IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR THURSDAY, THE 28TH FEBRUARY 2008 / 9TH PHALGUNA 1929 ITA.No. 93 of 2002() -------------------- ITA.96/COCH/1998 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: -------------------------------------- M/S. ANAND PAINTS, CLOTH BAZAR ROAD, ERNAKULAM, COCHIN-35, REPRESENTED BY ITS PARTNER, T.SUDHAKARAN. BY ADV. SRI.P.BALAKRISHNAN (E) SRI.K.C.KIRAN RESPONDENTS: APPELLANT: ----------------------- THE COMMISSIONER OF INCOME TAX, ERNAKULAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 28/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & T.R. RAMACHANDRAN NAIR, JJ. -------------------------------------------- I.T.A. No. 93 OF 2002 -------------------------------------------- Dated this the 28th day of February, 2008 JUDGMENT C.N. Ramachandran Nair,J. Heard counsel for the appellant and standing counsel for the respondent. The only question raised is whether the Tribunal was justified in confirming disallowance of Rs. 1,17,405/- towards interest paid on borrowed funds by the assessee. While the assessee's case is that interest is paid on funds borrowed for business purpose, department noticed that the assessee had advanced an amount of around Rs. 10 lakhs to the sister concern, namely, M/s. Anand Hardwares. It is an admitted position that advance made by the assessee to sister concern was not interest bearing. The assessing officer noticed that borrowal was not required for business purposes, because the assessee had excess funds available with them. Even though counsel for the assessee contended that there is progressive reduction in the advance given to the sister concern and the said advance was not made in the 2 previous year in which the assessee paid interest on borrowed funds, we do not think it makes any difference. The assessee which had funds available cannot advance the same to the sister concern as interest free loan and then borrow funds on payment of interest for it's own business purpose. We are therefore of the view that the Tribunal rightly confirmed the disallowance of interest paid. The appeal therefore fails and is dismissed. (C.N.RAMACHANDRAN NAIR) Judge. (T.R.RAMACHANDRAN NAIR) Judge. kk 3