JCT LTD. Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS appeal was admitted under s. 260A of the IT Act for the asst. yr. 1994 -95 on the following questions :

(2.) THE facts of the case briefly are as follows : During the relevant previous year for the asst. yr. 1994 -95 the appellant had borrowed funds on which it had paid interest. The deduction for such interest was allowed by the AO in the assessment made under s. 143(3) of the IT Act, 1961 (the Act). Thereafter the CIT initiated proceedings under s. 263 of the Act on the ground that the AO had not investigated whether borrowed funds were given by way of interest -free loans to the subsidiaries of the appellant. The initiation of the proceedings under s. 263 of the Act were challenged by the appellant by way of writ proceedings before assessment made by the AO with a direction to frame it afresh. Against the said order of the CIT the petitioner had taken an appeal to the Tribunal but was not successful therein. Ultimately the AO pursuant to the said order of the CIT disallowed a sum of Rs. 10,24,59,637 out of the interest paid by your petitioner on borrowed funds.

(3.) DURING the relevant previous year for the asst. yr. 1994 -95 your petitioner had outstanding advances and receivables from the concerns mentioned hereinafter. The AO disallowed interest paid on borrowed funds on the assumption that such borrowed funds were utilized in respect of such outstanding advances to such firms. The interest paid on borrowed funds were disallowed as under :