2016 (8) TMI 154

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.... 1999-00, 2001-02 and 2002-03 respectively, the revenue has preferred the present Tax Appeals. 2. The main issue involved in the consideration of these appeals is as to whether the Tribunal is right in law and on facts in confirming the order passed by CIT(A) in deleting the addition made on account of disallowance of interest relating to the borrowed funds which is diverted to the sister concern, without charging interest. 3. The Tribunal had dismissed the appeals filed by the revenue against the decision of CIT(A) deleting additions made on account of disallowance of interest relating to the borrowed funds diverted to the sister concern without charging interest. Being aggrieved and dissatisfied with the impugned judgment and order ....

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....f a component required for company's products, acquisition of facilities by way of office buildings etc and research and development work for company's products. 4.2 Mr. Mehta submitted that the CIT(A) as well as the Tribunal have committed an error in deleting the disallowance based on the assessment year 1996-97. He submitted that the Tribunal has erred in relying on the decision of the Apex Court in the case of Munjal Sales Corp. vs. Commissioner of Income Tax reported in [2008] 298 ITR 298 (SC) in view of the fact that the facts of the case of the assessee are not identical to the facts of the case relied upon by the Tribunal. 5. Mr. S.N. Soparkar, learned Senior Counsel appearing with Mr. B.S. Soparkar, learned advocate on behalf....

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....thorities below on the aforesaid question was not correct. xxx In our opinion, the High Court in the impugned judgment, as well as the Tribunal and the Income Tax Authorities have approached the matter from an erroneous angle. In the present case, the assessee borrowed the fund from the bank and lent some of it to its sister concern (a subsidiary) on interest free loan. The test, in our opinion, in such a case is really whether this was done as a measure of commercial expediency. xxx The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is al....