2016 (11) TMI 964

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..... under section 143(3) whereby interest expenses relatable to interest-free advances were disallowed in terms of the provisions contained in section 36(1)(iii) of the Income-tax Act. In the appeals that were filed by the assessee before the Commissioner Income-tax (Appeals), annexure B orders were passed, allowing the appeals. The Revenue carried the matter in appeals before the Tribunal and by the impugned annexure C orders, the Tribunal dismissed the appeals. It is in this context, these appeals are filed and the main question of law raised is whether the Tribunal was right in allowing the deduction under section 36(1)(iii) of the Income-tax Act. 2. We heard the senior counsel for the Revenue and the learned counsel appearing for the asse .....

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..... e are of the view that these appeals involving a substantial question of law deserve to be considered on the merits. Therefore, we reject the preliminary objection raised by the counsel for the assessee. 4. Section 36(1) of the Income-tax Act provides that, in computing the income referred to in section 28 the deductions provided for in the various clauses of the said section shall be allowed. One of the matters dealt with in clause (iii) is the amount of interest paid in respect of capital borrowed for the purposes of the business or profession. This section came up for consideration before this court, various other courts and the apex court. 5. In the judgment in CIT v. V. I. Baby and Co. [2002] 254 ITR 248 (Ker) a Division Bench of thi .....

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..... Reading of this order shows that in response to the notice that was issued, the assessee had produced the books of account and claimed the benefit of deduction. Without adverting to the facts that were urged by the assessee or examining whether the assessee had derived any benefit from the advances made or whether such advances were made on commercial expediency, the claim was disallowed merely referring to some judgments including the judgment in CIT v. V. I. Baby and Co. [2002] 254 ITR 248 (Ker) and CIT v. Abhishek Industries Ltd. [2006] 286 ITR 1 (P&H). In so far as the order that was passed by the Commissioner of Income-tax (Appeals) is concerned in that order also, by merely making reference to the records produced by the assessee, th .....

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