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Commissioner of Income Tax, Central-I Versus M/s. JR. Diamonds Pvt Ltd.

2015 (3) TMI 844 - BOMBAY HIGH COURT

Interest free loans advance to sister concern - whether were for business purpose or commercial expediency was not proved by the assessee - Held that:- In the present facts, we find that the CIT(A) has in the impugned order rendered a finding of fact that there was trade transaction between the Respondent Assessee and its group concern - M/s. Suraj Diamonds Consultancy Pvt. Ltd. during the subject Assessment Year i.e. A. Y. 2007-08. Once the fact of business relationship between the Respondent A .....

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), the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role of decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profit.we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profi .....

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of law for our consideration: "Whether, on the facts and the circumstances of the case and in law, the Tribunal was justified in holding that the interest free loans advance by the assessee to its sister concern were for business purpose without appreciating the fact that commercial expediency was not proved by the assessee?" 3. The Respondent claimed an expenditure of ₹ 51.91 lakhs on account of interest paid on ₹ 8.66 Crores borrowed from American Express Bank in June 20 .....

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of Income Tax (Appeals) [CIT(A)] recorded a finding of fact that during the Assessment Year 2007-08, the RespondentAssessee had trade transaction with its group concern - M/s. Suraj Diamonds Consultancy Private Limited. In spite of the holding that there was business relationship between the two, the interest paid was disallowed on the ground that the advance was given in June 2005 and the trade transaction took place only in the subject Assessment Year in particular on 16th March, 2007. On the .....

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ed. Accordingly, the impugned order allowed the appeal of the Respondent-Assessee. 5. The grievance of the Appellant-Revenue is that the reliance upon the decision of the Tribunal in case of another group concern of the Respondent Assessee was not appropriate as the particular facts such as the date of the loan, the date it was advanced and the manner in which the amounts were utilized by the group concern etc., are not brought on record. Moreover, it is also submitted that the decision of the S .....

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se. It was particularly emphasized that impugned order does not record/ establish any business relationship and, therefore, Apex Court's decision in S. A. Builders (supra) become inapplicable. 6. In the present facts, we find that the CIT(A) has in the impugned order rendered a finding of fact that there was trade transaction between the Respondent Assessee and its group concern - M/s. Suraj Diamonds Consultancy Pvt. Ltd. during the subject Assessment Year i.e. A. Y. 2007-08. Once the fact o .....

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