2005 (2) TMI 855 - HC - Income Tax

Summary

Issues:
1. Disallowance of interest on excess levy sugar price.
2. Disallowance of payment of interest on advance given to subsidiaries.

Analysis:

Issue 1: Disallowance of interest on excess levy sugar price
The High Court addressed the first issue regarding the disallowance of interest on excess levy sugar price. The Court referred to a previous judgment in CIT v. Dhampur Sugar Mills Ltd., where a similar question was decided in favor of the assessee. The Court highlighted the importance of determining whether the interest claimed had accrued during the relevant assessment year or was related to earlier liabilities. The Court clarified that only interest accrued during the specific previous year is allowable. Based on the precedent and the lack of clarity in the assessing authority's order, the Court concluded that the Tribunal was justified in deleting the disallowance of interest on excess levy sugar price.

Issue 2: Disallowance of payment of interest on advance to subsidiaries
Regarding the second issue of disallowance of payment of interest on advances given to subsidiaries, the Court referred to another judgment in ITR No. 196 of 1985, where a similar question was decided in favor of the assessee. Citing this precedent, the Court held that the Tribunal was justified in deleting the disallowance of a specific amount related to interest payments. Consequently, the Court answered both questions in favor of the assessee and against the Revenue, emphasizing that only interest accrued during the relevant year should be allowed. The Court concluded the judgment without imposing any costs.

In summary, the High Court's judgment dealt with two key issues related to the disallowance of interest on excess levy sugar price and the disallowance of interest payments on advances to subsidiaries. The Court relied on previous judgments to support its decision in favor of the assessee, emphasizing the importance of interest accrued during the specific assessment year.