Phaltan Sugar Works Ltd. v. CIT

215 ITR 582High Court1995#2364 most cited

What is Phaltan Sugar Works Ltd. v. CIT authority for?

Interest on borrowed capital used for purposes not directly related to the assessee's immediate business, such as providing interest-free advances or investing in a subsidiary's shares, is not deductible under Section 36(1)(iii) due to a restrictive interpretation of "for the purposes of business."

49

judgments rely on this decision, according to BharatTax’s citation analysis of 366,005 Indian tax judgments — from 2006 to 2025.

Also referred to as

Phaltan Sugar Works Ltd. v. CIT · 215 ITR 582 · Section 36(1)(iii) · interest on borrowed capital · disallowance of interest · commercial expediency · interest free advances · investment in subsidiary · for purposes of business · limited interpretation · overruled decision

Sections most often in play

Section 36(1)(iii)Section 1961Section 68Section 143(3)Section 194(I)(b)Section 24Section 37Section 115BBE

Issues it is cited on

section 40(a)(2)(b)section 36(1)(ii)interest free advancessection 36(1)(iii)commercial expediencycolourable devicebusiness connectionsection 36(1)section 36disallowance of interest expenditureput to useunabsorbed depreciation

Judgments citing Phaltan Sugar Works Ltd. v. CIT

Commissioner of Income Tax (C) -III vs. M/s Dd Industries Ltd

ITA/519/2013HC Delhi13 Mar 2015
Section 36

…13 sister concern, but that is not relevant. What is relevant is whether the assessee advanced such amount to its sister concern as a measure of commercial expediency? The law laid down by the Bombay High Court in Phaltan Sugar Works Ltd. v. CIT [1995] 215 ITR 582 was overruled whereas that of the Delhi High Court in CIT v. Dalmia Cement (B.) Ltd. [2002] 254 ITR 377 was approved. It was further held that it all depends on the facts and circumstance of the case as to whether the directors of the sister concern utilized the amount advanced to it by the assessee for their personal benefit, which obviousl…

Commissioner of Income Tax (C) -III vs. M/s Dd Industries Ltd

ITA/526/2013HC Delhi13 Mar 2015
Section 36

…13 sister concern, but that is not relevant. What is relevant is whether the assessee advanced such amount to its sister concern as a measure of commercial expediency? The law laid down by the Bombay High Court in Phaltan Sugar Works Ltd. v. CIT [1995] 215 ITR 582 was overruled whereas that of the Delhi High Court in CIT v. Dalmia Cement (B.) Ltd. [2002] 254 ITR 377 was approved. It was further held that it all depends on the facts and circumstance of the case as to whether the directors of the sister concern utilized the amount advanced to it by the assessee for their personal benefit, which obviousl…

Commissioner of Income Tax (C) -III vs. M/s Dd Industries Ltd

ITA/517/2013HC Delhi13 Mar 2015
Section 36

…13 sister concern, but that is not relevant. What is relevant is whether the assessee advanced such amount to its sister concern as a measure of commercial expediency? The law laid down by the Bombay High Court in Phaltan Sugar Works Ltd. v. CIT [1995] 215 ITR 582 was overruled whereas that of the Delhi High Court in CIT v. Dalmia Cement (B.) Ltd. [2002] 254 ITR 377 was approved. It was further held that it all depends on the facts and circumstance of the case as to whether the directors of the sister concern utilized the amount advanced to it by the assessee for their personal benefit, which obviousl…

Commissioner of Income Tax (C) -III vs. M/s Dd Industries Ltd

ITA/512/2013HC Delhi13 Mar 2015
Section 36

…13 sister concern, but that is not relevant. What is relevant is whether the assessee advanced such amount to its sister concern as a measure of commercial expediency? The law laid down by the Bombay High Court in Phaltan Sugar Works Ltd. v. CIT [1995] 215 ITR 582 was overruled whereas that of the Delhi High Court in CIT v. Dalmia Cement (B.) Ltd. [2002] 254 ITR 377 was approved. It was further held that it all depends on the facts and circumstance of the case as to whether the directors of the sister concern utilized the amount advanced to it by the assessee for their personal benefit, which obviousl…

The Commissioner of Income Tax - Central vs. M/s. Himagiri Biotech Pvt. Ltd

ITTA/526/2013HC Telangana30 Oct 2013

Commissioner of Income Tax Delhi IV vs. Agra Beverages Corporation P. Ltd

ITA - 966 / 2009HC Delhi25 Jan 2011
Section 37Section 37(1)

…rt in **Dalmia Cement** (supra) has been approved by the Supreme Court in the case of **S.A. Builders Ltd.** Vs. **CIT**, [2008] 288 ITR 1 in the following words:- "Similarly, the view taken by the Bombay High Court in Phaltan Sugar Works Ltd. Vs. CIT [1995] 215 ITR 582 also does not appear to be correct. We agree with the view taken by the Delhi High Court in CIT V. Dalmia Cement (B) Ltd. [2002] 254 ITR 377 that once it is established that there was nexus between the expenditure and the purpose of the business which need not necessarily be the business of the assessee e itself), the Revenue cannot justifiably…

Commissioner of Income Tax vs. Bharti Televenture Ltd

ITA - 1340 / 2010HC Delhi03 Jan 2011
Section 260ASection 36(1)(iii)

…an to the sister concern, but that is not relevant. What is relevant is whether the assessee advanced such amount to its sister concern as a measure of commercial expediency? The law laid down by the Bombay High Court in Phaltan Sugar Works Ltd. v. CIT (1995) 215 ITR 582 was overruled whereas that of Delhi High Court in CIT v. Dalmia Cement (B.) Ltd. (2002) 254 ITR 377 was approved. It was further held that it all depends on the facts and circumstance of the case as to whether the directors of the sister concern utilized the amount advanced to it by the assessee for their personal benefit, which obviously could n…

Commissioner of Income Tax vs. Bharti Televenture Ltd

ITA - 1339 / 2010HC Delhi03 Jan 2011
Section 260ASection 36(1)(iii)

…an to the sister concern, but that is not relevant. What is relevant is whether the assessee advanced such amount to its sister concern as a measure of commercial expediency? The law laid down by the Bombay High Court in Phaltan Sugar Works Ltd. v. CIT (1995) 215 ITR 582 was overruled whereas that of Delhi High Court in CIT v. Dalmia Cement (B.) Ltd. (2002) 254 ITR 377 was approved. It was further held that it all depends on the facts and circumstance of the case as to whether the director s of the sister concern utilized the amount advanced to it by the assessee for their personal benefit, which obviously could…

S.A. Builders Ltd vs. Commnr. of Income Tax, Chandigarh

C.A. No.-005811-005811 - 2006Supreme Court14 Dec 2006
For Respondent: Commissioner of Income Tax (Appeals) Chandigarh & Anr. .. Res
Section 154

…mmercial expediency is the correct view, and the view taken by the Bombay High Court which set aside the aforesaid decision is not correct. Similarly, the view taken by the Bombay High Court in Phaltan Sugar Works Ltd. vs. Commissioner of Wealth-Tax (1995) 215 ITR 582 also does not appear to be correct. We agree with the view taken by the Delhi High Court in CIT vs. Dalmia Cement (Bhart) Ltd. (2002) 254 ITR 377 that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot just…