Motor General Finance Ltd. vs Commissioner Of Income-Tax

4. The only question that arises for our consideration in this case is whether the amount advanced by the appellant to its subsidiary in the relevant year was out of the profit earned by the company for the said year or was from the funds borrowed by the appellant. In para. 6 of the impugned judgment, the High Court has observed (see [2002] 254 ITR 449) (page 452) :

"Pursuant to and in furtherance of the aforesaid direction, an opportunity was given to the assessee to place additional material. The asses-see merely furnished the statement of the deposits made in the bank account on those dates, on which the advance amounting to Rs. 50 lakhs was made to the sister concern. It, however, despite the direction did not furnish the copy of a bank statement to show as to whether there had been a credit balance or a debit balance in the bank accounts on those dates. In this situation, it was observed :

'If there was a debit balance, then it could safely be inferred that interest bearing overdraft facility of the bank was utilised to make those advances. But the assessee till date has not furnished any such statement. In view of this fact, the disallowance of Rs. 10 lakhs is to be sustained'."

5. The High Court in the impugned judgment has observed that in spite of giving opportunity to the appellant, it has not filed the necessary statement before the Commissioner of Income-tax. It is primarily based on this finding of fact that the High Court dismissed the statutory appeal filed by the appellant.

6. Learned counsel appearing for the appellant points out from the record that the observations made by the High Court are factually incorrect and, as a matter of fact, the statement of relevant account was produced before the Commissioner of Income-tax, copies of which are in this appeal papers at pages 70-74, notice of which has not been taken by the High Court. Learned counsel stated that it is in view of this factual error that the High Court has, by the impugned order, allowed the appeal of the respondent.

7. We have seen from the file that, as contended by learned counsel, certain statements were produced before the authorities, notice of which has not been taken by the High Court. The contents of these statements would have vital importance on the ultimate decision that the High Court may have to take. Therefore, we think it appropriate that since the High Court has proceeded on an erroneous factual basis, this matter should be remanded back to the High Court to consider the material produced by the appellant which is found at pages 70-74 of the appeal papers and decide the case on that basis.

8. In view of the above, we allow this appeal, set aside the impugned order of the High Court and remit the matter back to the High Court for fresh disposal.