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COMMISSIONER OF INCOME TAX-III Versus CORE HEALTH CARE LIMITED

2016 (8) TMI 154 - GUJARAT HIGH COURT

Disallowance of interest - borrowed funds which is diverted to the sister concern, without charging interest - Held that:- We are of the opinion that the Tribunal has not committed any error in deleting the addition made on account of disallowance of interest relating to the borrowed funds which is diverted to the sister concern without charging interest. - From the above, it is clear that the Tribunal has correctly approached the issue which has been proposed in the present Tax Appeals. Whe .....

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ecided in favour of the assessee - TAX APPEAL NO. 73 of 2010 TO TAX APPEAL NO. 76 of 2010 - Dated:- 26-7-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MR NITIN K MEHTA, ADVOCATE FOR THE OPPONENT : MR B S SOPARKAR, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench B (hereinafter referred to as ITAT) dated 05.06.2009 in ITA No. 220 .....

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Tribunal had dismissed the appeals filed by the revenue against the decision of CIT(A) deleting additions made on account of disallowance of interest relating to the borrowed funds diverted to the sister concern without charging interest. Being aggrieved and dissatisfied with the impugned judgment and order passed by the ITAT, the revenue has preferred the present Tax Appeals for consideration of the aforesaid substantial question of law. 4. Mr. Nitin Mehta, learned advocate appearing for the r .....

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ed assets 97202.22 Inventories 3422.24 Receivables 10009.15 Total 110633.61 4.1 The Assessing Officer in para 6 of the assessment order has further observed as under: ... As shown above, above advances have been taken by the company wholly and exclusively for the purpose of the business of the company. The advances have been given for sufficient, adequate and apparent consideration and therefore the same are not in the nature of loans. By advancing these amounts the company had obtained benefit .....

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sessment year 1996-97. He submitted that the Tribunal has erred in relying on the decision of the Apex Court in the case of Munjal Sales Corp. vs. Commissioner of Income Tax reported in [2008] 298 ITR 298 (SC) in view of the fact that the facts of the case of the assessee are not identical to the facts of the case relied upon by the Tribunal. 5. Mr. S.N. Soparkar, learned Senior Counsel appearing with Mr. B.S. Soparkar, learned advocate on behalf of the respondent - assessee has submitted that t .....

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by us we are of the opinion that the Tribunal has not committed any error in deleting the addition made on account of disallowance of interest relating to the borrowed funds which is diverted to the sister concern without charging interest. In the case of Raghuvir Synthetics Ltd. (supra), this Court has held as under: We may refer to the judgment of Apex Court at this stage given in case of S.A.Builders Ltd. v. Commissioner of Income Tax (Appeals) reported in 288 ITR 1 (SC) where the question wa .....

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x In our opinion, the High Court in the impugned judgment, as well as the Tribunal and the Income Tax Authorities have approached the matter from an erroneous angle. In the present case, the assessee borrowed the fund from the bank and lent some of it to its sister concern (a subsidiary) on interest free loan. The test, in our opinion, in such a case is really whether this was done as a measure of commercial expediency. xxx The expression "commercial expediency" is an expression of wid .....

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ich need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. The Income Tax Authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorit .....

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