Madhya Pradesh H.C : Whether appeal involves any substantial question of law out of the impugned order of the Tribunal, or in other words, whether two questions proposed by the appellant involve any substantial questions so as to admit the appeal?

High Court Of Madhya Pradesh : Indore Bench

CIT vs. Sanghi Finance & Investment Ltd.

Sections 5, 260A

Asst. Year 1994-95

A.M. Sapre & Ashok Kumar Tiwari, JJ.

IT Appeal No. 31 of 2004

21st June, 2004

Counsel Appeared

R.L. Jain, for the Appellant

JUDGMENT

A.M. Sapre, J. :

This is an appeal filed by the Revenue (IT Department) under s. 260A of the IT Act, against the orders dt. 14th Nov., 2003, passed by Tribunal in ITA No. 1036/Ind/1997 and ITA No. 7/Ind/1998.

The question that arises for consideration in this appeal is, whether appeal involves any substantial question of law out of the impugned order of the Tribunal, or in other words, whether two questions proposed by the appellant involve any substantial questions so as to admit the appeal? It is not in dispute that the prerequisite of admitting any appeal under s. 260A of the IT Act is to find out involvement of substantial question of law. Heard Shri R.L. Jain, learned counsel for the appellant.

Having heard learned counsel for the appellant and having perused record of the case, we are of the view that appeal does not involve any substantial question of law as is required to be made out under s. 260A of the Act and hence it merits dismissal in limine, resulting in upholding of the impugned order of the Tribunal.

The dispute relates to asst. yr. 1994-95. It is in this assessment year the assessee (respondent) gave certain loan to another sister company free of interest. The AO and CIT(A) added the interest in the income of the assessee. However, the Tribunal deleted the addition of interest amount and while accepting the stand taken by the assessee held that the transaction of loan entered into between the assessee and the borrower is genuine and there are valid reasons for not charging interest from its sister concern. It was held that since the financial condition of the sister concern to whom the loan was advanced was not very sound and hence under these circumstances, if the assessee has not charged the interest or has charged lower rate of interest then the same cannot be said to be either illegal or to evade any payment of income-tax.

We concur with this finding of the Tribunal as in our opinion no substantial question of law arises to examine this issue again in appeal by this Court in its appellate jurisdiction. It is to our mind a pure question of fact and based on the transaction entered into between the parties. In any event, whether interest should be charged or not and at what rate, is a matter of contract between the parties and the same is not really governed by any law as such. That apart, it depends upon several factors as to at what rate interest should be charged and the authorities cannot substitute their own rate for calculating the rate of interest. It is only when the taxing authorities find that the transaction of loan itself is bogus one and was entered into to avoid payment of tax, the appropriate addition can be made in the hands of the assessee.

Since, in this case, Tribunal came to a conclusion that the transaction in question is a genuine one then in such case, the same had to be given effect to as it is. The Tribunal, therefore, was justified in deleting the addition made by the AO and CIT(A) relating to Rs. 88,919 and Rs. 97,309 as an assumed amount of interest said to have been earned by the assessee.

No other issue was urged by learned counsel for the appellant except what is taken note of supra in support of this appeal. Even otherwise, we find that question No. 3 proposed by the appellant in memo of appeal does not involve any substantial question of law.

Appeal thus fails and is hereby dismissed in limine.

[Citation : 272 ITR 553]

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