Itxa/1401/2012 Of The Commissioner Of Income Tax - 8 v. Kec International

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1401 OF 2012 … The Commissioner of Income Tax-8v/s. ...Appellant KEC International Ltd. ...Respondent … Mr.Arvind Pinto for the Appellant.Mr.Nitesh Joshi i/b Atul K. Jasani for the Respondent. ... CORAM : S.C.DHARMADHIKARI & A.A. SAYED, JJ. DATED : 31 OCTOBER 2014 P.C.: Having heard both sides, we find that there is no substantial question of law raised by the Revenue to challenge the order passed by the Income Tax Appellate Tribunal. There were two Income Tax Appeals before the Tribunal, Bench at Mumbai. The Appeal of the Assesee was Income Tax Appeal No.4862 of 2001 and the Assessment Year is 1998-99. It is that Appeal, and one of the grounds on which it is allowed, that is being challenged by the Revenue. 2.The Appeal of the Assessee was directed against the order of the Commissioner of Income Tax (Appeals) dated 29 May 2001. 3.We do not find that any substantial question of law is raised in this Appeal because the argument of Mr.Pinto, learned Advocate on behalf of the Petitioner, proceeded on the footing that the company, assessee before us, was borrowing money and paying interest on the same. Therefore, when it chose to accommodate its subsidiary and by advancing loan to it, it should have charged interest on the same. That there being a subsidiary which is accommodated is no justification not to charge interest. Further, the justification that the interest was not charged because the financial position of the subsidiary was bad is belied by the fact that the subsidiary made profit of Rs.2.57 crores in the year under consideration. Hence, the entire attempt was to evade tax and by not disclosing the entire income of the Assessee. 4.We are unable to agree, because Mr.Joshi, learned Advocate appearing on behalf of the Assessee has pointed out that there was justification on both counts. Firstly, the loans or advances are not made from borrowed funds, but from own funds of the Assessee. Secondly, there is no material to indicate that any fresh loans or advances were made. The amount and which was referred by the Assessing Officer is a debit entry in the Book of the Assessee, which shows that outstanding amount from the Assessee's subsidiary has been merely brought forward. In that regard also the argument of the Assessee was that in the year under consideration a profit may have been made, but the loans were advanced much prior thereto and in that regard there is no material to indicate that the position of the subsidiary was not what is indicated by the Assessee, but otherwise. Once there were enough funds with the Assessee of its own, then, the objection raised could not have been sustained. itxa-1401-12.doc 5.We have perused that part of the order of the Tribunal and the discussion in paras 20 to 26 would indicate that the Tribunal has applied the correct legal principles and while reversing the order of the Assessing Officer held that the position of the Assessee as per its balance-sheet for the year ending 31 March 1998 was enough to show that it could have advanced the money from its own funds. Secondly, there was no disallowance in the earlier years and when the sum was advanced to the subsidiary and when the amount was brought forward and shown as a debit balance, that the objection has been raised by the Assessing Officer for the year under consideration. 6.In these circumstances, in which the loans were advanced and there being no material to indicate that the position of the Assessee's subsidiary was not bad as is now urged, the Tribunal's findings and conclusions essentially on facts and peculiar to the Assessee do not raise any substantial question of law. 7.The Appeal is devoid of merit and is dismissed. (A.A. SAYED, J.) (S.C.DHARMADHIKARI,J.)