TMI Blog2011 (9) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... edits could not be seen as other than business liabilities, and were not free-funds in the sense in which the assessee could use it freely. Appeal of revenue allowed. - TC(A). Nos.608 to 611 of 2005 - - - Dated:- 26-9-2011 - Mrs.Justice CHITRA VENKATARAMAN, Mr.Justice M.JAICHANDREN, JJ. For Appellant : Mr.K.Subramaniyam For Respondent : Mr.V.S.Jayakumar COMMON JUDGMENT CHITRA VENKATARAMAN, J The Revenue is on appeals as against the order of the Income Tax Appellate Tribunal. The only question raised by the Revenue for the assessment year 1997-98 to 2000-01 is as follows; "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent made in respect of all the years are one and the same. Aggrieved by the same, the assessee went on appeal before the Commissioner of Income Tax (Appeals). 3. As regards the investment of shares in M/s.Caplin Point Laboratories Limited, the assessee contended that the same was for the purpose of securing the dealership which was borne out by the agency agreement. The assessee contended that the investment in shares and credits extended to trade debtors were incidental to the assessee's business; the debit balance in the current account taken for the purpose of computing the diverted funds had arisen due to business loss and hence, could not be considered as diversion of funds. In any event, the Assessing Officer should have considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income Tax (Appeals) pointed out records clearly pointed out utilisation of interest bearing borrowed funds for non business purposes. Thus, the Commissioner of Income Tax (Appeals) rejected the appeal for the assessment years. The Commissioner of Income Tax (Appeals) applied his decision relating to the assessment year 1998-99 on the aspect of diversion of funds to non business purposes in respect of appeals relating to the assessment years 1997-98, 1999-00 and 2000-01 and rejected these appeals too. 5. As regards the debit balance in the current account relating to assessment year 1997-98 and 1999-00, the Commissioner of Income Tax (Appeals) pointed out that these were on account of investments tax payment and house construction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tune of Rs.1,70,000/-, to which, the relatable interest came to Rs.36,167/-. On going through the said statement, the Tribunal allowed the appeal to the extent as stated above. Aggrieved by the same, the Revenue is on appeals. 8. As rightly pointed out by the learned Standing Counsel for the Revenue, given the fact that the assessee had not produced necessary materials to point out to the extent of diversion for non business purpose, the grant of relief just based on cash flow statement and balance sheet per se would not a justifiable ground to grant the relief to the assessee. The Commissioner of Income Tax (Appeals) in its order stated that the assessee did not secure any fresh borrowals during the relevant year and almost the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet, cannot by any stretch of reasoning be taken as materials for proving the claim of the assessee. In the circumstances, we do not find any ground to sustain the order of the Tribunal. 10. Since the Officer had restricted the disallowance to 50% of interest payment, considering the fact that the borrowing were old borrowings and there were no fresh borrowals during the assessment years under consideration, we feel that instead of remitting the matter back to the Tribunal or the officer, the proper course herein would be to adopt the reasoning given by the Commissioner of Income Tax (Appeals) in his orders. 11. As already pointed out in respect of assessment year 1998-99, based on the letter given by the assessee, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-funds in the sense in which the assessee could use it freely. Keeping this in the background, the Commissioner analysed the liability to find out, whether the assessee had resorted to more interest bearing borrowals other than what the business needs warranted. Based on the analysis, the Commissioner of Income Tax (Appeals) came to the conclusion that the entire non business advances and investments were made by using the borrowed funds. The Officer thus was directed to rework the disallowance by taking diverted funds as given therein. 13. On going through the orders of the Tribunal, we feel that the order of the Tribunal is based purely on the summary of the statement and hence, could not be accepted as such. In the circumstances, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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