TMI Blog2009 (7) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... y company". 2. The facts of the case on the basis of which the above question has been referred are that the assessee company M/s. Dalmiya Cement (Bharat) Limited manufactures and deals in cement and dead burnt magnesite. Its method of accounting is mercantile and the accounting year for the assessment years 1976-77 and 1977-78 ended on 31.12.1975 and 31.12.1976, respectively. The assessee company had advanced an interest free loan to the tune of Rs.40,00,000/- to its 100% subsidiary company, namely, M/s. Srirangam Investment Company, Limited. The Income Tax Officer (ITO) noted from the accounts that the interest bearing borrowings from banks and public had increased during the year 1976-77 to Rs.1,14,46,904/- and Rs.68,16,000/- against Rs.3,78,797/- and Rs.53,81,000/-, respectively in the immediately preceding previous year. The ITO concluded that the additional loans had been raised by the assessee company to advance loan to its subsidiary company. Accordingly, Assessee Officer disallowed part of the interest amounting to Rs.2,26,973/- in respect of the claim of interest debited by the assessee for the year 1976-77 and Rs 3,70,392 in respect of the assessing year 1977-78. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that the loans which are given to the subsidiary company have been diverted from the loan taken by the assessee company from its bank. The learned counsel further contended that this chart was not disputed by the revenue before the C.I.T. (Appeals) and was also accepted by the I.T.A.T. and duly considered before arriving at its findings of para 11 as stated above. The counsel of the assessee then relied upon the afore-stated para 11 of the judgment of the I.T.A.T which he contended is final, the tribunal being the final fact finding authority. The learned counsel for the assessee has placed strong reliance upon the various decisions; S.A. Builders Ltd. Vs. Commissioner of Income-Tax (Appeals) (2007) ITR 1 (SC), Commissioner of Income Tax Vs. Tin Box Co. (2003) ITR 637(DB,Delhi), K. Ravindranathan Nair Vs. Commissioner of Income Tax, (2001) 247 ITR 178 (SC) Sudarshan Silk Sarees Vs. CIT, (2008)300 ITR 205 to canvass the propositions that firstly the Tribunal is the final fact finding authority and the findings of the Tribunal as recorded in its para 11 of its judgment cannot be challenged by the revenue and secondly the counsel further contended that unless the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes and it should not be held that the loan as given in the ordinary course of business for commercial expediency by the assessee company to the subsidiary company. 6. (i) We may straightway refer to the Supreme Court judgment in S.A. Builders Ltd (Supra). In the said case almost on the similar facts, the High Court had affirming the findings of the ITO and ITAT and disallowed the interest with respect to the loan advanced to the sister concern. The Supreme Court noted this position in its judgment as under : "The High Court held that since it stands established that the amounts of Rs.82 lakhs and Rs.37.85 lakhs had been advanced by the assessee to its sister concern from out of the overdraft account with the bank in which there was already a debit balance, the order of the Tribunal does not suffer from any factual or legal infirmity. Accordingly, the High Court dismissed the appeal" (Placitum 13, Pg 7) (ii). Before the Supreme Court, the issue which arose was whether loan given by the assessee company to its sister concern would disentitle the assessee company from debiting the interest paid to the banks as revenue expediture. The Supreme Court held that the loan was gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at "the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession" has to be allowed as a deduction in computing the income under Section 28 of the Act. In Madhav Prasad Jatia Vs. CIT (1979) 118 ITR 200(SC); AIR 1979 SC 1291, this Court held that the expression " for the purpose of business" occurring under the provision is wider in scope than the expression " for the purpose of earning income, profits or gains", and this has been the consistent view of this Court. 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) as interest free loan. The test, in our opinion, in such a case is really whether this was done as a measure of commercial expediency. In our opinion, the decisions relating to Section 37 of the Act will also be applicable to Section 36(1)(iii) because in Section 37 also the expression used is "for the purpose of business". It has been consistently held in the decisions relating to Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter set out above, the High Court is obliged to proceed upon the findings of fact reached by the Tribunal and to give an answer in law to the question of law that is before it. The only jurisdiction of the High Court in a reference application is to answer the question of law that are placed before it. It is only when a finding of the Tribunal on fact is challenged as being perverse, in the sense set out above, that a question of law can be said to arise." (ii). Similarly, it has been further held in Sudarshan Silks and Sarees Vs. Commissioner of Income-tax (2008)300 ITR 0205 at page 6 of the reporter as under: "In the present case, the question of law referred to the High Court for its opinion was, as to whether the Tribunal was right in upholding the findings of the Commissioner of Income-tax (Appeals) in cancelling the penalty levied under Section 271(1)(c). Question as to perversity of the findings recorded by the Tribunal on facts was neither raised nor referred to the High Court for its opinion. The Tribunal is the final court of fact. The decision of the Tribunal on the facts can be gone into by the High Court in the reference jurisdiction only if a question ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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