2015 (2) TMI 764 - HC - Income Tax

High Court sets aside Tribunal's order on interest-free money, remits for fresh adjudication.

M/s Kishan Chand & Co. Oil Industries Ltd Versus Commissioner of Income Tax, Ludhiana and others

The High Court allowed the appeal, setting aside the Income Tax Appellate Tribunal's order and remitting the matter for fresh adjudication. The Court ... Interest free money advanced to sister concerns - whether occasioned by commercial expediency or not? - Held that:- Perusing the impugned order as well as judgment in S.A.Builders Ltd. v. Commissioner of Income Tax(Appeals) and another(2006 (12) TMI 82 - SUPREME COURT) the question of commercial expediency viz-a-viz. money advanced to sister concerns is required to be considered. The Tribunal has not considered this aspect. Counsel for the parties agree that in this view of the matter, the appeal may be remitted to the Tribunal for adjudication afresh. - Decided in favour of assessee for statistical purposes. Issues:1. Challenge to the order passed by the Income Tax Appellate Tribunal on specific questions of law.2. Legality of addition of specific amounts in the case.3. Determination of commercial expediency regarding interest-free money advanced to the appellant's sister concerns.Analysis:1. The appellant challenged the order dated 10.04.2000, passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', on the legality of specific questions of law. The questions included the sustainability of orders Annexure A-1 and A-3, the addition of specific amounts, and the nexus between interest-bearing funds and money advanced to the appellant's sister concerns.2. The legality of adding Rs. 12,60,500 and Rs. 10,08,789 was questioned, especially regarding the establishment of a nexus between the interest-bearing funds and the money advanced to the appellant's sister concerns. The assessing officer's inability to establish this nexus raised concerns about the sustainability of these additions, particularly in light of the fact that the money with the sister concerns as interest-free loans was not part of the overdraft amount for which interest liability deduction was claimed.3. The issue of commercial expediency concerning the interest-free money advanced to the appellant's sister concerns was crucial. The parties agreed to reframe the question as to whether the money advanced was occasioned by commercial expediency. Referring to a previous judgment, it was agreed that the Tribunal needed to reconsider the commercial expediency aspect in light of the funds provided to sister concerns. The High Court, after considering the impugned order and the relevant judgment, concluded that the Tribunal had not adequately considered the aspect of commercial expediency. Therefore, the appeal was allowed, the Tribunal's order was set aside, and the matter was remitted to the Tribunal for fresh adjudication in accordance with the law.