The Commissioner Of Income-Tax, Central-Ii, Mumbai v. M/S.supreme Industries Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORIGINAL SIDE INCOME TAX APPEAL NO. 436 OF 2002 The Commissioner of Income-tax,Central-II, Mumbai.vs. M/s.Supreme Industries Ltd. AppellantRespondent Mr. Vijay Kantharia i/b. Mr.H.D. Rathod for theappellant. P.C. CORAM: R.M. LODHA &J.P.DEVADHAR,JJ DATED: 19th August 2004 Heard. 2. In the memorandum of appeal, the revenue hasproposed three substantial questions of law viz.:"1.Whether on the facts and in thecircumstances of the case and in law, theHon’ble ITAT was justified in upholdingthe decision of the CIT(A) in which hedeleted the additions of Rs.1854867/-made by the Assessing officer to thevalue of closing stock in respect of A.Y.1996-97 on account of unavailed MODVATcredit ignoring the fact that the issueis pending for a decision by the SupremeCourt?2.Whether on the facts and in thecircumstances of the case in law, the Hon’ble ITAT was justified in upholdingthe deletion of disallowance of interestof Rs. 1779109/- paid by the assessee inrespect of A.Y. 1996-97 on borrowedfunds used for making interest trueadvance to M/s.Premier LightingIndustries Ltd., ignoring the nexusbetween the borrowed funds and the"interest free advance made"?3.Whether on the facts and in thecircumstances of the case in law theHon’ble ITAT was justified in upholdingthe deletion of disallowance of interestpayable on borrowed funds diverted formaking interest free advance to M/s.KSPL in respect of A.Y. 1996-97 ignoringthe fact that the decision relied upon bythe Ld. CIT(A) has no application to thefacts of the present case.?"3. In so far as proposed question no.1 is concerned,the learned counsel for the revenue conceded that thesaid controversy is concluded by the judgement of theSupreme Court in the case of Commissioner of Income-taxv. Indo Nippon Chemicals Co. Ltd., 261 ITR 275. In this view of the matter the finding of the Tribunal in respect of proposed question no.1 cannot be faulted. 4. As regards proposed question no.2, we find that the Tribunal considered this aspect thus: " It is noticed that assessee is operatingfrom the premises of PLI without paying anyrent. Interest free advance was given inconsideration of using the space given by PLI.PLI is not carrying on any manufacturing orother activity over a decade. The amountadvanced by the assessee represents nothingbut the statutory and administrative expensesof PLI. The premises owned by PLI admeasuring approximately 2140 sq.mtrs. at Goregaon,Mumbai, was used by the assessee for its ToolRoom, Machinery and R & D Divisions, withoutany payment of rent to PLI. It was statedthat amount of rent payable in the same areafor a comparable premises would be much higherthan the notional interest on the loan. Ihave perused the reasoning adduced in theimpugned order. I am inclined to agree withthe same."5. We do not find any infirmity in the consideration ofthe aforesaid aspect by the Tribunal.6. In so far as the proposed question no.3 isconcerned, the Tribunal held that the loan free interestto KSPL was made out of the available funds and not outof borrowed funds. This is a question of fact. It is not in dispute that KSPL was promoted by the appellant-assessee. 7. No substantial question of law arises. 8. Appeal is dismissed in limine. (R.M. LODHA,J.)(J.P. DEVADHAR,J.)