Ita/93/2002 Of M/S.anand Paints v. The Commissioner Of Income-Tax,Ernakulam

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR THURSDAY, THE 28TH FEBRUARY 2008 / 9TH PHALGUNA 1929 ITA.No. 93 of 2002() -------------------- ITA.96/COCH/1998 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: -------------------------------------- M/S. ANAND PAINTS, CLOTH BAZAR ROAD, ERNAKULAM, COCHIN-35, REPRESENTED BY ITS PARTNER, T.SUDHAKARAN. BY ADV. SRI.P.BALAKRISHNAN (E) SRI.K.C.KIRAN RESPONDENTS: APPELLANT: ----------------------- THE COMMISSIONER OF INCOME TAX, ERNAKULAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 28/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR &T.R. RAMACHANDRAN NAIR, JJ. -------------------------------------------- I.T.A. No. 93 OF 2002 -------------------------------------------- Dated this the 28th day of February, 2008 JUDGMENT C.N. Ramachandran Nair,J. Heard counsel for the appellant and standing counsel for therespondent. The only question raised is whether the Tribunal wasjustified in confirming disallowance of Rs. 1,17,405/- towards interestpaid on borrowed funds by the assessee. While the assessee's case isthat interest is paid on funds borrowed for business purpose,department noticed that the assessee had advanced an amount of aroundRs. 10 lakhs to the sister concern, namely, M/s. Anand Hardwares. It isan admitted position that advance made by the assessee to sisterconcern was not interest bearing. The assessing officer noticed thatborrowal was not required for business purposes, because the assesseehad excess funds available with them. Even though counsel for theassessee contended that there is progressive reduction in the advancegiven to the sister concern and the said advance was not made in the previous year in which the assessee paid interest on borrowed funds,we do not think it makes any difference. The assessee which had fundsavailable cannot advance the same to the sister concern as interest freeloan and then borrow funds on payment of interest for it's own businesspurpose. We are therefore of the view that the Tribunal rightlyconfirmed the disallowance of interest paid. The appeal therefore failsand is dismissed. (C.N.RAMACHANDRAN NAIR)Judge. (T.R.RAMACHANDRAN NAIR) Judge. kk