Law:

Section:

Section 143, read with section 260A, of the Income-tax Act, 1961 - Assessment - Additions to income - Assessment year 1994-95 - Assessee gave certain loan to its sister company free of interest - Assessing Officer as well as Commissioner (Appeals) made addition as an assumed amount of interest said to have been earned by assessee - Tribunal finding that transaction in question was genuine and that there were valid reasons for not charging interest from sister concern, deleted addition - Whether it was only when taxing authorities found that transaction of loan itself was bogus one and was entered into to avoid payment of tax that appropriate addition could be made in hands of assessee - Held, yes - Whether since Tribunal had come to conclusion that transaction in question was genuine one, same had to be given effect to as it was and, therefore, no substantial question of law arose for consideration - Held, yes FACTS For the assessment year 1994-95, the assessee gave certain loan to its sister company free of interest. The Assessing Officer and the Commissioner (Appeals) 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 was genuine and there were valid reasons for not charging interest from its sister concern; that 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 had not charged the interest or had charged lower rate of interest then the same could not be said to be either illegal or to evade any payment of income tax. On appeal under section 260A : HELD No substantial question of law arose to examine the issue again in appeal by the High Court in its appellate jurisdiction. It was 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, was a matter of contract between the parties and the same was not really governed by any law as such. That apart, it depended upon…

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