9911796707
TMI Blog1986 (8) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... w, on facts and in the circumstances of the case." 2. The original assessment in this case was framed by the ITO on 21-2-1983. During the course of the assessment proceedings, the ITO observed that the assessee had paid a sum of Rs. 29,741 as interest to Mehta Financiers. In view of the provisions of section 40A(8) of the Act, the question of disallowing 15 per cent of the aforesaid interest along with certain other such payments came for consideration before the ITO. However, on perusal of the records and the correspondence between the assessee and the ITO, we find that no such disallowance was made, as the ITO came to the conclusion that the aforesaid interest payment fell under clause (b)(vii) of the Explanation to section 40A(8). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause was wide enough to include all types of agents including the one under consideration. He also drew our attention to the agreement entered into between the assessee and Mehta Financiers which is appended on page 18 of the paper book. He drew our attention to various clauses of the aforesaid agreement to urge that Mehta Financiers were acting as a del credre agent in terms of the agreement dated 1-12-1981. He particularly drew our attention to paragraph 7 on the first page of the agreement as well as to paragraphs 2, 3, 5 and 6 of the main agreement. According to him, Mehta Financiers were to certify the creditworthiness of various parties to whom the assessee sold its goods on credit basis. It was further contended that they were also r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no disallowance was to be made. The learned Commissioner on the other hand has gone through the same agreement and interpreted various clauses and came to a contrary decision. According to the learned Commissioner there was no relationship of principal and agent between the assessee and the aforesaid firm. He further held that the firm was not acting as an agent of the assessee in respect to any other third parties. He also opined that the deposit of Mehta Financiers did not fall under any of the exempted categories of clause (b) of the Explanation to the said section. He accordingly directed the ITO to disallow 15 per cent of the interest paid to Mehta Financiers. We are of the opinion that the action of the Commissioner is not proper, kee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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