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TAXAP/38420/2008 2/ 4 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No.384 of 2008
With
TAX
APPEAL No.386 of 2008
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THE
COMMISSIONER OF INCOME TAX - Appellant
Versus
CLARIS
LIFESCIENCES LTD. - Opponent
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Appearance :
MRS
MAUNA M. BHATT for Appellant.
None for
Opponent.
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CORAM
:
HONOURABLE
MR. JUSTICE K. A. PUJ
and
HONOURABLE
MR.JUSTICE BANKIM N. MEHTA
Date
: 07/08/2008
ORAL
ORDER
(Per
: HONOURABLE MR. JUSTICE K. A. PUJ)
The Revenue has filed these two
Tax Appeals for Assessment Years 2001-02 and 2000-01 under Section
260A of the Income Tax Act, 1961 proposing to formulate the same
question of law for both the years for determination and
consideration of this Court. The question is as under:
Whether
the Appellate Tribunal is right in law and on facts in confirming the
order passed by the CIT (A) deleting the disallowance of interest
payment made by the Assessing Officer on the ground that the assessee
had made interest free advances out of interest bearing fund?
2. The brief facts
giving rise to the present appeals are that the the assessee had made
interest free advances out of the interest bearing funds. The
Assessing Officer found that the assessee had borrowed the funds on
interest for the purpose of business, however, it made interest free
advances to sister concerns and some parties without charging any
interest or proving any business expediency.
3. Being aggrieved
by the order of the Assessing Officer, the assessee preferred appeal
for both the years before the CIT (Appeals), who deleted the said
disallowance. The Revenue being aggrieved by the order of the CIT
(Appeals) took the matter before the Tribunal and the Tribunal has
also confirmed the order of the learned CIT (Appeals) and dismissed
the appeal filed by the Revenue. The Revenue has, therefore, filed
the above two appeals against the decision of the Tribunal on this
issue.
4. Mrs.Mauna
M. Bhatt, learned Standing Counsel appearing for the Revenue, has
submitted that the Tribunal has proceeded entirely on erroneous basis
as it has been established from the record that the assessee had
borrowed loans on interest and had made interest free advances out of
interest bearing funds. She has relied on a decision of Punjab &
Haryana High Court in the case of Abhishek Industries 286 ITR 1
wherein it is held that once it is borne out from record that the
assessee had borrowed certain funds on which liability to pay
interest is being incurred and on the other hand certain amounts have
been advanced to sister concerns and others, without charing any
interest and without any business purpose, the interest to the extent
the advance has been made without carrying any interest has to be
disallowed. She has, therefore, submitted that both the appellate
authorities have committed an error in law and, hence, substantial
question as proposed by the Revenue arose out of the order of the
Tribunal.
5. We have
considered the submissions made by the learned Standing Counsel for
the Revenue and also perused the orders passed by the authorities
below.
6. The CIT
(Appeals) has discussed the said aspect in great detail in its order
and observed that as per the financial statement of the company, the
company has made cash profit of Rs.1278.89 lacs and its capital as on
31.03.2001 was Rs.1500.00 lacs. The investments made in share during
the previous year were to the tune of Rs.226.02 lacs and interest
free loans were only Rs.2.70 lacs. Accordingly, the aggregate amount
of investment and loans of Rs.228.72 lacs is much below the profits
of the company as well as share capital of the company. Similarly for
the second year also, cash profit is much more than the investments
made. The Tribunal has also taken the same view while confirming the
order of the CIT (Appeals).
7. Considering the
orders of the CIT (Appeals) as well as the Tribunal, we are of the
view that both the authorities have factually considered the
submissions and record of the case and arrived at a right conclusion.
We are, therefore, of the view that no substantial question of law
arises out of the order of the Tribunal. Hence, both these appeals
are accordingly dismissed.
[K.A.
Puj, J.]
[Bankim
N. Mehta, J.]
Rajendra
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