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Judgment
Honourable Ms. Justice S.G. Gokani
The order of the Tribunal dated 18.1.2010 is challenged in this Tax Appeal proposing following substantial questions of law for our consideration:-
Whether the appellate Tribunal is right in law and on facts in deleting the disallowance of interest expenses of Rs. 2,07,65,701/-?
It appears that from the pleadings that the assessee company filed its return declaring its total income at Rs. 1,93,000 (rounded off). On scrutiny assessment, this was changed to Rs. 6,79,32,478/-. Ground of challenge essentially relates to the disallowance of interest to the tune of Rs. 2,07,65,701/- essentially on the ground that the assessee company had borrowed funds at the higher rate and the same had been advanced at a lower rate. This was considered by the Assessing Officer as contrary to the prudent policy and accordingly, the disallowance of interest was made.
When challenged before CIT (Appeals), it sustained the disallowance of Rs. 1,43,99,880/- in respect of the third party out of the total disallowance made by the Assessing Officer. However, it did not agree with the Assessing Officer as far as disallowance of Rs. 2,07,65,701/- is concerned. CIT (Appeals) on discussing the issue at length was of the opinion that the amount advanced to RIM Finance and Global Finance actually was not an advance of loans to these parties, but, the outstanding amount was transferred to the books of the appellant company on taking over of the trading department. The fixed deposits also were found to be sufficiently explained. Therefore, it chose to reduce the disallowance of Rs. 3,50,84,351/- giving the relief to the assessee appellant company.
When the Revenue carried this issued to the Tribunal, it upheld the order of CIT (Appeals). Learned Counsel Ms. Mauna Bhatt fervently submitted before us that both CIT (Appeals) and the Tribunal committed error as assessee company had made the advance in terms of the loans, and it had admitted before Assessing Officer that there was no business exigency for so doing and yet, having borrowed the same at the rate of 15%, it chose to divert it at a lower rate of 11% to 13% and weighted average comes to 12%. Though the company had no surplus fund, she urged that it could not have used for non-commercial purpose such funds bereft of prudence.
On having noted submissions so also the orders of both CIT (Appeals) and Tribunal, we could notice that CIT (Appeals) from the material placed before it concluded that this transaction was not the advancement of the loan, but the appellant company took over the trading department of M/s. EWPL. The Tribunal also did not find any material to controvert these findings of CIT (Appeals) and, therefore, chose to uphold the same. We find no error much less any question of law for us to interfere. Therefore, this Tax Appeal deserves to be dismissed and the same is dismissed.