AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2009 (7) TMI 45
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.... Rs.40,00,000/- to its 100% subsidiary company, namely, M/s. Srirangam Investment Company, Limited. The Income Tax Officer (ITO) noted from the accounts that the interest bearing borrowings from banks and public had increased during the year 1976-77 to Rs.1,14,46,904/- and Rs.68,16,000/- against Rs.3,78,797/- and Rs.53,81,000/-, respectively in the immediately preceding previous year. The ITO concluded that the additional loans had been raised by the assessee company to advance loan to its subsidiary company. Accordingly, Assessee Officer disallowed part of the interest amounting to Rs.2,26,973/- in respect of the claim of interest debited by the assessee for the year 1976-77 and Rs 3,70,392 in respect of the assessing year 1977-78. The order of the Assessing Officer was upheld by the C.I.T. (Appeals) wherein the view of the ITO was upheld holding that no interest is allowable for amount of moneys which have been loaned to the subsidiary company and consequently an appeal was preferred to the I.T.A.T by the assessee. The I.T.A.T. after discussing the rival contentions of the parties held as under: "11. The Ld. Assessing Officer and the first appellate authority appear to have gone....
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....ent of the I.T.A.T which he contended is final, the tribunal being the final fact finding authority. The learned counsel for the assessee has placed strong reliance upon the various decisions; S.A. Builders Ltd. Vs. Commissioner of Income-Tax (Appeals) (2007) ITR 1 (SC), Commissioner of Income Tax Vs. Tin Box Co. (2003) ITR 637(DB,Delhi), K. Ravindranathan Nair Vs. Commissioner of Income Tax, (2001) 247 ITR 178 (SC) Sudarshan Silk Sarees Vs. CIT, (2008)300 ITR 205 to canvass the propositions that firstly the Tribunal is the final fact finding authority and the findings of the Tribunal as recorded in its para 11 of its judgment cannot be challenged by the revenue and secondly the counsel further contended that unless the revenue is able to show that the loans given to the subsidiary company are not for any individual use for any director or some such similar personal purpose which cannot be said to be a personal purpose, then, the loan is deemed to be given for the commercial expediency/purpose and cannot be questioned by the Assessing Authority. 4. Per contra, the counsel for the revenue has placed reliance upon the decision of the C.I.T.(Appeals) which gave the following findings:....
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....his position in its judgment as under : "The High Court held that since it stands established that the amounts of Rs.82 lakhs and Rs.37.85 lakhs had been advanced by the assessee to its sister concern from out of the overdraft account with the bank in which there was already a debit balance, the order of the Tribunal does not suffer from any factual or legal infirmity. Accordingly, the High Court dismissed the appeal" (Placitum 13, Pg 7) (ii). Before the Supreme Court, the issue which arose was whether loan given by the assessee company to its sister concern would disentitle the assessee company from debiting the interest paid to the banks as revenue expediture. The Supreme Court held that the loan was given for the business purposes and in this regard held at placitum 35 and 36 as under: "We agree with the view taken by the Delhi High Court in CIT Vs. Dalmia Cement (B.) Ltd. (2002) 254 ITR 377 that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the bo....
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....sistent view of this Court. 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) as interest free loan. The test, in our opinion, in such a case is really whether this was done as a measure of commercial expediency. In our opinion, the decisions relating to Section 37 of the Act will also be applicable to Section 36(1)(iii) because in Section 37 also the expression used is "for the purpose of business". It has been consistently held in the decisions relating to Section 37 that the expression " for the purpose of business" includes expenditure voluntarily incurred for commercial expediency, and it is immaterial if a third party also benefits thereby." (iv). The supreme Court further held at placitum 26 at page 8 of the report as under: "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 leg....
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....held in Sudarshan Silks and Sarees Vs. Commissioner of Income-tax (2008)300 ITR 0205 at page 6 of the reporter as under: "In the present case, the question of law referred to the High Court for its opinion was, as to whether the Tribunal was right in upholding the findings of the Commissioner of Income-tax (Appeals) in cancelling the penalty levied under Section 271(1)(c). Question as to perversity of the findings recorded by the Tribunal on facts was neither raised nor referred to the High Court for its opinion. The Tribunal is the final court of fact. The decision of the Tribunal on the facts can be gone into by the High Court in the reference jurisdiction only if a question has been referred to it which says that the finding arrived at by the Tribunal on the facts is perverse, in the sense that no reasonable person could have taken such a view. In reference jurisdiction, the High Court can answer the question of law referred to it and it is only when a finding of fact recorded by the Tribunal is challenged on the ground of perversity, in the sense set out above, that a question of law can be said to arise. Since the frame of question was not as to whether the findings rec....