIT vs. Indo Saudi Travel (P) Ltd. ii) 336 ITR 209 (Bom) CIT vs. Y.S. Dempo & Co. (P) Ltd. High Court of Karnataka i) 293 ITR 451 (Kar) DCIT vs. Mircotex Separators Ltd. ITAT Delhi Bench i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. From the various details furnished by the assessee in the paper book, it is noted that the assessee has paid interest as well as received interest from both the sister concerns, namely, M/s Samjhai Nath Industries and Saraswati Ginning Pressing & Oil Mills. Further, the transactions with the parties have not been doubted and these are business transactions. The AO has also not brought anything on record to the effect that the assessee has violated the provisions of section 40A(2)(b) of the Act. I find, the Hon'ble Supreme Court in the case of SA Builders (supra) has held that once the assessee establishes that there was a nexus between expenditure and the purpose of business, the Revenue cannot justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the said role to decide how much is a reasonable expenditure having regard to the circumstances of the case. The relevant observation of the Hon'ble Supreme Court reads as under:- "It is to be noted that in the present case the question that has been raised by the Revenue is not one relating to the expenditure being not for the purposes of the business. It is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1979 (118) ITR 200 (SC)], if the borrowed amount was donated for some sentimental or personal reasons and not on the ground of commercial expediency, the interest thereon could not have been allowed under section 36(l)(iii) of the Act. In Madhav Prasad's case [1979 (118) ITR 200 (SC)], the borrowed amount was donated to a college with a view to commemorate the memory of the assessee's deceased husband after whom the college was to be named, it was held by this court that the interest on the borrowed fund in such a case could not be allowed, as it could not be said that it was for commercial expediency. 28. Thus, the ratio of Madhav Prasad Jatia's case [1979 (118) ITR 200 (SC)] is that the borrowed fund advanced to a third party should be for commercial expediency if it is sought to be allowed under section 36(1)(iii) of the Act. 29. In the present case, neither the High Court nor the Tribunal nor other authorities have examined whether the amount advanced to the sister concern was by way of commercial expediency. 30. It has been repeatedly held by this court that the expression "for the purpose of business" is wider in scope than the expression "for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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