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The Commissioner Of Income Tax vs Deepak Agarwal on 30 May, 2013 cites

Sarabhai Sons (P.) Ltd. vs Commissioner Of Income-Tax on 18 January, 1993

10. On the other hand, the department, apart from placing reliance on the judgment in the case of Radico Khaitan Ltd. (supra), Commissioner of Income Tax vs. Rajendra Prasad Moody (supra), and Sarabhai Sons Pvt. Ltd vs. CIT (supra), has also placed reliance upon the judgement reported in (1991) 187 ITR 363. In that case, H.R. Sugar Factory Pvt. Ltd was the asssessee company engaged in manufacture of sugar. The company had borrowed a huge amount from various banks and other financial institutions and it lend the same to its directors on a meagre rate of interest of 5% p.a. Subsequently, under a compromise decree passed by the civil court, the amount of interest was reduced to 2.5% . The assessing officer disallowed the proportionate interest paid by the company on the borrowed sum holding that the said lending was not for the purpose of its business. Aggrieved by the order of the assessing officer, the company preferred an appeal and remained unsuccessful and thereafter it took the matter in further appeal before the tribunal which allowed the appeal filed by the asssessee. A division bench of this court, after considering the entire facts found the order of the Tribunal to be not sustainable in law. It was held that the assessee is not a finance company and it is engaged in manufacture of sugar and no business purposes is served by lending the borrowed money to its directors/ shareholders. It was further held that if the company has not advanced money to the directors, the same would have been available to it for its own business and to that extent it was not found necessary to borrow from the bank. Consequently, it was held that the interest paid to the bank on the sum borrowed by the company to its directors, is not an allowable expense u/s. 36(1)(iii).
Gujarat High Court Cites 13 - Cited by 19 - Full Document

Commissioner Of Income Tax, West Bengal ... vs Rajendra Prasad Moody, Calcutta Etc on 4 October, 1978

In (1978) 115 ITR 519, CIT vs. Rajendra Prasad Moody, the Apex Court was considering the scope of section 57(iii) of the Income Tax Act, 1961 which uses the phrase "any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income." In that case, there was no dispute that the assessees have borrowed moneys for making investment in the shares of certain companies. The Apex Court repelled the contention of the department that since the investment in the shares had not yielded any dividend and therefore the expenditure is not allowable. This case is not of any help to the assessee as there was no dispute therein that the borrowed funds were utilised for business purposes.
Supreme Court of India Cites 19 - Cited by 413 - P N Bhagwati - Full Document

Cit vs Radico Khaitan Ltd. on 14 September, 2004

10. On the other hand, the department, apart from placing reliance on the judgment in the case of Radico Khaitan Ltd. (supra), Commissioner of Income Tax vs. Rajendra Prasad Moody (supra), and Sarabhai Sons Pvt. Ltd vs. CIT (supra), has also placed reliance upon the judgement reported in (1991) 187 ITR 363. In that case, H.R. Sugar Factory Pvt. Ltd was the asssessee company engaged in manufacture of sugar. The company had borrowed a huge amount from various banks and other financial institutions and it lend the same to its directors on a meagre rate of interest of 5% p.a. Subsequently, under a compromise decree passed by the civil court, the amount of interest was reduced to 2.5% . The assessing officer disallowed the proportionate interest paid by the company on the borrowed sum holding that the said lending was not for the purpose of its business. Aggrieved by the order of the assessing officer, the company preferred an appeal and remained unsuccessful and thereafter it took the matter in further appeal before the tribunal which allowed the appeal filed by the asssessee. A division bench of this court, after considering the entire facts found the order of the Tribunal to be not sustainable in law. It was held that the assessee is not a finance company and it is engaged in manufacture of sugar and no business purposes is served by lending the borrowed money to its directors/ shareholders. It was further held that if the company has not advanced money to the directors, the same would have been available to it for its own business and to that extent it was not found necessary to borrow from the bank. Consequently, it was held that the interest paid to the bank on the sum borrowed by the company to its directors, is not an allowable expense u/s. 36(1)(iii).
Allahabad High Court Cites 37 - Cited by 55 - R K Agrawal - Full Document

Commissioner Of Income-Tax vs Rajeeva Lochan Kanoria on 21 February, 1994

In (1994)208 ITR 616 Commissioner of Income Tax vs. Rajeev Lochan Kanoria, the asssessee was found to be engaged in the business of rehabilitating and financing various companies. It was further found that the acquisition of shares by the assessee to gain control over such companies, were the activities relating to the business of the assessee. It was held that since the assessee was carrying on business of promoting, monitoring, financing and controlling the companies and therefore, the investment in shares was in connection with the business of the assessee and was held to be allowable expenditure under section 36(1)(iii).
Calcutta High Court Cites 15 - Cited by 58 - S C Sen - Full Document

Commissioner Of Income-Tax vs Gorawara Plastics And General ... on 11 December, 2006

In (2007) 289 ITR 224 Commissioner of Income Tax vs. Gorawara Plastics and General Industries (P) Ltd., the assessee was a company. It was found that its memorandum and article of association provides for investment in shares. The assessee company had taken term loan from Hongkong and Sanghai Banking Corporation but the project could not take off during the substantial part of the previous year therefore, the assessee company as a prudent businessman invested the amount of term loan of Rs.30,00,000/- in equity shares of M/s. Samtel India Ltd. And M/s. Teletube Electronics Ltd. The Assessing Officer disallowed the claim of interest on the ground that the amount of term loan was not utlised for the purpose for which it was sanctioned. Repelling the said contention, it was held that the investment in the shares in the circumstances aforesaid, was for business purposes and is allowable expenditure u/s. 36(1)(iii).
Allahabad High Court Cites 4 - Cited by 1 - Full Document
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