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TMI Blog1983 (5) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... not for the purpose of any business of the assessee and since a part of the loan obtained by the assessee on interest from other parties, was used for advancing to Mr. Nesar Ahmed, proportionate interest calculated at Rs. 18,626 would have to be disallowed as the same was incurred not entirely and exclusively for the purposes of the business of the assessee. 3. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals) [CIT (A) for short], before whom it was submitted by the assessee that the ITO should not have made this disallowance. It was argued that the Audited Balance Sheet of the firm as on 31st March 1979 showed that the assets of the firm were far in excess of the market borrowing and, therefore, it was me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, as actually it was for the assessee to show that the borrowed money was utilised for the purpose of the business. According to the ld. departmental representative. the borrowings were to the extent of Rs. 22,00,000, while the value of the fixed assets were also to the same extent, whereas the capital account of the partners was only to the extent of Rs. 5,68,000 and odd. It is urged that the liquidity position of the assessee was low and there was no surplus so as to enabling the assessee to advance the money out of its own funds, to Mr. Nesar Ahmed. It is repeatedly submitted that the loan given to Mr. Nesar Ahmed was out of the borrowed funds, as there was no liquid fund with the assessee out of its own funds. It is submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision in the case of Sassoon J. David Co. Pvt. Ltd. vs. CIT (1972) 85 ITR 83 (Bom). 5. We have perused the order of the authorities below for our consideration. We have also gone through the case laws referred to at the time of hearing. The facts of the case as discussed in the orders of the authorities below are not disputed. The dispute is that no part of interest payment should be disallowed as the assessee claimed that the entire loan borrowed by it earlier, was only for the purpose of the business and there was no nexus between that loan and the advance given to Mr. Nesar Ahmed. The ITO was of the view that the advance given to Mr. Nesar Ahmed was only out of the borrowed funds. The CIT (A) has relied on a decision given in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest payment, whereas in that Bombay case, the facts were completely different. In this connection, it may be noted that the Hon'ble Bombay High Court has referred to the decision of the Hon'ble Madhya Pradesh High Court in the case of Ram Kishan Oil Mills vs. CIT (1965) 56 ITR 186 (MP), in which the earlier decision of the Hon'ble High Court in the case of Birla Gwalior Pvt. Ltd. vs. CIT (1962) 44 ITR 847 (MP) was referred to. The above High Courts have noted that in order to entitle the assessee to deduction of interest paid on borrowed capital, all that is necessary is that, firstly the money must have been borrowed by the assessee, secondly, it should have been borrowed for the purpose of the business profession etc. and thirdly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Roopchand Chabildas Sons vs. CIT (1967) 62 ITR 166 (Mad). Similar is the view of the Hon'ble Mysore High Court in the case of CIT vs. United Breweries (1973) 89 ITR 17 (Mys). After considering the various submission made before us and after taking into account the facts as borne by the orders of the authorities below, and the decisions in the various cases mentioned in the preceding paragraphs, we are of the opinion that the CIT (A) erred in deleting the amount on the facts of the case. The CIT (A) has wrongly applied the ratio of the decision in the case of Bombay Samachar as we find that the facts of the present case before us are distinguishable. In this view of the matter, and in view of what we have discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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