TaxTMI 
TaxTMI 
2004 (7) TMI 19
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....arh (for short "the Tribunal"), dated October 26, 2003, whereby disallowances of Rs. 10,95,000 and Rs. 15,00,000 on account of lease rent paid to M/s. I.C.S.L. (Haryana) Limited, a sister concern of the appellant, made by the Assessing Officer in two assessment years 1993-94 and 1994-95, respectively, have been sustained. The lease rent has been paid at the rate of Rs. 1,25,000 per month for land and building and at the rate of Rs. 25,000 per month for plant and machinery. During the course of assessment proceedings, the Assessing Officer found that the assets, on which lease rent had been paid, earlier belonged to the assessee. The same were sold by it to its sister concern on October 10, 1991, for a consideration of Rs. 45,35,491 and, ....
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....was disallowed. On appeal by the assessee, the Commissioner of Income-tax (Appeals) deleted the disallowances on the ground that the conclusions drawn by the Assessing Officer were merely conjectural and that the Assessing Officer had failed to consider the fact that the losses suffered by the assessee were far in excess of lease money paid by it. He also observed that the interest-free loan had subsequently been received back by the assessee in March, 1993. Aggrieved by the orders of the Commissioner of Income-tax (Appeals), the Revenue preferred appeals before the Tribunal. The Tribunal vide the impugned orders has allowed the appeals of the Revenue on this issue and restored the disallowances made by the Assessing Officer. The relevan....
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.... from whom it received a sum of Rs. 45,35,451 as sale price of the assets, so, that business of M/s. ICLS Ltd. gets running smoothly, also does not seem to have any force because in that case the assessee could have simply advanced the interest free loan to M/s. ICLS Ltd. instead of entering into this transaction of selling the land, building and machinery to ICLS Ltd. and then taking back the same on lease at a monthly rent of Rs. 1.50 lakhs. Had this transaction been genuine and genuinely entered wholly and exclusively for the purpose of the business either of the assessee or of ICLS Ltd., there was no need of entering into such type of sale, lease agreement and then in advancing interest-free loan to M/s. ICLS Ltd., and more so when no b....
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....ncern, without doing any business from the assets purchased from the assessee, earned monthly rent of Rs. 1.50 lakhs and an interest-free loan of Rs. 50 lakhs and at the same time, the assessee got the benefit of diverting its profits to its sister concern. The learned Commissioner of Income-tax (Appeals) in his order has failed on considering all the abovementioned aspects and also failed in his duty in properly appreciating the facts and thereafter in analysing the same whether this entire transaction was genuine or ingenuine but he simply seems to be carried away by the plea of the assessee that this entire transaction has been entered into by the assessee with ICLS Ltd., with a view to reduce its losses. He also failed in his duty not c....
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....37(1) in association with expression for the purpose of is a word of one commutation. In the context of taxing statute the word business would signify continued commercial activity which is carried on with the end in view of making and earning profits. Therefore, under section 37(1) of the Income-tax Act, connection has to be established between the expenditure incurred and the activity undertaken by the assessee with such object which is wanting in the present case of the assessee. 28. Accordingly, the order of the Commissioner of Income-tax (Appeals) in deleting the addition of Rs. 10,95,000 is reversed and the order of the Assessing Officer in making addition for the assessment year 1993-94 is restored. Ground No. 6 taken by the Reven....