COMMISIONER OF INCOME TAX Vs. BHARTI TELEVENTURE LTD

JUDGEMENT

(1.) These three appeals have been preferred by the revenue under Section 260A of the Income Tax Act (hereinafter referred to as Act) against a common order dated 24th July, 2009 passed by learned Income Tax Appellate Tribunal (ITAT in short). Since the parties are common, the questions of law are common and the appeals have been preferred against the common order of the ITAT, we propose to dispose of these three appeals by this common order.

(2.) ITA 1340/2010 relates to Assessment Year 2001-02, ITA 1337/2010 to Assessment Year 2003-04 and ITA 1339/2010 to Assessment Year 2004-05. In all these cases common questions of law are whether the Assessing Officer was right in disallowing the interest claimed by the Assessee on borrowed funds giving interest-free advances to its subsidiaries and whether the expenditure incurred by the Assessee by way of interest was for business purposes so as to allow deductions under Section 36(1)(iii) of the Act. Since the basis of the orders of the AO as passed in ITA 1337/10 and ITA 1339/10 was the same as order of the AO passed in ITA 1340/2010, we may briefly refer to the facts of the case of this appeal which pertained to AY 2001-02.

(3.) AO assessed income at Rs. 29,85,70,311/- as against returned income of Rs. 73,47,390/- for the AY 2001-02. The Assessee company had claimed deduction of Rs. 28,98,86,967/- being interest paid on the borrowings. The AO while noticing that the Assessee had made interest free advances to its subsidiary companies out of funds borrowed on interest, disallowed deduction of Rs. 28,98,86,967/-. In the appeal the CIT(A) after going through the entire record allowed the deductions of the aforesaid amount of payment of interest on borrowings. Relevant part of the order of CIT(A) is reproduced as under: