S.A. Builders Ltd. v. CIT

288 ITR 1Supreme Court of India2007#26 most cited

What is S.A. Builders Ltd. v. CIT authority for?

Interest paid on borrowed funds cannot be disallowed merely because the assessee made interest-free advances, provided those advances were made for business purposes and commercial expediency. The Revenue cannot dictate a businessman's commercial decisions, but the assessee bears the onus to prove the business expediency.

1,484

judgments rely on this decision, according to BharatTax’s citation analysis of 366,470 Indian tax judgments — from 2008 to 2026.

Also referred to as

S.A. Builders Ltd. v. CIT · 288 ITR 1 · Section 36(1)(iii) · commercial expediency · business expediency · interest-free advances · disallowance of interest · onus to prove business purpose · borrowed funds · Revenue interference

Also reported as

158 Taxmann 74158 Taxmann.com 74

Sections most often in play

Section 143(3)Section 36(1)(iii)Section 14ASection 1961Section 148Section 147Section 40(a)(ia)Section 142(1)
Read the full judgment

Issues it is cited on

commercial expediencyinterest free advancessection 36(1)(iii)business expediencydisallowance of interest expendituresection 36(1)section 36revenue expendituresection 37(1)section 37capital expendituresection 14a

Judgments citing S.A. Builders Ltd. v. CIT

ACIT Cen Cir-8, Mumbai vs. M/S. Jindal Drugs Ltd, Mumbai

In the result, appeals filed by the assessee are allowed in part whereas the appeals filed by the Revenue are dismissed

ITA 4342/MUM/2008[2005-2006]Status: DisposedITAT Mumbai29 Oct 2015AY 2005-2006

Bench: Shri R.C. Sharma & Shri Sandeep Gosainassessment Year: - 2005-06 Jindal Drugs Limited Vs. The Asst. Commissioner Of Bakhtawar, 6Th Floor, B&C, Income Tax, Central Circel 229, Nariman Point, – 8 Aaykar Bhavan, Mumbai – 400 021. M.K. Road, Mumbai – 400 020. Appellant Respondent Pan/Gir No. Aaacj1000A Assessment Year: - 2005-06 The Asst. Commissioner Of Vs.` Jindal Drugs Limited Bakhtawar, 6Th Floor, B&C, Income Tax, Central Circel – 8 229, Nariman Point, Old Cgo Bldg, Annexe, Mumbai – 400 021. M.K. Road, Mumbai – 400 020. Pan/Gir No. Aaacj1000A Appellant Respondent Assessment Year: - 2006-07 Jindal Drugs Limited Vs. The Asst. Commissioner Of Bakhtawar, 6Th Floor, Income Tax, Central Circel – 8, B&C, Aaykar Bhavan, 229, Nariman Point, M.K. Road, Mumbai – 400 020. Mumbai – 400 021. Pan/Gir No. Aaacj1000A Appellant Respondent

Section 143(3)Section 14ASection 36(1)(iii)Section 80Section 80I

…unds given to the sister concern on interest free, the interest can be disallowed u/s 36(1)(iii). The decision of the Hon’ble Bombay High Court in the case of Phalton Sugar Works Ltd has been reversed by the Hon’ble Supreme Court in the case of SA Builders in 288 ITR 1 =(2006-TIOL-179-SCIT). The Hon’ble Supreme Court has categorically held that if funds given to the sister concern or its subsidiary for the purpose of own business or their business, then no disallowance can be made u/s 36(1)(iii) as it has to be taken into consideration that those funds are to be treated as used for business purposes. The ratio of…

Jindal Drugs Ltd, Mumbai vs. M/S. ACIT Cen Cir-8, Mumbai

In the result, appeals filed by the assessee are allowed in part whereas the appeals filed by the Revenue are dismissed

ITA 2592/MUM/2008[2005-2006]Status: DisposedITAT Mumbai29 Oct 2015AY 2005-2006

Bench: Shri R.C. Sharma & Shri Sandeep Gosainassessment Year: - 2005-06 Jindal Drugs Limited Vs. The Asst. Commissioner Of Bakhtawar, 6Th Floor, B&C, Income Tax, Central Circel 229, Nariman Point, – 8 Aaykar Bhavan, Mumbai – 400 021. M.K. Road, Mumbai – 400 020. Appellant Respondent Pan/Gir No. Aaacj1000A Assessment Year: - 2005-06 The Asst. Commissioner Of Vs.` Jindal Drugs Limited Bakhtawar, 6Th Floor, B&C, Income Tax, Central Circel – 8 229, Nariman Point, Old Cgo Bldg, Annexe, Mumbai – 400 021. M.K. Road, Mumbai – 400 020. Pan/Gir No. Aaacj1000A Appellant Respondent Assessment Year: - 2006-07 Jindal Drugs Limited Vs. The Asst. Commissioner Of Bakhtawar, 6Th Floor, Income Tax, Central Circel – 8, B&C, Aaykar Bhavan, 229, Nariman Point, M.K. Road, Mumbai – 400 020. Mumbai – 400 021. Pan/Gir No. Aaacj1000A Appellant Respondent

Section 143(3)Section 14ASection 36(1)(iii)Section 80Section 80I

…unds given to the sister concern on interest free, the interest can be disallowed u/s 36(1)(iii). The decision of the Hon’ble Bombay High Court in the case of Phalton Sugar Works Ltd has been reversed by the Hon’ble Supreme Court in the case of SA Builders in 288 ITR 1 =(2006-TIOL-179-SCIT). The Hon’ble Supreme Court has categorically held that if funds given to the sister concern or its subsidiary for the purpose of own business or their business, then no disallowance can be made u/s 36(1)(iii) as it has to be taken into consideration that those funds are to be treated as used for business purposes. The ratio of…

The Swastik Safe Deposits & Invt, Ltd, Mumbai vs. ACIT 7(2), Mumbai

The appeal of the assessee is treated as allowed for statistical purposes

ITA 3545/MUM/2012[1998-99]Status: DisposedITAT Mumbai28 Oct 2015AY 1998-99

Bench: Shri R.C. Sharma & Shri Sanjay Gargassessment Year: 1998-99 M/S. The Swatik Safe Deposits Acit 7(2) & Invt. Ltd., Mumbai 8Th Floor, Piramal Tower, Vs. Ganpatrao Kadam Marg, Lower Parel, Mumbai – 400 013 Pan: Aaact 3608G (Appellant) (Respondent) Present For: Assessee By : Shri Ronak G. Doshi, A.R. Revenue By : Shri Neil Philip, D.R. Date Of Hearing : 28.10.2015 Date Of Pronouncement : 28.10.2015 O R D E R

For Appellant: Shri Ronak G. Doshi, A.RFor Respondent: Shri Neil Philip, D.R

…Mum/2004, dated 19.12.2007. Assessee’s representative submitted, exactly identical issue was remanded back to the file of AO by the Tribunal vide Para 12 of its order, following the decision of the Hon’ble Supreme Court in the case of SA Builders, reported in 288 ITR 1 (SC). 6. Since identical issue has been decided by the Tribunal in assessee’s own case for the year under consideration also we direct the AO to decide the issue afresh as per the direction of the Tribunal for the assessment year 2001-02, contained in Para 12 of the order (cited supra). The appeal by the assessee on this ground is allowed for stat…

M/S. Mafatlal Industries Ltd., Mumbai vs. DCIT Spl. RG. - 20, Mumbai

In the result, appeal of the assessee is partly allowed for statistical purposes

ITA 4597/MUM/2005[1999-2000]Status: DisposedITAT Mumbai21 Oct 2015AY 1999-2000

Bench: Shri D.Karunakara Rao & Shri Sandeep Gosainआयकर अपीऱ सं./I.T.A. No.4597/Mum/2005 (निर्धारण वर्ा / Assessment Year : 1999-2000)

For Appellant: Shri Girish DaveFor Respondent: Shri Shishir Dhamija
Section 35D

…bunal in the assessee’s own case for the assessment years 1991-92 to 1998-99, AY 2003-04 and the Tribunal has restored this issue to the file of AO for fresh adjudication following the precedent laid down by the Hon’ble Apex Court in S.A.Builders, reported in 288 ITR 1(SC). Therefore, this being identical issue, the same view may be taken as taken earlier by this Tribunal. 9. The ld. DR did not object to the plea put forth by the ld.AR. 10. After hearing both the parties and on perusal of the record, we find that the similar issue had come up before this Tribunal in assessee’s own cases in the assessment years…

M/S Elsamex - Tws - Snc Joint Venture, Bangalore vs. CIT, Bangalore

In the result, the appeal for the assessment year 2006-07

ITA 610/BANG/2011[2006-07]Status: DisposedITAT Bangalore09 Oct 2015AY 2006-07

Bench: Shri Vijay Pal Rao & Shri Jason P Boaz & M/S.Elsamex-Tws-Snc Joint Venture, 12Th Floor, S.N.Towers, No.25/2, M.G. Road, Bangalore-560001. … Appellant Pan:Aaaae0553B Vs. 1. Commissioner Of Income-Tax, Bangalore-1, Bangalore. 2. Asst. Commissioner Of Income-Tax, Circle 1(1), Bangalore. … Respondent

For Appellant: Shri A.Shankar, AdvocateFor Respondent: Shri G.R.Reddy, CIT(DR)
Section 143(3)Section 263Section 36(1)(iii)

…t the interest-free advance was given for commercial expediency and availing the facility of bank guarantee from its partner. In support of his contention, the assessee relied upon the decision of the Hon’ble Supreme Court in the case of S.A.Builders vs. CIT (288 ITR 1). 3. Alternatively, the assessee submitted that the disallowance of interest u/s 36(1)(iii) of the Act as proposed was not correct since the amount of Rs.11.5 crores paid as advance to Shri Manohar Shetty was a opening balance which was carried forward from the earlier year and there was no transaction in the previous year relevant to the assessme…

M/S Elsamax - Tws-Snc-Joint Venture, Bangalore vs. ACIT, Bangalore

In the result, the appeal for the assessment year 2006-07

ITA 314/BANG/2011[2007-08]Status: DisposedITAT Bangalore09 Oct 2015AY 2007-08

Bench: Shri Vijay Pal Rao & Shri Jason P Boaz & M/S.Elsamex-Tws-Snc Joint Venture, 12Th Floor, S.N.Towers, No.25/2, M.G. Road, Bangalore-560001. … Appellant Pan:Aaaae0553B Vs. 1. Commissioner Of Income-Tax, Bangalore-1, Bangalore. 2. Asst. Commissioner Of Income-Tax, Circle 1(1), Bangalore. … Respondent

For Appellant: Shri A.Shankar, AdvocateFor Respondent: Shri G.R.Reddy, CIT(DR)
Section 143(3)Section 263Section 36(1)(iii)

…t the interest-free advance was given for commercial expediency and availing the facility of bank guarantee from its partner. In support of his contention, the assessee relied upon the decision of the Hon’ble Supreme Court in the case of S.A.Builders vs. CIT (288 ITR 1). 3. Alternatively, the assessee submitted that the disallowance of interest u/s 36(1)(iii) of the Act as proposed was not correct since the amount of Rs.11.5 crores paid as advance to Shri Manohar Shetty was a opening balance which was carried forward from the earlier year and there was no transaction in the previous year relevant to the assessme…

M/S Vodafone East Ltd.(Formerly Known As Vodafone Essar East Limited), Kolkata vs. A.D.I.T Range - 7, Kol., Kolkata

In the result, the appeal of the revenue in ITA No

ITA 1864/KOL/2012[2009-10]Status: DisposedITAT Kolkata15 Sept 2015AY 2009-10

Bench: Shri Mahavir Singh & Shri M. Balaganesh

Section 143(3)Section 194ISection 40

…ond doubt. The case law relied upon by the Learned AR is very well placed and directly applicable to the facts of the instant case. It is also observed that the case laws relied upon by the Learned DR have been rendered prior to the supreme court judgement in 288 ITR 1 and hence are not considered herein. 5.4. We also hold that the action of the Learned CIT(Appeals) in invoking the provisions of section 14A of the Act is totally misplaced as the income received from the subsidiary, if any, would only be in the nature of interest which is taxable. Admittedly, the provisions of section 14A of the Act could be invo…

M/S Embassy Development Corporation vs. The Assistant Commissioner

The appeals are dismissed

ITA/465/2009HC Karnataka08 Sept 2015

Bench: B.MANOHAR,VINEET SARAN

Section 142(1)Section 143(1)Section 143(2)Section 260Section 43D

…he Tribunal was justified in law in disallowing interest on borrowed loan on the facts and circumstances of the case? 8 (ii) Whether the Tribunal failed in law to apply the ratio of the Apex Court in S.A.Builders Vs. CIT reported in 288 ITR 1(SC) in matter of commercial expediency of appellant on the facts and circumstances of the case? (iii) Whether the Tribunal was justified in law in holding that earning of income is precondition for allowing expenditure under Section 36(iii) of the Act. (iv) Whether the Tribunal was justified in law in not following the decision of Ape…

Brigade Enterprises Ltd, Bangalore vs. Additional Commissioner of Income Tax, Bangalore

In the result, the assessee’s appeal is treated as partly allowed

ITA 1275/BANG/2014[2010-11]Status: DisposedITAT Bangalore08 Jul 2015AY 2010-11

Bench: Smt. P. Madhavi Devi & Shri Abraham P Georgem/S.Brigade Enterprises Ltd., 29Th & 30Th Floor, World Trade Centre, Brigade Gateway Campus, 26/1, Dr.Rajkumar Road, Rajajinagar, Bangalore-560055. … Appellant Pan: Aaacb7459F Vs. Addl. Commissioner Of Income-Tax, Range-11, Bangalore. … Respondent

For Appellant: Shri Padamchand Khincha, CAFor Respondent: Dr. P.K.Srihari, Addl.CIT(DR)
Section 10(35)Section 143(3)Section 14A

…e interest paid by the assessee. The view of the Tribunal is in consonance with the decision of this court in the case of C/Tribunal V Radico Khaitan Ltd. (2005) 274 ITR 354 and of the apex court in the case of S.A. Builders Ltd. V C/Tribunal (Appeals) (2007) 288 ITR 1. That being the position the substantial question of law referred to above is answered in favour of the assessee and against the Revenue and consequently the appeal fails and is dismissed.” ITA Nos.1275 & 1323/Bang/2014 M/s.Brigade Enterprises Ltd., Page 21 of 25 10.5.4 In view of the above and considering the fact that there appears to be no mate…

P.Sundararajan, Avanashi vs. DCIT, Tiruppur

In the result, the appeal of the assessee in ITA No

ITA 1666/CHNY/2013[2006-07]Status: DisposedITAT Chennai25 Jun 2015AY 2006-07

Bench: Shri Chandra Poojari & Shri V. Durga Raoआयकर अपील सं./ I.T.A. No.1666/Mds/2013 ("नधा"रण वष" / Assessment Year : 2006-2007)

For Appellant: Shri. G. Baskar, AdvocateFor Respondent: Shri. N. Madhavan, IRS, JCIT
Section 143(3)Section 147Section 148Section 36

…‘आयकर अपील"य अ"धकरण, ‘डी ’ "यायपीठ, चे"नई IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, CHENNAI "ी चं" पूजार", लेखा सद"य एवं "ी वी. दुगा" राव, "या"यक सद"य के सम" BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER आयकर अपील सं./ I.T.A. No.1666/Mds/2013 ("नधा"रण वष" / Assessment Year : 2006-2007) R. Sundararajan, The Deputy Commissioner of No.39-A, Extension Street, Vs Income Tax, Kaikattipudur, Company Circle, Avinashi 641 654 Tirupur [PAN: AGQPS 1345A] (अपीलाथ"/Appellant) (""यथ"/Respondent) अपीलाथ" क" ओर से / Appellant by : Shri. G. Baskar, Advocate ""यथ" क" ओर से / Respon…

Suresh Linganagowda Patil vs. JCIT

In the result, the assessee's appeal for Assessment Year 2009-10 is dismissed

ITA 1227/BANG/2013[2009-10]Status: DisposedITAT Bangalore20 Mar 2015AY 2009-10

Bench: Shri N.V. Vasudevan & Shri Jason P. Boaz

For Appellant: Smt. Jyothi, AdvocateFor Respondent: Dr. K. Shankar Prasad, JCIT (D.R)
Section 143(1)Section 143(3)

…was advanced at a concessional rate to the firm M/s. Basant Betons on grounds of commercial expediency and business compulsions. In support of this contention, the ld. AR placed reliance on the decision of the Hon'ble Apex Court in the case of S.A. Builders (288 ITR 1). The ld. AR filed written submissions dt.6.1.2015 and also reiterated the submissions put forth before the learned CIT (Appeals) in appellate proceedings and prayed that the assessee's appeal be allowed. 4.4 Per contra, the ld. DR supported the impugned order of the learned CIT (Appeals). The ld. DR submitted that all the contentions put forth by…

DCIT, Chennai vs. Dsm Soft Private Limited, Chennai

In the result, the appeal of the Revenue in ITA

ITA 2059/CHNY/2015[2008-09]Status: DisposedITAT Chennai16 Mar 2015AY 2008-09

Bench: Shri Chandra Poojari & Shri G. Pavan Kumar

For Appellant: Shri. A.B. Koli, IRS, JCITFor Respondent: Ms. Hemalatha, K. ACA
Section 10ASection 143(1)Section 143(3)Section 148

…deleting the disallowance of interest on borrowed capital diverted for giving interest free loans to the group concerns of the assessee and for investment in the equity shares of the assessee's subsidiary company applying the decision of the Supreme Court in 288 ITR 1 without considering the difference in the facts containing in the assessee's case. 3.1 The learned CIT(A) erred in not appreciating the legal fiction created by the clarificatory explanation inserted by the Finance Act, 2012 giving the same retrospective effect from 01.06.1976. The learned CIT(A) ought to have appreciated the intent of the legisla…

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

ITA - 518 / 2013HC Delhi13 Mar 2015
Section 36

…bsence of any other material establishing dubiousness in the transaction, is not warranted. The court here recollects S. A. Builders 2015:DHC:2476-DB ITA Nos.512/2013, 516/2013, 517/2013, 518/2013, 519/2013 & 526/2013 Page 15 v. CIT (Appeals) [2007] 288 ITR 1 (SC) where the views of this Court in Commissioner of Income Tax 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 itself), the Revenue cannot justifiably claim to put itself in the a…

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

ITA - 516 / 2013HC Delhi13 Mar 2015
Section 36

…bsence of any other material establishing dubiousness in the transaction, is not warranted. The court here recollects S. A. Builders 2015:DHC:2476-DB ITA Nos.512/2013, 516/2013, 517/2013, 518/2013, 519/2013 & 526/2013 Page 15 v. CIT (Appeals) [2007] 288 ITR 1 (SC) where the views of this Court in Commissioner of Income Tax 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 itself), the Revenue cannot justifiably claim to put itself in the a…

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

ITA - 512 / 2013HC Delhi13 Mar 2015
Section 36

…bsence of any other material establishing dubiousness in the transaction, is not warranted. The court here recollects S. A. Builders 2015:DHC:2476-DB ITA Nos.512/2013, 516/2013, 517/2013, 518/2013, 519/2013 & 526/2013 Page 15 v. CIT (Appeals) [2007] 288 ITR 1 (SC) where the views of this Court in Commissioner of Income Tax 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 itself), the Revenue cannot justifiably claim to put itself in the a…

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

ITA/518/2013HC Delhi13 Mar 2015
Section 36

…bsence of any other material establishing dubiousness in the transaction, is not warranted. The court here recollects S. A. Builders 2015:DHC:2476-DB ITA Nos.512/2013, 516/2013, 517/2013, 518/2013, 519/2013 & 526/2013 Page 15 v. CIT (Appeals) [2007] 288 ITR 1 (SC) where the views of this Court in Commissioner of Income Tax 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 itself), the Revenue cannot justifiably claim to put itself in the a…

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

ITA/516/2013HC Delhi13 Mar 2015
Section 36

…bsence of any other material establishing dubiousness in the transaction, is not warranted. The court here recollects S. A. Builders 2015:DHC:2476-DB ITA Nos.512/2013, 516/2013, 517/2013, 518/2013, 519/2013 & 526/2013 Page 15 v. CIT (Appeals) [2007] 288 ITR 1 (SC) where the views of this Court in Commissioner of Income Tax 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 itself), the Revenue cannot justifiably claim to put itself in the a…

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

ITA/519/2013HC Delhi13 Mar 2015
Section 36

…bsence of any other material establishing dubiousness in the transaction, is not warranted. The court here recollects S. A. Builders 2015:DHC:2476-DB ITA Nos.512/2013, 516/2013, 517/2013, 518/2013, 519/2013 & 526/2013 Page 15 v. CIT (Appeals) [2007] 288 ITR 1 (SC) where the views of this Court in Commissioner of Income Tax 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 itself), the Revenue cannot justifiably claim to put itself in the a…

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

ITA/526/2013HC Delhi13 Mar 2015
Section 36

…bsence of any other material establishing dubiousness in the transaction, is not warranted. The court here recollects S. A. Builders 2015:DHC:2476-DB ITA Nos.512/2013, 516/2013, 517/2013, 518/2013, 519/2013 & 526/2013 Page 15 v. CIT (Appeals) [2007] 288 ITR 1 (SC) where the views of this Court in Commissioner of Income Tax 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 itself), the Revenue cannot justifiably claim to put itself in the a…

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

ITA/517/2013HC Delhi13 Mar 2015
Section 36

…bsence of any other material establishing dubiousness in the transaction, is not warranted. The court here recollects S. A. Builders 2015:DHC:2476-DB ITA Nos.512/2013, 516/2013, 517/2013, 518/2013, 519/2013 & 526/2013 Page 15 v. CIT (Appeals) [2007] 288 ITR 1 (SC) where the views of this Court in Commissioner of Income Tax 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 itself), the Revenue cannot justifiably claim to put itself in the a…