Somasundaram and Bros. v. CIT

238 ITR 939High Court1999#2163 most cited

What is Somasundaram and Bros. v. CIT authority for?

Interest paid on borrowed funds is not allowable as a deduction under Section 36(1)(iii) of the Income-tax Act to the extent such funds are diverted to provide interest-free advances for non-business purposes, such as to sister concerns or promoter companies.

53

judgments rely on this decision, according to BharatTax’s citation analysis of 366,339 Indian tax judgments — from 2015 to 2025.

Also referred to as

Somasundaram and Bros. v. CIT · 238 ITR 939 Madras · Section 36(1)(iii) Income-tax Act · interest on borrowed capital · interest-free advances · diversion of borrowed funds · non-business purpose disallowance · commercial expediency interest deduction · interest disallowance sister concern · borrowed funds interest-free loan

Sections most often in play

Section 143(3)Section 143(3A)Section 143(3B)Section 246ASection 250Section 253Section 36(1)(iii)Section 801A(iv)

Issues it is cited on

tax recovery officersection 36(1)(ii)interest free advancessection 51section 36(1)(iii)mistake apparent from recordsection 10aacomputer softwarecommercial expediencysection 10asection 36(1)section 36

Judgments citing Somasundaram and Bros. v. CIT

Kuloday Technopack P. Ltd, Mumbai vs. ITO 8(2)(2), Mumbai

In the result, appeal of the assessee in ITA No

ITA 3300/MUM/2013[2009-10]Status: DisposedITAT Mumbai29 Sept 2017AY 2009-10

Bench: Shri Joginder Singh & Shri Ramit Kocharआयकर अपीऱ सं./I.T.A. No. 3300/Mum/2013 (नििाारण वर्ा / Assessment Year : 2009-10 ) आयकर अपीऱ सं./I.T.A. No. 2423/Mum/2014 (नििाारण वर्ा / Assessment Year : 2010-11)

For Appellant: Shri. M. SubramanianFor Respondent: Shri Rajesh Kumar Yadav,DR
Section 143(3)Section 154Section 172Section 172(1)Section 194CSection 195Section 40

…t of it. Accordingly, the assessee will not be entitled to claim deduction of the interest on the borrowings to the extent those are diverted to sister concerns or other persons without interest. K. Somasundaram & Bros.vs. CIT (1999) 153 CTR (Mad) 153: (1999) 238 ITR 939 (Mad), CIT vs. M.S. Venkateswaran (1997) 141 CTR (Mad) 510 : (1996) 222 ITR 163 (Mad), CIT vs. P. Ganu Rao & Sons (1989) 77 CTR (Mad) 28 : (1990) 185 ITR 324 (Mad), CIT vs V.I. Baby & Co. (2002) 174 CTR (Ker) 164 : (2002) 254 ITR 248 (Ker), CIT vs, Motor General Finance Ltd. (2002) 173 CTR (Del) 123 : (2002) 254 ITR 449 (Del), CIT vs. H.R. Sugar…

Briggs Trading Co. P.Ltd, Mumbai vs. ACIT Cir 6(1), Mumbai

In the result, the appeal filed by the revenue is allowed for statistical purposes

ITA 3961/MUM/2011[2007-08]Status: DisposedITAT Mumbai27 Sept 2017AY 2007-08

Bench: Shri B. R. Baskaran, Am & Shri Sandeep Gosain, Jm आयकरअपीलसं./ I.T.A. No. 1911/Mum/2008 (निर्धारणवर्ा / Assessment Year: 2004-05)

Section 14A

…09, 3960 & 4747/Mum/2011 & 3961/Mum/2011 Briggs Trading Company Pvt. Ltd. expenses of Rs. 17,57,77,163/- is therefore treated as expenditure disallowable u/s 14A of the IT Act and subsequently, AO while applying the judgment of K. Somasundram& others Vrs. CIT 238 ITR 939 and made additions, therefore, Ld. CIT(A) had partly allowed the appeal. 18. We have heard the counsels for both the parties at length and after considering the facts of the present case, we have noted that the similar issues was raised in earlier years i.e. AY 2001-02 to 2003-04 and the Hon’ble ITAT in ITA No. 3723/M/05, 3121/M/06, 4683/M/07 and…

DCIT, Chennai vs. Alagumalai Impex P. Ltd., Chennai

In the result, the appeal filed by the Revenue is dismissed and the appeals filed by the assessee for both the assessment years are allowed

ITA 721/CHNY/2014[2008-09]Status: DisposedITAT Chennai11 Jul 2017AY 2008-09

Bench: Shri Chandra Poojari & Shri Duvvuru Rl Reddy

For Appellant: Shri R. Kumar, AdvocateFor Respondent: Shri Supriyo Pal, JCIT
Section 10ASection 10BSection 143(3)Section 14A

…आयकर अपील"य अ"धकरण, ‘‘बी’’ "यायपीठ, चे"नई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI "ी चं" पूजार", लेखा सद"य एवं "ी धु"वु" आर.एल रे"डी, "या"यक सद"य के सम" Before Shri Chandra Poojari, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member I.T.A. Nos. 2911 and 214/Mds/2014 Assessment Years:2007-08 and 2008-09 M/s. Alagumalai Impex Pvt. Ltd., Vs. The Deputy Commissioner of No. 95, New Avadi Road, Income Tax, Company Circle I(1), Kilpauk, Chennai 600 010. Chennai 600 034. [PAN: AADCA6590R] (अपीलाथ" /Appellant) (""यथ"/Respondent) I.T.A. No. 721/Mds/2014 Assessment Year:2008-09 The Deputy Commissione…

Alagumalai Impex Pvt Ltd., Chennai vs. DCIT, Chennai

In the result, the appeal filed by the Revenue is dismissed and the appeals filed by the assessee for both the assessment years are allowed

ITA 2911/CHNY/2014[2007-08]Status: DisposedITAT Chennai11 Jul 2017AY 2007-08

Bench: Shri Chandra Poojari & Shri Duvvuru Rl Reddy

For Appellant: Shri R. Kumar, AdvocateFor Respondent: Shri Supriyo Pal, JCIT
Section 10ASection 10BSection 143(3)Section 14A

…आयकर अपील"य अ"धकरण, ‘‘बी’’ "यायपीठ, चे"नई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI "ी चं" पूजार", लेखा सद"य एवं "ी धु"वु" आर.एल रे"डी, "या"यक सद"य के सम" Before Shri Chandra Poojari, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member I.T.A. Nos. 2911 and 214/Mds/2014 Assessment Years:2007-08 and 2008-09 M/s. Alagumalai Impex Pvt. Ltd., Vs. The Deputy Commissioner of No. 95, New Avadi Road, Income Tax, Company Circle I(1), Kilpauk, Chennai 600 010. Chennai 600 034. [PAN: AADCA6590R] (अपीलाथ" /Appellant) (""यथ"/Respondent) I.T.A. No. 721/Mds/2014 Assessment Year:2008-09 The Deputy Commissione…

M/S. Alagumalai Impex Pvt. Ltd., Chennai vs. DCIT, Chennai

In the result, the appeal filed by the Revenue is dismissed and the appeals filed by the assessee for both the assessment years are allowed

ITA 214/CHNY/2014[2008-09]Status: DisposedITAT Chennai11 Jul 2017AY 2008-09

Bench: Shri Chandra Poojari & Shri Duvvuru Rl Reddy

For Appellant: Shri R. Kumar, AdvocateFor Respondent: Shri Supriyo Pal, JCIT
Section 10ASection 10BSection 143(3)Section 14A

…आयकर अपील"य अ"धकरण, ‘‘बी’’ "यायपीठ, चे"नई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI "ी चं" पूजार", लेखा सद"य एवं "ी धु"वु" आर.एल रे"डी, "या"यक सद"य के सम" Before Shri Chandra Poojari, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member I.T.A. Nos. 2911 and 214/Mds/2014 Assessment Years:2007-08 and 2008-09 M/s. Alagumalai Impex Pvt. Ltd., Vs. The Deputy Commissioner of No. 95, New Avadi Road, Income Tax, Company Circle I(1), Kilpauk, Chennai 600 010. Chennai 600 034. [PAN: AADCA6590R] (अपीलाथ" /Appellant) (""यथ"/Respondent) I.T.A. No. 721/Mds/2014 Assessment Year:2008-09 The Deputy Commissione…

Shroff Textiles Ltd, Mumbai vs. DCIT 8(3), Mumbai

ITA 512/MUM/2016[2011-12]Status: DisposedITAT Mumbai28 Jun 2016AY 2011-12

Bench: Shri Shailendra Kumar Yadav & Shri Rajesh Kumar.

For Appellant: Shri Rajiv Khandelwal &For Respondent: Shri Manjunath Swamy
Section 36(1)(iii)Section 40A(2)Section 40A(2)(b)

…purpose of business and continues as such.? 3. Whether on the facts and in circumstances of the case and in law, the Ld.CIT(A) erred in not following the ratio laid down by the Hon'ble Madras High Court in the case of K. Somasundaram and Bros. vs. CIT(1999) 238 ITR 939. ?" 4. Assessee is a Limited Company engaged in the business of manufacturing of expanded Poly. Foam, Assy Floor Mats and Articles of Plastic. First issue in this appeal is with regards to disallowance of commission payment of Rs. 1,41,21,044/- paid by assessee to M/s Delite International. M/s. Delite International is a proprietary concern of Mr.…

DCIT 11(2)(1), Mumbai vs. Shroff Textiles Ltd, Mumbai

ITA 365/MUM/2016[2011-12]Status: DisposedITAT Mumbai28 Jun 2016AY 2011-12

Bench: Shri Shailendra Kumar Yadav & Shri Rajesh Kumar.

For Appellant: Shri Rajiv Khandelwal &For Respondent: Shri Manjunath Swamy
Section 36(1)(iii)Section 40A(2)Section 40A(2)(b)

…purpose of business and continues as such.? 3. Whether on the facts and in circumstances of the case and in law, the Ld.CIT(A) erred in not following the ratio laid down by the Hon'ble Madras High Court in the case of K. Somasundaram and Bros. vs. CIT(1999) 238 ITR 939. ?" 4. Assessee is a Limited Company engaged in the business of manufacturing of expanded Poly. Foam, Assy Floor Mats and Articles of Plastic. First issue in this appeal is with regards to disallowance of commission payment of Rs. 1,41,21,044/- paid by assessee to M/s Delite International. M/s. Delite International is a proprietary concern of Mr.…

Vil International Ltd., Chennai vs. DCIT, Chennai

In the result, the appeal of the assessee is allowed for

ITA 1467/CHNY/2014[2006-07]Status: DisposedITAT Chennai09 Jun 2016AY 2006-07

Bench: Shri N.R.S. Ganesan & Shri A. Mohan Alankamonyआयकर अपील सं./Ita No.1467/Mds/2014 "नधा"रण वष" / Assessment Year : 2006-07 M/S Vil International Ltd., C/O Shri B.S. Purshotham, The Deputy Commissioner Of Chartered Accountant, V. Income Tax, 23-A, North Boag Road, Company Circle – Iii(4), 3Rd Floor, 3D Pioneer Homes, Chennai - 600 034. T. Nagar, Chennai - 600 017. Pan : Aabcv 2233 L (अपीलाथ"/Appellant) (""यथ"/Respondent)

For Appellant: Shri B.S. Purshotham, CAFor Respondent: Shri K.N. Dhandapani, JCIT
Section 36(1)(iii)

…tal Representative, submitted that the assessee claimed that it had 4 I.T.A. No.1467/Mds/14 sufficient money in the form of capital, reserve and surplus, etc. Placing reliance on the judgement of Madras High Court in K. Somasundaram & Bros. v. CIT (1999) 238 ITR 939, the Ld. D.R. pointed out that if the assessee borrowed funds for the purpose of business or profession, the interest on such borrowed funds can be allowed under Section 36(1)(iii) of the Income-tax Act, 1961 (in short "the Act"). The object of Section 36(1)(iii) of the Act is not to enable the assessee to make a large borrowing and create a l…

Accel Limited, Chennai vs. DCIT, Chennai

In the result, the appeal of the assessee is allowed for 38

ITA 24/CHNY/2015[2009-10]Status: DisposedITAT Chennai20 May 2016AY 2009-10

Bench: Shri Chandra Poojari & Shri G. Pavan Kumar

For Appellant: Shri. S.T. Prabhu, DirectorFor Respondent: Shri. A.V. Sreekanth, IRS, JCIT
Section 143(1)Section 143(2)Section 143(3)Section 148Section 2(22)Section 2(22)(e)

…e Tax (Appeals) considered the submissions and case law at page 6 of his order and the transactions between subsidiary company and assessee company are on commercial expediency and relied on the jurisdictional High Court decision of K. Somasundaram & Bros 238 ITR 939 and dealt exhaustively at page 8 and 9 of order with the reasons for loans and advances provided to subsidiary and the assessee company paying interest to one of the subsidiary company which needs a bank guarantee from the assessee :- 32 -: ITA No. 23, 24, 144 to 147/2015. company on their advances. The ld. Commissioner of Income Tax (Appeals…

Accel Limited, Chennai vs. DCIT, Chennai

In the result, the appeal of the assessee is allowed for 38

ITA 23/CHNY/2015[2005-06]Status: DisposedITAT Chennai20 May 2016AY 2005-06

Bench: Shri Chandra Poojari & Shri G. Pavan Kumar

For Appellant: Shri. S.T. Prabhu, DirectorFor Respondent: Shri. A.V. Sreekanth, IRS, JCIT
Section 143(1)Section 143(2)Section 143(3)Section 148Section 2(22)Section 2(22)(e)

…e Tax (Appeals) considered the submissions and case law at page 6 of his order and the transactions between subsidiary company and assessee company are on commercial expediency and relied on the jurisdictional High Court decision of K. Somasundaram & Bros 238 ITR 939 and dealt exhaustively at page 8 and 9 of order with the reasons for loans and advances provided to subsidiary and the assessee company paying interest to one of the subsidiary company which needs a bank guarantee from the assessee :- 32 -: ITA No. 23, 24, 144 to 147/2015. company on their advances. The ld. Commissioner of Income Tax (Appeals…

DCIT, Chennai vs. Accel Limited, Chennai

In the result, the appeal of the assessee is allowed for 38

ITA 144/CHNY/2015[2002-03]Status: DisposedITAT Chennai20 May 2016AY 2002-03

Bench: Shri Chandra Poojari & Shri G. Pavan Kumar

For Appellant: Shri. S.T. Prabhu, DirectorFor Respondent: Shri. A.V. Sreekanth, IRS, JCIT
Section 143(1)Section 143(2)Section 143(3)Section 148Section 2(22)Section 2(22)(e)

…e Tax (Appeals) considered the submissions and case law at page 6 of his order and the transactions between subsidiary company and assessee company are on commercial expediency and relied on the jurisdictional High Court decision of K. Somasundaram & Bros 238 ITR 939 and dealt exhaustively at page 8 and 9 of order with the reasons for loans and advances provided to subsidiary and the assessee company paying interest to one of the subsidiary company which needs a bank guarantee from the assessee :- 32 -: ITA No. 23, 24, 144 to 147/2015. company on their advances. The ld. Commissioner of Income Tax (Appeals…

Arumugam Murukiah, Chennai vs. ACIT, Chennai

In the result, the appeal of the assessee in ITA

ITA 1733/CHNY/2015[2007-08]Status: DisposedITAT Chennai14 Jan 2016AY 2007-08

Bench: Shri Chandra Poojari & Shri G. Pavan Kumar

For Appellant: Shri. V.S. Jayakumar, AdvFor Respondent: Shri. A.B. Koli, IRS, JCIT
Section 143(1)Section 143(3)Section 148

…tax, TDS deducted, investment in sister concern advance for purchase and staff advanc. On the basis of the submission of the assessee the Assessing Officer relied on the decision of Jurisdictional High Court in the case of K. Samasundaram Brothers vs. CIT 238 ITR 939 under the presumption that the assessee had to first utilize the fund for repayment of loan and balance of excess funds should be given for interest free loan. With this finding, the ld.AO disallowed interest amount of "3,93,752/- and passed order 143(3) r.w.s 147 of the Act dated 21.03.2013. Aggrieved by the order of the Assessing Officer, th…

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

…nstitutions would be giving loan to its subsidiary companies and that too when it pays a heavy interest to its lenders, it would claim no or little interest from its subsidiaries. 14. In the case of K. Somasundaram and Brothers v. Commissioner of Income-Tax 238 ITR 939, while dealing with a similar proposition, Madras High Court held as under (page 944): The amount so lent, according to the assessee, came out of the contract earnings. The amount borrowed, according to the assessee was invested in the execution of the contracts. It is clear, therefore, that the assessee had invested the borrowed funds in the e…