Law:

Section:

Section 260A, read with section 36(1)(iii), of the Income-tax Act, 1961 - High Court, appeals to - Assessment year 1996-97 - Whether a question, as to whether a particular transaction entered into by assessee with particular person is essentially a question of fact and, therefore, once any finding on either way is recorded by Tribunal, same is not liable to be interfered with by Court, unless an error of law as contemplated under section 260A is pointed out - Held, yes Section 36(1)(iii) of the Income-tax Act, 1961 - Interest on borrowed capital - Assessment year 1996-97 - Whether there is no prohibition in law that assessee can never advance amount without charging any interest on advance amount; every transaction has got to be examined on its terms and conditions entered into between parties, with a view to find out whether it is a genuine one, or not - Held, yes - Whether once Tribunal upholds genuineness of transaction then in such event benefit of transaction has to be given to assessee - Held, yes FACTS The assessee-company purchased industrial gas cylinders from one 'M' by utilising borrowed fund and leased the same. The assessee claimed deduction of interest under section 36(1)(iii). The Assessing Officer noticed that the assessee had not shown any lease rent from such lease transaction. The Assessing Officer, treating said transaction as not genuine held that the assessee had made interest-free advances to 'M' and disallowed the assessee's claim of interest. The Commissioner (Appeals) upheld the finding of the Assessing Officer. On further appeal, the Tribunal held that transaction in question entered into by the assessee was genuine and proper and that once the transaction in question was held to be genuine, the same had got to be given effect to. The Tribunal, accordingly, allowed the assessee's claim of interest. On appeal : HELD The Tribunal, having examined the factual documents brought on record at the instance of the assessee in support of the bona fides of the transactions in question, recorded a finding of genuineness of transaction. In other words, the Tribunal was satisfied, on facts, that transaction in question was not bogus but genuine.…

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