Assessing Officer can determine the true legal relation resulting from a transaction on substance of the transaction

The Assessee borrowed money from a sister concern at 18 per cent interest and purchased shares from another sister concern carrying a dividend at 4 per cent. The Revenue thought the device was colourable and disallowed the interest. Investment in shares was considered not for business purposes. High Court applied the test of commercial expediency. The question whether having regard to the relationship between different concerns, where a transaction which was patently imprudent takes place, the taxing authority should examine the question of business expediency and not go merely by the fact tha...