TaxTMI 
TaxTMI 
2006 (12) TMI 499
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....ht in law in deleting the addition made on account of interest on interest-free loans advanced by the assessee company to its subsidiary and associate companies in which the directors were interested ? (ii) Whether, on the facts and circumstances of the case, the Tribunal was right in law in deleting the addition made on account of interest on investment in shares by the assessee company in its subsidiary and associate companies ? (iii) Whether, on the facts and circumstances of the case, the Tribunal was right in law in allowing the fees paid by the assessee company to the Punjab Pollution Board, Patiala in the year of payment even though the payment resulted in enduring benefit to the assessee company for the period of 15 years ? 2. ....
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....aced on judgments of Madras High Court in CIT v. Hotel Savera [1999] 239 ITR 795(Mad) and Madhya Pradesh High Court in D&H Secheron Electrodes (P) Ltd. [1983] 142 ITR 528(MP) 4. We have heard learned Counsel for the parties and perused the record. 5. The findings on the substantial question raised are as under: Re. Question No. (i): Learned Counsel for the assessee submits that the Tribunal has followed its own decision in the case of the assessee for the earlier assessment years, which view has also been upheld by this Court vide order dt. 28th March, 2006 in ITA No. 88 of 2004, CIT v. Industrial Cables (P) Ltd. on the ground that the Tribunal had only followed its view in the case of the assessee, which had become final. Learned Co....
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....d, in our view, the stand of the assessee that the onus of proving the nexus of funds available with the assessee with the funds advanced to the sister-concerns without interest is on the Revenue is not correct. Section 36(1)(iii) of the Act provides for deductions of interest on the loans raised for business purposes. Once the assessee claims any such deduction in the books of accounts, the onus will be on the assessee to satisfy the AO that whatever loans were raised by the assessee, the same were used for business purposes. If in the process of examination of genuineness of such a deduction, it transpires that the assessee had advanced certain funds to sister-concerns or any other person without any interest, there would be very heavy on....
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.... business or to be invested in a manner in which it generates income and not that it is diverted towards sister-concern free of interest. This would result in not presenting true and correct picture of the accounts of the assessee as at the cost being incurred by the assessee, the sister-concern would be enjoying the benefits thereof. It cannot possibly be held that the funds to the extent diverted to sister-concerns or other persons free of interest were required by the assessee for the purpose of its business and loans to that extent were required to be raised. We do not subscribe to the theory of direct nexus of the funds between borrowings of the funds and diversion thereof for non-business purposes. Rather, there should be nexus of use....
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.... 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. We may notice that although the principle of consistency is applicable and the decision on the issue having been taken in favour of the assessee for the previous year, the same has to be followed, but each assessment year being an independent one, in view of conscious judgment of this Court on the issue after referring to other judgments and in absence of any direct judgment of the Hon'ble Supreme Court, we are of the view that the earlier order of this Court dismissing appeal of the Revenue in limine cannot be taken to be conclusive. Reference may be made to the law laid do....
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....ad been made by the assessee and there was no change in the facts. Thus, following the principle of consistency, as reiterated by the Hon'ble Supreme Court in Radhasoami Satsang v. CIT [1992] 193 ITR 321(SC), the question is answered against the Revenue and in favour of the assessee. Re. Question No. (iii): 7. The Tribunal held in para 32 of its own decision that the assessee having incurred the liability in the year in question and mere fact that certificate was valid for 15 years, did not justify spreading over its expenditure. Learned Counsel for the assessee defended the finding recorded by referring to judgment of the Hon'ble Supreme Court inter alia in CIT v. Associated Cement Companies Ltd.: [1988] 172 ITR 257(SC) , wherei....