TaxTMI 
TaxTMI 
TaxTMI 
1983 (4) TMI 105
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.... Out of the borrowed funds, the assessee had advanced moneys to a concern by the name of M.P. Spinning & Weaving Mills P. Ltd. in which the directors of the assessee-company were interested, i.e., they were directors in the M.P. Spinning & Weaving Mills P. Ltd. The ITO found that the account of M.P. Spinning & Weaving Pvt. Ltd. in the books of the assessee was as under: Month Date Particulars V. No CBF. No Amount April 1 To Bal b/f . . 762000 Aug. 10 To Bank 503 67 30000 Aug. 25 To Bank 566 74 25000 Sept. 8 To Bank 618 81 26000 Sept. 11 To Bank 629 82 60000 Jan. 29 To Bank 1191 156 40000 Feb. 5 To Bank J/18 J/62 16000 Feb. 11 To Bank J/19 J/64 37000 Feb. 15 To Bank J/19 J/66 36000 ....
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....ssessee's own business and the interest there on should, therefore have been allowed under the IT Act. After considering the submission made on behalf of the assessee, the CIT(A) referred to the Mysore High Court decision in the case of CIT vs. United Breweries (1973) 89 ITR 17 (Mys) where it has been held that if a part of the borrowed capital was given as advance to a subsidiary concern free of interest, such interest could not be held to be for the purposes of the business of the company unless the business of the principal company and that of the subsidiary are one and the same. The CIT(A) was of the opinion that since in the instant case the relationship between the assessee and the associate concern was not that of the principal compa....
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....the year, such as the net profit, depreciation fund, sale proceeds of the investment, increase in the secured loans and its application by way of repayment of unsecured loans, increase in the working capital and dividends for the year, It was submitted that the assessee had advanced the funds from its own resources. Reference was also made to the a ITAT decision in I.T.A. No. 1490 (Bom) 81 decided on 24th December, 1982, wherein, we are told, in similar circumstances, the Tribunal held that no disallowance could be made in respect of the interest on borrowed funds. Reference was also made to the Bombay High Court decision in the case of CIT vs. Kishinchand Chellaram (1977) 109 ITR 569 (Bom). It was further submitted that the moneys, in resp....
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....f manufacturing yarn for supplying to the assessee, in our opinion, the Mysore High Court decision in the case of CIT vs. United Breweries (1973) 89 ITR 17 (Mys) is a perfect answer for the assessee's argument on this ground. Further, as to the argument on the basis of the decision of the Bombay High Court in the case of Kishinchand Chellaram the facts of the Bombay case are entirely distinguishable. In the Bombay case, the moneys were received by the assessee initially for the purposes of its own business. Thereafter, the assessee diverted the moneys for non-business purposes. Such is not the case here. The moneys have been borrowed exclusively for the purpose of advancing them to the M.P. Spinning & Weaving Mills P. Ltd. In the circumstan....
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....s amount. The balance of the disallowance is hereby vacated. 7. The next ground in appeal is concerning the assessee's claim for deduction u/s 80J. The assessee had claimed relief on the basis of the Calcutta High Court decisions in the case of Century Enka Ltd. vs. ITO (1977) 107 ITR 123 (Cal) and 1977 CTR (Cal) 433 : (1977) 107 ITR 909 (Cal). The ITO, however, worked out this relief on the basis of the net assets, viz., gross assets employed in the undertaking less the debts and borrowings as on the first day of the computation period. The CIT(A) upheld it in light of the amendment made to s. 80J of the IT Act by the Finance (No. 2) Act of 1980. The assessee is in appear before us on this issue. Since we find that the order of the CIT(A)....