9911796707
TMI Blog1978 (9) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 30,000 having been given as a loan to Shri K.S. Mehta. Since interest had not been charged on this amount also, the ITO disallowed the interest at 12 percent. The total disallowance came to Rs. 18,719. 3. In asst. yr. 1975-76, the ITO similarly disallowed the interest on advances paid to HUF at 12 per cent amounting to Rs. 17,608 and in respect of advances to Shri K.S. Mehta Rs. 3,600. 4. The assessee came in appeal before the AAC and challenged the disallowance. Before the AAC the ITP appearing for the as analysed the capital fund comprising the firm's own moneys and borrowed moneys and pointed out that the appellant's own funds or those of connected cases of creditors for non-interest bearing loans received, were substantially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e counsel for the assessee. Ground No. 2 of the appeal memorandum challenges the finding of the AAC that the disallowance cannot be upheld because the ITO has not established a direct correlation as between the borrowed funds and advances so as to demonstrate positively that the borrowed funds alone had in fact been diverted towards the non-interest bearing advances. Ground No. 3 says that the AAC should have appreciated the fact that the ITO was justified in disallowing the interest on presumption basis as the appellant's own funds or non-interest bearing credits were inadequate for diverting towards non-interest bearing advances. Basically, there is no merit in both these grounds of appeal. The ITO's rationale for the disallowance simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in can be disallowed only to the extent that the firm pays interest and the ITO's order only mentions that the firm pays interest on borrowed funds, but does not say anything further. Ground No. 3 in the Departmental appeal is also not based on facts because it says that the appellant's own funds or non-interest hearing credits were inadequate for diverting towards non-interest bearing advances. No facts were placed before us in this regard. In para 4 of his order, the learned AAC has given facts and figures to show that there were net credit balances in the accounts of the partners and in the accounts of the members of the HUF and to Shri Mehta without interest. Normally, since the learned AAC. had not verified the contention of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 1970 itself. The assessee should therefore have written it off in the relevant accounting year. Alternatively if the assessee argues that out of the paltry assets he could recover the bad debt from the receiver which till to date has not been done than this is not the year in which it has become bad and it should be continued till it is finally settled. In either case, the bad debt could not be allowed in this year. 7. This order was challenged before the AAC It was urged before him that of whom viz., Shri V.T. Ponnuswamy had alone been declared insolvent so that they attempted further to make recovery from the other partner. They were also expecting formal intimation from the official liquidator concerned with the case. It was there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was informed by the Official Liquidator that the other partner also became insolvent. We fail to understand what is the basis for this ground because it is no body's case that the other partner had also become insolvent and in any event there is no material on record for such a conclusion that the assessee was awaiting a formal intimation from the official liquidator that the other partner had become insolvent. The learned counsel for the assessee has placed before us a copy of the order of he Tribunal in the case of the First ITO, Belgaum vs. Messrs V.D. Mehta Co., Nipani, (6) dt. 24th Sept., 1975, who also were the creditors of M/s. T.P. Swamy Co, Tirunelveli. The claim of bad debt as allowed by the AAC was upheld by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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