9911796707
TMI Blog2017 (9) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals, learned counsel for the Revenue pointed out that in case of this very assessee, such an issue was being admitted by this Court in Tax Appeal No. 1166 of 2011 in following terms: "1. We have heard Mr. K. M. Parikh, learned counsel appearing for the appellant. 2. Admit. We formulate the substantial question of law as under : "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting disallowance of interest on account of diversion of interest bearing fund by the assessee to its sister concern on the ground that said advances were made for assessee's own business interest ? 3. Issue notice to respondent. Paper book be filed within three months." 2. We had, therefore, ordered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion that there was commercial justification in the assessee doing so. The Tribunal relying on the decision of Supreme Court in case of S.A.Builders Ltd vs. Commissioner of Income Tax (Appeals) amd anr reported in 288 ITR 1 confirmed the view of the CIT (Appeals) making following further observations: "8. We find that the disallowance is not justified in view of the fact that the said sister concerns to whom funds are transferred are exclusively engaged in promoting sales of the assessee's products. Further, these concerns were continuously incurring losses on account of inadequate margin allowed to them by the assessee. Hence, assessee had to finance various business expenses of these concerns on the interest of assessee's own bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit, but voluntarily and on grounds of commercial expediency and in order to indirectly to facilitate the carrying on the business. The above test in Atherton's case (1925)10 TC 155, has been approved by this Court in several decisions e.g. Eastern Investments Ltd. vs. CIT (1951) 20 ITR 1, CIT vs. Chandulal Keshavlal & Co. (1960) 38 ITR 601 etc. In our opinion, the High Court as well as the Tribunal and other Income Tax authorities should have approached the question of allowability of interest on the borrowed funds from the above angle. In other words, the High Court and other authorities should have enquired as to whether the interest free loan was given to the sister company (which is a subsidiary of the assessee) as a measure of c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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