Law: Income Tax Act, 1961

Section: 260A

Law: Civil Procedure Code (V of 1908)

Section: 100

Section 260A of the Income-tax Act, 1961 - High Court - Appeals to - Whether if question is settled by highest court or general principles to be applied in determining question are well-settled and there is a mere question of applying those principles or that plea raised is palpably absurd question would not be a substantial question of law - Held, yes - Whether even if it is found that question involved is identical, then also, simply because a question of law is involved in appeal and on same question, a reference has been made, it will not be a substantial question of law for purpose of section 260A - Held, yes Section 36(1)(iii) of the Income-tax Act, 1961 - Interest on borrowed capital - Assessing authority disallowed interest attributable to interest free advance to sister concern of assessee-company - Commissioner (Appeals) as well as Tribunal deleted addition on ground that no nexus was established between interest bearing funds and interest-free advance - Whether a substantial question of law arose from Tribunal's order required to be referred - Held, no FACTS While completing the assessment, the assessing authority made disallowance of interest attributable to interest-free advance to sister concern of the assessee-company. On appeal, the Commissioner (Appeals) deleted the addition holding that no nexus was established between interest bearing funds raised and the interest free advance. On appeal by the revenue, the Tribunal upheld the order of the Commissioner (Appeals). On appeal: HELD Section 260A was inserted by the Finance (No. 2) Act, 1998 with effect from 1-10-1998. The amendment was felt necessary as the existing provisions of making reference to the High Court led to plethora of conflicting s, which created confusion in the minds of public with respect to interpretation of the various provisions of the Act. The existing provisions also burden the High Courts and the Supreme Court with an unnecessary large number of references and appeals. Thus, the litigation has been confined to cases where a question of law is involved and such question of law is a substantial question of law. The provision provides that the appellant is required to state,…

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