2017 (8) TMI 1403 - HC - Income Tax

Disallowance of interest - advances to sister concerns - Held that - Interest incurred on amount which was advanced to the sister concerned is a business income hence not taxable.

Summary

Issues:
Common questions of law and facts involved in multiple appeals challenging Tribunal's judgment on disallowance of interest expenditure.

Analysis:
1. The High Court admitted multiple appeals challenging the Tribunal's decision to dismiss the department's appeals regarding the disallowance of interest expenditure. The substantial questions of law framed by the court revolve around the justification of deleting the disallowance of interest expenses incurred by the Assessing Officer. The court questioned the correctness of the ITAT's decision in allowing interest expenditure that was not debited in the books of accounts or the P & L account but only shown in the computation of income.

2. The court specifically addressed the issue of whether the ITAT was right in deleting the disallowance of interest expenditure when it was incurred for non-business purposes. The court examined the validity of the ITAT's decision and questioned whether it was contrary to facts and therefore perverse.

3. Another issue raised in one of the appeals was related to the deletion of an addition made by the Assessing Officer on account of the disallowance of interest paid to a bank. The court analyzed whether the Tribunal was justified in upholding the decision of the CIT(A) in this regard. Additionally, the court questioned the correctness of the interest payment on funds attributable to the diversion of funds.

4. The High Court had previously held that interest incurred on amounts advanced to a sister concern constitutes business income and is therefore not taxable. Based on this precedent, the court ruled in favor of the assessee against the Department, leading to the dismissal of the appeals. The judgment concluded by instructing a copy to be placed in the connected files for reference.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the questions of law framed by the court, and the ultimate decision in favor of the assessee based on established legal principles and precedents.