COMMISSIONER OF INCOME TAX Vs. VIJAY SOLVEX LTD.

JUDGEMENT

(1.) This Income Tax Appeal by the appellant-revenue u/s 260A of the Income Tax Act (for short, "IT Act") is directed against the order dt.12/01/2004, passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, "ITAT") in ITA No.1296/JP/96 by which the ITAT has partly allowed the appeal filed by the respondent-assessee. It relates to assessment year 1992-93.

(2.) The appeal was admitted on the following substantial question of law:-

(3.) The brief facts, which can be noticed on perusal of the order impugned and the orders of the lower authorities are that the respondent-assessee is a limited company and had furnished Return declaring income of Rs.1,22,05,430/-. During the course of the assessment proceedings, the Assessing Officer (for short, "AO") noticed that the respondent-assessee had claimed a total amount of Rs.18,69,880/- out of which an amount of Rs.13,99,733/- had been charged to revenue as interest and the remaining balance amount of Rs.3,52,962/-, Rs.70,097/- and Rs.47,088/- represent Bank charges, commission, insurance premium and commitment charges. On further scrutiny, the AO noticed that the assessee paid interest to RIICO, RFC, Bank of Baroda and other debtors from whom the assessee had raised loans. It was also noticed that the assessee had received interest from some of the debtors and after analyzing the material on record, the AO was of the view that on the one hand, the assessee is making payment of interest to RIICO, RFC Banks and debtors but on the other hand, had advanced money to other sister concerns, on which no interest was charged and after calculating the interest on the debtors as well as creditors, came to the conclusion that out of the total claim of interest of Rs.11,67,756/-, which has been claimed to have been paid to RIICO, RFC and Bank and interest bearing loans have been diverted to non-business purposes accordingly disallowed an amount of Rs.5,80,215/-.