2014 (9) TMI 885 - HC - Income Tax

Interest expenses utilized for business purpose or not - Whether the Tribunal erred in concurring to the views of the CIT(A) in deleting the entire disallowances made by the AO on account of interest expenses, when the loan was not utilized for the purpose of business Held that - Both the CIT(A) as well as the Tribunal have recorded concurrent findings of fact to the effect that the assessee was also running a sarafi business and the funds obtained from the bank had got merged with the funds of other businesses - Having regard to the total funds available from the sarafi business, the Tribunal has found no reason to believe that bank funds have been diverted as interest free/lower interest advances - no material has been brought on record by the revenue either to demonstrate that the sarafi business was bogus or to establish diversion of interest bearing funds as low/interest free advances - revenue is not in a position to point out any material to the contrary so as to dislodge the concurrent findings of fact recorded by the CIT(A) and the Tribunal - the Tribunal has based its conclusion on the concurrent findings of fact recorded by it upon appreciation of the evidence on record thus, the order of the Tribunal is upheld Decided against revenue.

Summary

Issues Involved:
Appeal under section 260A of the Income Tax Act, 1961 challenging the order of the Income Tax Appellate Tribunal regarding the deletion of disallowances made on account of interest expenses for the Assessment Year 2006-07.

Detailed Analysis:

1. Disallowance of Interest Expenses:
The appellant-revenue challenged the order passed by the Income Tax Appellate Tribunal regarding the deletion of disallowances made on account of interest expenses amounting to Rs. 41,41,474. The Assessing Officer noted that the assessee had obtained a loan for the purchase of Isabgul but had not utilized the funds for the intended purpose during the year. The Commissioner [Appeals] deleted the addition, and the Tribunal upheld this decision. The Commissioner [Appeals] found that the loan obtained against the stock of Isabgul had been partly liquidated by funds arising from the sarafi business, and the total funds available from the sarafi business were comparable to the bank funds. The Tribunal concurred with these findings, emphasizing that no material was presented to prove the sarafi business was bogus or that interest-bearing funds were diverted as low-interest advances. The Tribunal concluded that no interference was warranted as the concurrent findings of fact were based on evidence on record.

2. Arguments and Findings:
The appellant's counsel reiterated the grounds stated by the Assessing Officer, but the Tribunal found no reason to interfere with the decision of the Commissioner [Appeals]. The Tribunal highlighted that the sarafi business was run in a commercial sense, and the funds obtained from the bank had merged with other businesses' funds. It was observed that no material was presented by the revenue to dispute the findings of the Commissioner [Appeals]. The Tribunal emphasized that the appellant failed to demonstrate any perversity in the concurrent findings of fact recorded by the Commissioner [Appeals] and the Tribunal. As no substantial question of law was identified to warrant interference, the appeal was summarily dismissed.

Conclusion:
The High Court dismissed the appeal, upholding the decision of the Tribunal to delete the disallowances on interest expenses. The judgment emphasized the importance of concurrent findings of fact based on evidence on record and the lack of material to challenge the Commissioner [Appeals]'s decision. The judgment highlighted the commercial nature of the sarafi business and the absence of evidence to support the diversion of funds as interest-free or lower interest advances.