2008 (6) TMI 209

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..... nterest on borrowals on so much of amount. It cannot be denied by the assessee that the funds reaching its hands on maturity of deposits could not be utilised for its own business purposes - we reverse the order of the Tribunal and the first appellate authority and restore the assessment on disallowance
C. N. RAMACHANDRAN NAIR and V. K. MOHANAN JJ. P. K. R. Menon and George K. George for the appellant. V. G. Arun for the respondent. JUDGMENT The judgment of the court was delivered by C. N. RAMACHANDRAN NAIR J.—Heard standing counsel for the appellant and the counsel appearing for the respondent-assessee. 2. Two issues are raised in the appeal filed by the Revenue. The first question pertains to the bogus purchases accounted by the .....

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..... t in the case of the assessee is a protective assessment and the regular assessment in which same addition is sustained stands remanded to the Assessing Officer. We, therefore, reverse the order of the Tribunal on this issue and remand the matter to the Assessing Officer for reconsideration in the light of the findings in the case of the sister concern. Since the matter is remanded, the assessee is given freedom to raise all contentions on the merits. 4. The next question raised pertains to the order of the Tribunal confirming the appellate order reversing the disallowance of proportionate interest on the sum advanced by the assessee to the partners as interest-free loans. The assessee had a fixed deposit receipt of Rs.10 lakhs with the ba .....

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..... n first above referred. The Tribunal has not gone into the question whether borrowals were justified when the assessee had funds with it. The assessee was well aware of the maturity of the deposit and they could have easily limited the borrowals in such a way so that interest for the deposit amount is avoided after its maturity. The assessee, which advanced its funds as interest-free loans to the partners, has no justification to claim interest on borrowals on so much of amount. It cannot be denied by the assessee that the funds reaching its hands on maturity of deposits could not be utilised for its own business purposes. This could have reduced the interest burden. In this view of the matter we feel, proportionate disallowance of interest .....

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