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TMI Blog1986 (1) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... th the business and that no attempt was made by him to disallow any interest paid by the assessee, is not based on facts. The same is factually incorrect. 2. It is prayed that the order of the CIT (A) may be reversed and that of the ITO be restored. 3. The facts of the case are that on 1st April, 1979 there was an amount of Rs. 1,22,000 advanced to M/s Bharat Machinery Works, a sister concern of the assessee-firm. The ITO observed that there were no trading transactions with the said firm. He therefore, inferred that these amounts were advanced by the assessee to M/s Bharat Machinery Works without charging any interest whereas the interest and bank charges were paid to the bank amounting to Rs. 18,854 in respect of the overdraft. He a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the lease agreement and, therefore, the amount was advanced in the normal course of business. It was also stated that in the immediately preceding assessment year the ITO had treated the advance as connected with the business and no attempt was made by him to disallow any interest paid by the assessee. Finally, it was contended that only interest bearing loan as on 31st March, 1978 was Rs. 45,301 out of which Rs. 21,000 could be said to have been advanced to M/s Delux Woollen General Mills in connection with business and only the remaining amount of Rs. 24,000 could be linked to the advance given to M/s Bharat Machinery Works. Without conceding this issue it was stated that ITO could at best make the disallowance of interest @ 14 per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same on merits. He further urged that it was the duty of the CIT (A) to give guidelines to the ITO in making the proper assessment, instead of deleting the addition. In this connection, he relied upon the decision of the Supreme Court reported as Kapur Chand Shrimal vs. CIT (1981) 24 CTR (SC) 345 : (1981) 131 ITR 451 (SC). The ld. counsel for the assessee, on the other hand, has supported the order of the CIT (A). 6. We have given our careful consideration to the rival submissions. According the ITO, the loans advanced to M/s Bharat Machinery Works were advanced out of the capital borrowed from the bank on which heavy interest was paid. According to the ITO, there was therefore, a direct nexus between the borrowings and the diversion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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