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Commissioner Of Income-Tax vs Prem Heavy Engineering Works P. Ltd. on 25 April, 2005 cites

Commissioner Of Income-Tax, Madras vs Pudukottai Company P. Ltd. on 24 January, 1972

I have heard learned Counsel and gone through the facts of the case. From the perusal of the facts brought on record I find that during the year under consideration, the appellant has got interest-free advances from its customers to the extent of Rs. 1 crore. In addition to these interest-free advances, the appellant has reserve and share of capital to the tune of Rs. 60.45 lakhs. The interest-free advances at Rs. 37 lakhs and odds to the sister concern are fully covered by the interest-free advances reserve and capital of the appellant. Therefore, it cannot be said that the appellant has diverted any fund on which it has paid interest to its sister concern on which no interest was charged. This practice has been adopted by the appellant even in the preceding year where it has been accepted. Even in the succeeding year such plea of the appellant has been accepted. There is no dispute over the fact that the appellant has taken the overdraft facilities for the purpose of business. The position being so, no part of the interest can be disallowed in view of the decision of the Madras High Court in the case of CIT v. Pudukottai Co. P. Ltd. reported in [1972] 84 ITR 788.
Madras High Court Cites 3 - Cited by 16 - Full Document

D & H Secheron Electrodes (P.) Ltd. vs Deputy Commissioner Of Income-Tax on 26 March, 1996

A similar view has been taken by the Madhya Pradesh High Court in the case of D & H Secheron Electrodes P. Ltd. v. CIT , where the facts of the case were that the Income-tax Officer disallowed part of the interest paid by the assessee on the capital borrowed by it for the purpose of its business on the ground that the assessee has given advances to some concerns without charging interest and this was upheld by the Commissioner of Income-tax (Appeals) and the Tribunal. On reference, the hon'ble Madhya Pradesh High Court held that the disallowance of part of the interest was not justified. It is interesting to note that the appellant has given similar interest-free advances to similar other parties who are doing the same job work/supply of machinery or the appellant but no adverse view has been taken by the Assessing Officer in respect of those parties. Considering the facts of the case and legal position, I would delete the addition of Rs. 1,81,000.
Income Tax Appellate Tribunal - Indore Cites 16 - Cited by 14 - Full Document

Cit vs Radico Khaitan Ltd. on 14 September, 2004

8. From the perusal of the reply reproduced above, we find that the respondent-assessee had sufficient amount of money towards share capital, surplus and reserve as also interest-free advances by the two companies which was about Rs. 1,60,00,000. Thus, the interest-free advances made to the sister concern, namely, M/s. Prem Engineering Works was fully covered from the interest-free advances which was share capital, surplus and reserve with the respondent-assessee had. This court in the case of CIT v. Radico Khaitan Ltd. had considered this aspect and has held that where the amount of any interest-free loan is sufficiently covered by the non-interest-bearing funds available with the assessee, the question of disallowance of interest on borrowed funds does not arise. It is also not the case of the Revenue that any amount borrowed from the bank on which the liability for payment of interest-free advance was there with the respondent-assessee, had not utilized for the purposes of business.
Allahabad High Court Cites 37 - Cited by 55 - R K Agrawal - Full Document
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