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TMI Blog2013 (12) TMI 1416X X X X Extracts X X X X X X X X Extracts X X X X ..... n the rate prevailing in the market and the rate of interest to be paid to the bank - Decided against assessee. - Income Tax Appeal Defective No. - 25 of 2003, Income Tax Appeal Defective No. - 26 of 2003, Income Tax Appeal No. - 313 of 2012 - - - Dated:- 27-8-2012 - Hon'ble Sunil Ambwani and Hon'ble Aditya Nath Mittal,JJ. For the Petitioner : R. R. Agarwal For the Respondent : A.N. Mahajan,Ashok Kumar,Bharatji Agarwal,Csc,D. Awasthi,G.Krishna,R.K. Upadhaya,S Chopra ORDER We have heard Shri Suyash Agrawal, learned counsel for the assessee-appellant. Shri R.K. Upadhyay appears for the Income Tax Department. These appeals were admitted on the question of law:- "Whether the Tribunal was legally justified in confirming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are being diverted, and that there are circumstances to the effect that the petitioner had diverted the business funds, the Court should not disallow the interest. He relies upon Commissioner of Income Tax v. Motor Sales ltd., (2008) 304 ITR 123 (All) and the Full Bench decision of Punjab and Haryana High Court in CIT v. Rockman Cycle Industries Private Ltd., (2011) 331 ITR 401 (P H) [FB]. In CIT v. Motor Sales Ltd. (Supra) the petitioner had made interest free advances. On the findings that there was no diversion of borrowed capital for non-commercial purposes it was held that no part of interest could be disallowed under Section 36 (1) (iii). The Court relied upon CIT v. Radico Khaitan Ltd., (2005) 274 ITR 354 (All), and S.A. Builders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of interest to the family members and sister concern at 24% was found to be diversion of profits. It was found highly unusual for a person to borrow from the family at higher rate than the rate prevailing in the market and the rate of interest to be paid to the bank. We do not find that the income tax authorities have committed any error in law. They have arrived at findings after examining the records, and the facts and circumstances in holding that the business profits were diverted to claim allowance of interest at much higher rate than the rate prevalent in the market. The question of law is decided against the appellant assessee and in favour of the revenue. The department will proceed accordingly. - - TaxTMI - TMITax - In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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