Ltd v. K.vinod Chandran

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON FRIDAY ,THE 01ST DAY OF FEBRUARY 2019 / 12TH MAGHA, 1940 ITA.No. 507 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 1093/2005 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 17-11-2006 APPELLANT/S: THE COMMISSIONER OF INCOME TAX,COCHIN. BY ADVS.SRI.P.K.R.MENON, SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC FOR INCOME TAX RESPONDENT/S: OEN INDIA LTD.,VYTTILA, COCHIN-682019. BY ADV. SRI.E.K.NANDAKUMAR (SR.) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON01.02.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Vinod Chandran, J. JUDGMENT The issue arising in the above appeal is of a dis-allowance of expenditure claimed by way of interest onborrowed funds. This was on the premise that theassessee had advanced interest free amounts to itssister concern, M/s O/E/N Micro Systems Ltd., ofRs.41,66,648/-. The Assessing Officer found that thesaid advance would not have been from own funds alone,but from borrowed funds. Hence, to that extentproportionate dis-allowance was made on the interest onborrowed funds claimed as expenditure. The FirstAppellate Authority and the Tribunal followed theearlier order for the year 1990-91 and 1991-92 to findthat there can be no such dis-allowance made. Asimilar question arose in the assessment year 1996-97also, which we have disposed of by a judgment datedtoday in I.T.A.No.689/2009. We have found that theissue requires reconsideration at the hands of theAssessing Officer, specifically looking at whether there was commercial expediency as held in S.A.Builders Ltd. v. CIT (Appeals), [2007] 228 ITR 1 (SC) and if theassessee had own funds in excess of the amounts nowadvanced to the subsidiary company. The assessee alsohas claimed that the advance was in pursuance of acontract of job works and not a loan granted. Thiswould also have to be examined by the AssessingOfficer, specifically looking at the contract.Considering the fact that; the assessment year is longprior, definitely the contract would have been executedthe evidence of which also could be produced by theassessee. The I.T.A. is allowed only for remanding thematter for fresh consideration without any observationon the merits. No order as to costs. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE APPENDIX APPELLANT'S/S ANNEXURES: ANNEXURE A COPY OF ASSESSMENT ORDER DATED 29.1.1998U/S 143(3) OF THE INCOME TAX ACT, 1961. ANNEXURE B COPY OF ORDER DATED 12.8.2005 OF THECOMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE C COPY OF THE ORDER DATED 17.11.2006 OF THEINCOME TAX APPELLATE TRIBUNAL, COCHINBENCH, COCHIN IN ITA NO.1093/COCH/2005.