TMI Blog2000 (6) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1985-86. The original assessment order was passed by the Assessing Officer on January 28, 1988, and Rs. 15,24,434 was disallowed out of the total interest claimed by the assessee at Rs. 1,41,08,898. The assessee went on appeal up to the Commissioner of Income-tax (Appeals), hereinafter referred as ("the CIT(A)"), about the disallowance. The Commissioner of Income-tax (Appeals) set aside the order of the assessment and directed the Assessing Officer to adjudicate the claim of interest for revenue deduction in the light of the directions passed in its order. A fresh assessment was made thereafter by the Assessing Officer. The assessee claimed for revenue deduction on the interest before the Assessing Officer. The assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded that there was direct nexus between the borrowings on which interest had been paid and the loans advanced to the subsidiary companies on which no interest had been charged and accordingly turned down the plea of the assessee. The assessee preferred appeal before the Commissioner of Income-tax (Appeals). It was, inter alia, contended before the Commissioner of Income-tax (Appeals) that the advances to the subsidiary companies were meant for the business of the assessee. The Commissioner of Income-tax (Appeals) did not accept the contention of the assessee that the advances were made for the purpose of the business of the assessee. The Commissioner of .Income-tax (Appeals), however, held that sufficient funds were available for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax (Appeals). The moneys advanced to the two subsidiary companies of the assessee-company were also through cash credit and current accounts. The Revenue pointed out that the moneys advanced to the two subsidiary companies of the assessee-company were through cash credit and current accounts and it is also contended on behalf of the Revenue that there was no dispute that the assessee paid (interest on) cash credit account and the money available for the current account was from the public on which interest was paid by the assessee-company. Merely because the liabilities came down substantially in the year in question from that of the earlier year and that the various reserves, etc., had increased in the year did not ipso facto lead to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely because the loans advanced passed through the cash credit and current account of the assessee-company. The appellate authority also noted that there was no dispute as to the fact that the funds of the assessee-company were deposited with the bankers and the loans advanced to the subsidiary companies were also given by cheques. The appellate authority accordingly upheld the order of the Commissioner of Income-tax (Appeals) to the effect that the interest free loans advanced to the subsidiary companies were not from interest bearing funds from the bankers but from their own funds that were available with the assessee. The Revenue accordingly preferred an application before the Tribunal under section 256(1) of the Act requiring the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are questions of law requiring interpretation from this court. Learned counsel referring to the decision-making process of the Tribunal submitted that the questions raised were of law and, therefore, it was a case in which the Tribunal ought to have referred the aforesaid two questions for full consideration of the matter by this court in exercise of its power under section 256(1) requiring the Tribunal to state the case and refer to the High Court according to law. Mr. K. P. Sarma, learned counsel, in support of his case referred to a number of cases amongst which the following cases may be mentioned : Woolcombers of India Ltd. v. CIT [1982] 134 ITR 219 (Cal) ; CIT v. Sujani Textiles (P.) Ltd. [1985] 151 ITR 653 (Mad) and Indian Metals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals) on appraising the assertion of the assessee as to the adequate funds on hand at the disposal of the assessee and the Revenue failed to establish any correlation between the funds withdrawn from the cash credit and current account and the funds advanced to the subsidiary companies. The Tribunal concurred with the findings and reasoning of the Commissioner of Income-tax (Appeals). The Tribunal also opined that the findings made by the Commissioner of Income-tax (Appeals) were not rebutted by the Revenue with any contrary evidence. The Tribunal, on the other hand, held that the pleas of the assessee was supported by the books of account of the assessee-company. The Tribunal accepted the findings of the Commissioner of Income-tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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