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2016 (10) TMI 701 - GUJARAT HIGH COURT

2016 (10) TMI 701 - GUJARAT HIGH COURT - TMI - Disallowance of interest expenses - Held that:- The assessee had diverted its interest bearing funds for the purpose of its business. It was not mere lending without interest but involved engagement of the assesseee in a business of developing real estate. - Tax Appeal No. 717, 718 of 2016 - Dated:- 26-9-2016 - Akil Kureshi And A. J. Shastri, JJ. Mrs Mauna M Bhatt, Advocate for the Appellant ORDER ( Per : Honourable Mr. Justice Akil Kureshi ) 1. Lea .....

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2002-03? 4. From the facts we gather that the assessee had borrowed funds from HDFC Bank out of which, a sum of ₹ 15 crores was lend to the sister concern M/s. SSKI which carried no interest. The Revenue was of the opinion that the interest paid to the asessee on such borrowings which was diverted for interest free loans should be disallowed. This is second round of litigation. In the first round, the Tribunal accepted that there was diversion of interest bearing funds for advancing intere .....

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ellant company has been engaged into the business of financial activities. The funds given to SSKI were given for the purpose of real estate project by the appellant company and the same was used for the purpose of appellant company's business only. And accordingly, the question for treating as non-business purpose should not arise. The Assessing Officer, however, discarded such defence and taxed the income by disallowing a claim of expenditure on the interest paid on such borrowed funds. 5. .....

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rpose of such objects, the company could acquire machineries, plants, stock in trade, trademarks and such other movable and immovable properties of all description. The Tribunal held that the advance was for business expediency. The Tribunal made following observations: 18. As mentioned above, the objects in the Memorandum of Association are clearly in favour of the impugned transaction and establish a direct neux between the business of the assessee and the advancing of money. Our view is also .....

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