2012 (1) TMI 317 - AT - Income Tax

Summary

Issues involved: Appeal by revenue against CIT(A) order allowing interest on borrowed funds used for interest-free loans to sister concerns for Assessment Year 2005-06.

Summary:
The Appellate Tribunal ITAT MUMBAI, comprising R. S. Syal (Accountant Member) and Vijay Pal Rao (Judicial Member), heard an appeal by the revenue against the CIT(A) order for the Assessment Year 2005-06. The sole ground raised by the revenue was regarding the allowance of interest on borrowed funds utilized for interest-free loans to sister concerns. The Tribunal noted that a similar issue had been decided in favor of the assessee for the Assessment Year 2004-05. The CIT(A) had allowed the claim based on the precedent of the previous year. The Tribunal upheld the decision in favor of the assessee for the Assessment Year 2004-05, emphasizing the commercial expediency of the transactions and the wide import of the expression 'commercial expediency.' The Tribunal found no reason to disturb the conclusions reached by the CIT(A) and declined to interfere in the matter. Consequently, the Tribunal decided the issue in favor of the assessee and against the revenue, dismissing the appeal filed by the revenue. The order was pronounced in the open court on the 11th day of January 2012.