COMMISSIONER OF INCOME TAX, RAIPUR vs. M/S SYNDICATE ENGG.COMP.BHILAI P.LTD

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ITA/54/2003HC ChhattisgarhCGHC01007766200318 February 2013Author: HON'BLE THE CHIEF JUSTICE,HON'BLE SHRI JUSTICE PRITINKER DIWAKER3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal, after considering the sources of funds available with the assessee and the amount of loans taken, had recorded a finding of fact that the loans taken by the assessee were for business purposes and the interest paid on such borrowed funds was incurred wholly and exclusively for the purposes of its business. The Court found that no substantial question of law arose from the Tribunal's order. Therefore, the appeal filed by the Revenue was dismissed. The operative direction was the dismissal of the appeal. No issue was expressly left undecided.

What were the facts?

The assessee, M/s Syndicate Engineering Company Private Limited, Bhilai, took bank loans of ₹24,74,382/- during assessment years 1995-96 and 1996-97. In the same years, it advanced ₹9,47,464/- as interest-free loans to a sister concern. The assessee claimed deduction for interest expenditure on bank loans amounting to ₹1,70,543/- and ₹1,57,375/-, which was disallowed by the assessing officer. The Commissioner of Income Tax (Appeals) dismissed the assessee's appeals on January 12, 2001. The assessee then filed further appeals (ITA Nos. 157 and 158/Nag/2001) before the Income Tax Appellate Tribunal, Nagpur Bench, which were allowed on March 10, 2003. The Revenue has filed the present appeal under Section 260A of the Income Tax Act, 1961.

What were the issues?

1. Whether the Tribunal erred in allowing the deduction of interest expenditure when the assessee had advanced interest-free loans to its sister concern, thereby raising a question of law or mixed law and fact concerning the allowability of interest expenditure under Section 36(1)(iii) of the Income Tax Act, 1961. Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the Tribunal's decision, which was upheld by the High Court, implies that the assessee argued that the interest paid on borrowed funds was for business purposes. Revenue's Contention: The Revenue contended that the Tribunal erred in allowing the deduction of interest expenditure. The Revenue likely argued that the advancement of interest-free loans to a sister concern indicated that the borrowed funds were not used wholly and exclusively for the business purposes of the assessee, or that there was a diversion of funds that should have been used to offset the interest liability.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
u ‘ ‘ Commissioner of Income (/Tax, VERSUS RESPONDENT M “ l Estae, t Bhilai, Dist. // APPEAL UNDER SECTION 2 OA OF INCOME TAX ACT 1961 1 T Agb/ OF 2003 Nand1n1 Road, Durg N THE mGH COURT OF JUDICATURE AT BILASP f 3‘ (CHHATTISGARH) Raipur [C. G] /s Syndicate Engg. Co. Cw [Bhilai]P.Ltd.,6iindustria [c.G} 1 UR and ?24 45 768I— In the assessment years Il ?14,30,743/- as interest free loans to its sister-concern. II 2 Subsequently, on the loans taken by the Assessee from the bank It clalmed deduction of the Interest to the tune of ?1 70 543l— and ?1 ,57,375/—, expenditure. This was dls—aliowed by the assessmg offcer. ‘I i 3 The Assessee fled appeals which were dismissed by the CommISSIoner of Income Tax (Appeals) {the CIT(A)} on 12 01 2001 The Assessee flied further appeals namely,,lTA 157 and 158/Nag/2001 before the Income Tax Appellate Tribunal’ Nagpur Bench Nagpur (the Tribunal). 1 HIGH COURT OF CHHATTISGARH AT BILASPUR DIVISION BENCH CORAM: HON BLE SHRI YATINDRA SINGH C J HON BLE SHRI PRITINKER DIWAKER J ITA No. 54 of 2003 . y Commissione‘l of Income Tax, Raipur C.G. VER$U$ M/s Syndicate h’ E’ngg. (Bhilai) Co. P. Ltd. I Appeal under Section 260A of lr’Icome Tax Act, 1961 Appearance: Shrl Anand Dadarla co‘unsel for the appellant Shrl PS Koshy, counsel for the respondent Appellant Respondent l} (I JUDGEMEN1 (1 9‘“ February, 201 3) 1. M/s Syndicate Engineering Company Private Limited Bhllal (the l Assessee) had taken loans from the ban to the extent of ?24 74 382/- 1995 96 and 1996 97 In the “same years, the Assessee had given loan of ?9,47,464/— and In the relevant assessment years as a busmess 4. The aforesaid appeals were aowe on 10.03.2003. ence, the present appeal by the Income Tax Department (the Department). 5. We have heard counsel for the parties. :1 I lld H 'I /% ‘ x 2 l ‘ 6. The Assessee had filed two appeals bgfore the Tribunal. They were heard together and consolidated judgement was given. This does not mean that only single appeal could be Wed against the

order. The ‘ Department ought to have flied two apbeais against the said order. However, we do not wish to decide this a‘ppeal on this technical ground and proceed to decide the appeal on merits. [i

7.

The Tribunal after considering the sou'rices of the funds available with the Assessee and the amount of: loanértaken by the'Assessee has recorded a finding that-the loantaken by thesAssessee was for the business purpose and the interest paid§ on such borrowed fund was incurred‘wholly and exclusively for the purposes of its business. This is a finding of factJ‘No substantial question of i'aw'rarises in this appeal. : , , subbu

8.

The appeal has no merit. It is dismissed. . \\ l . l- i Pritinker Diwaker Chief Justice 3* l Judge /j /\

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