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Issues involved: Appeal u/s 260A of the Income-tax Act against the order of the Income-tax Appellate Tribunal regarding disallowance of interest on interest-free advance to a sister concern.
Summary: The appeal was filed against the order of the Income-tax Appellate Tribunal, which upheld the decision of the Commissioner of Income-tax (Appeals) deleting the disallowance of interest on an interest-free advance. The appellant contended that there was no nexus established between the interest-bearing funds raised and the interest-free advance. The substantial question of law raised was whether the Tribunal was justified in upholding the deletion of the disallowance. The High Court declined to entertain the appeal, stating that it did not involve a substantial question of law. Section 260A of the Income-tax Act, inserted in 1998, requires the High Court to be satisfied that a substantial question of law is involved for an appeal to be entertained. The purpose of this provision was to limit litigation to cases where a substantial question of law exists. The Court highlighted that under section 100 of the Civil Procedure Code, a second appeal can only be entertained when a substantial question of law is involved. The Court emphasized the need to differentiate between a "question of law" and a "substantial question of law." Guidelines were provided based on previous court decisions to determine what constitutes a substantial question of law. The Court concluded that the appeal did not meet the criteria of involving a substantial question of law under section 260A. It was emphasized that the High Court cannot disturb findings of fact unless they are erroneous or contrary to the law. The appeal was dismissed as it did not warrant consideration under section 260A of the Income-tax Act.
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