TaxTMI 
TaxTMI 
2020 (1) TMI 1040
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.... (hereinafter referred to as 'the Act', for short) which was admitted by a Bench of this Court by an order dated 20.04.2010 on the following substantial questions of law: a) Whether in law, the Tribunal is justified in ignoring the fact that the expenditure on borrowals was a business expenditure in as much as the same had been incurred during the course and for the purpose of business of the Appellant? b) Whether in law, the Tribunal is justified in rejecting the claim under Section 36(1)(iii) of the Appellant towards the payment of interest on borrowing when the genuineness of such borrowings and the utilization of such amounts in the business is not disputed? c) Whether in law, the Tribunal is justified in conf....
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....ood Pvt. Ltd. Being aggrieved, the appellant preferred an appeal before the Commissioner of Income Tax (Appeals) which was dismissed by an order dated 30.03.2009. The Appellate Authority, inter alia, held that the letter of credit was obtained allowing the sister concern to enjoy higher income which was subjected to deduction under Section 80HHC of the Act. Being aggrieved, the petitioner preferred an appeal before the Income Tax Appellate Tribunal. The order passed by the Commissioner of Income Tax (Appeals) has been upheld by the Tribunal. In the aforesaid factual background, this appeal has been filed. 4. Learned counsel for the appellant, while inviting the attention of this Court to Section 36(1)(iii) of the Act, submitted that in o....
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....her hand, learned counsel for the revenue has taken us through the order of assessment, order passed by the Commissioner of Income Tax (Appeals) as well as the order passed by the Tribunal and has submitted that cogent reasons have been assigned by the Tribunal for disallowing the benefit to the appellant as claimed by it. It is also submitted that in fact the substantial questions of law framed by this Court do not arise for consideration in this appeal. 6. We have considered the submissions made by the learned counsel for the parties and have perused the record. From perusal of Section 36(1)(iii) of the Act, it is evident that 3 conditions have to be complied with namely, money must have been borrowed by the assessee, it must have been....
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....de to reduce the interest burden on the sister concern. The Commissioner of Income Tax (Appeals) has upheld the aforesaid finding and has held that the assessee has tried to give the whole arrangement a colour of business expediency falling within the purpose and nexus to business. But on a close scrutiny, it is evident that it is nothing but shouldering the interest burden on itself, thereby diverting the benefit in favour of the sister concern. It has further been held that where the borrowing is illusory or colourable, the interest paid on such borrowings is not allowable. Reference has been made to the decision of the Supreme Court in the case of 'MC DWELL & CO. LTD. VS. COMMERCIAL TAX OFFICER' (1985) 154 ITR 148. The Tribunal, by the i....
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....es not arise for consideration in this appeal. 8. All the authorities have assigned cogent reasons which has been stated supra and have rejected the claim of the appellant filed under Section 36(1)(iii) of the Act. The second substantial question of law is based on incorrect factual finding inasmuch as the Assessing Authority, Appellate Authority as well as the Tribunal have doubted the genuineness of such a transaction and therefore, the substantial question of law as framed in the absence of any dispute with regard to genuineness of the transaction, whether the Tribunal was justified in rejecting the claim under Section 36(1)(iii) also does not arise for consideration. The Supreme Court in the case of SA BUILDERS LIMITED, supra, has he....