Section 153A(1)(b) of the Income Tax Act
The decision most relied on for Section 153A(1)(b) is CIT v. Bharti Televenture Ltd. (331 ITR 502), cited in 89 of the 65 judgments on BharatTax that turn on this section.
Leading authorities on Section 153A(1)(b)
Interest expenditure cannot be disallowed under Section 36(1)(iii) for interest-free advances made to subsidiaries or group companies if the advances are from owned funds or are justified by commercial expediency.
When an assessee borrows capital and diverts funds, often interest-free, to a sister concern or related party, the interest paid on such borrowed capital may not be deductible under Section 36(1)(iii) if commercial expediency for the assessee's own business is not established. The burden is on the assessee to prove that the borrowed funds were used for its own business purposes.
Where an assessee claims that investments were made from their own non-interest bearing funds, the onus is on them to establish this, particularly when funds are mixed.
A contrary Tribunal order is superseded by a High Court's view which was subsequently followed by another Tribunal bench.
This case is cited for the proposition that when an AO issues a notice under section 153A(1)(b), it is mandatory to produce the relevant books of accounts and documents for assessment, even if the assessment is being done under section 143(3).
Prior period expenses are allowable expenditures if not rebutted by the revenue and confirmed by the CIT(A).
Interest on borrowed funds is not deductible to the extent funds are diverted for non-business purposes, even if the diversion is not illegal but contrary to public policy or government policy. The court considers the reality that borrowings would have been less without such diversions.
Prior period expenditure crystallizes during the year and is allowable when the necessary bills are received, even if after the close of the accounting period.
Additions of unexplained investments and consequential estimation of income cannot be sustained if made on suspicion without corroborating evidence.
Judgments on Section 153A(1)(b)
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