TaxTMI 
TaxTMI 
2005 (4) TMI 32
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....ear 1984-85. Briefly stated the facts giving rise to the present reference are as follows: The respondent-assessee has been assessed to income-tax in the status of a company. During the assessment year under consideration, it had advanced a sum of Rs. 37,47,583 to its sister concern, namely, M/s. Prem Engineering Works P. Ltd. on various dates. Whereas the services provided by the said sister concern for job work came to the extent of Rs. 21,58,191. The respondent-assessee had also an opening debit balance of Rs. 30,34,337 in the name of the sister concern. The Assessing Officer was of the view that the respondent-assessee having paid interest on overdraft facilities, it should not make any interest-free advances to its sister concern and....
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....hya Pradesh High Court in the case of D & H Secheron Electrodes P. Ltd. v. CIT reported in [1984] 149 ITR 400, where the facts of the case were that the Income-tax Officer disallowed part of the interest paid by the assessee on the capital borrowed by it for the purpose of its business on the ground that the assessee has given advances to some concerns without charging interest and this was upheld by the Commissioner of Income-tax (Appeals) and the Tribunal. On reference, the hon'ble Madhya Pradesh High Court held that the disallowance of part of the interest was not justified. It is interesting to note that the appellant has given similar interest-free advances to similar other parties who are doing the same job work/supply of machinery or....
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....000 Total Rs. 50,00,000 If at all it is to be considered that the assessee has interest-free advances to its sister concern, reasonable presumption that when the assessee has its own capital and interest-free advances, the same could have been utilized in the said non-business advances. It cannot, therefore, be presumed that the assessee has, made interest-free advances out of funds borrowed from the bank on which interest has been paid. The overdraft from the bank has been clearly taken for working the capital which has been totally used for the assessee's business." From the perusal of the reply reproduced above, we find that the respondent-assessee had sufficient amount of money towards share capital, surplus and reserve as also inte....