Revenue appealed against the Tribunal's order deleting disallowance of interest-free advance to a sister concern. The High Court found no substantial question of law as facts showed the advance was for commercial expediency.
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In the High Court of Judicature at Madras Dated : 18.12.2018 Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mr.Justice N.SATHISH KUMAR
Tax Case Appeal No.791 of 2018
Commissioner of Income Tax, Corporate Circle 2, Madurai.
...Appellant Vs
M/s. Sri Jayajothi Textile Mills Pvt. Ltd., 154, Reddiapatti Road, Keelarajakularaman Rajapalayam-626 136 PAN:AABCS 5352 B ...Respondent
APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 02.05.2018 in ITA No.1896/CHNY/2017 on the file of the Income Tax Appellate Tribunal Chennai 'C' Bench for the assessment year 2013-14. against the order of Commissioner of Income Tax (Appeal-I) in ITA.No.61/2016-17 dt:08/05/2017 and against the order of Deputy Commissioner of Income Tax, Corporate Circle-2,/ No.2, V.P.R. Rathinasamy Nadar Road, Madurai.
Judgment was delivered by T.S.SIVAGNANAM,J
We have heard learned Standing Counsel for the Revenue and carefully perused the materials placed on record.
“ Whether the Income Tax Appellate Tribunal was right in deleting disallowance made under section 36(1) (iii) that the interest free advance paid to the sister concern was considered as commercial expediency without noting that there were
excess advance were given to the sister concern by the assessee ?”
“When the Assessing Officer himself admitted that the sister concern has not utilized the funds received from the appellant for any non-business purpose, I find that there is no scope for addition as the advance has been made only as a measure of commercial expediency. In view of the above, i direct the Assessing Officer to delete the addition of Rs.7,54,67,339/-. Apart from the above, it is seen that the appellant's case was selected for scrutiny for AY 2014-2015 and while completing the scrutiny assessment u/s 143(3) on 22.12.2016, the Assessing Officer did not make any addition on the ground that borrowed funds were diverted for non business purpose as on 31.03.2014, even though the amount outstanding as on 31.03.2015 to SITPL at Rs.54,08,41,068/- This means that the Assessing Officer himself, while completing the subsequent year's scrutiny assessment, accepted that there was adequate own funds of the company and the advance made to SITPL was only for the purpose of commercial expediency and not for non business purpose. In the circumstances, I find that the addition made by the Assessing Officer for this assessment year is not correct and the same is deleted”
shows that the advance has been given only for the purpose of commercial expediency. Thus, we find that the 1st Appellate Authority and the Tribunal had considered the factual issue and arrived at a conclusion. We find that there are no substantial question of law arisen for consideration in this appeal.
//True Copy//
Sub Assistant Registrar
To
1.The Income Tax Appellate Tribunal, Chennai 'C' Bench.
2.The Commissioner of Income Tax, Corporate Circle-2, Madruri.
3.The Deputy Commissioner of Income Tax, Corporate Circle-2, No.2 V.P.R.Rathinasamy Nadar Road, Marduri.
4.The Commissioner of Income Tax, Appeals-1, Madurai.
TCA.No.791 of 2018
KK(CO) GSP(24/01/2019)
2 issues framed by the court
Whether the Income Tax Appellate Tribunal was right in deleting disallowance made under section 36(1)(iii) regarding interest-free advances to a sister concern.
Whether the advances made to the sister concern should be considered as commercial expediency despite the Revenue's claim of excess advance.
1 provisions across 1 enactments
Commissioner of Income Tax, Corporate Circle 2, Madurai
M/s. Sri Jayajothi Textile Mills Pvt. Ltd.
T.S.Sivagnanam
N.Sathish Kumar
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
