Case Law Details
Vaman Prestressing Co. Pvt. Ltd. Vs ACIT (Bombay High Court)
Introduction: The case of Vaman Prestressing Co. Pvt. Ltd. vs. ACIT, as heard by the Bombay High Court, sheds light on the intricacies of reassessment in income tax matters, particularly concerning the concept of commercial expediency and the necessity of a valid belief for reopening assessments.
Detailed Analysis: In this case, the court referred to the precedent set by the Hon’ble Apex Court in S.A. Builders Ltd., emphasizing that interest on borrowed funds given to sister or associate concerns of the assessee can be claimed as a deduction under Section 36(1)(iii) of the Income Tax Act if it was done as a measure of commercial expediency.
The term “commercial expediency” encompasses expenses incurred by a prudent businessman for the benefit of the business, even if not legally obligated to do so. However, whether an expense qualifies as a matter of commercial expediency depends on the specific facts and circumstances of each case.
The court reiterated that the formation of a belief by the Assessing Officer for reopening an assessment is a subjective matter and doesn’t require conclusive proof of income escapement. It should be based on relevant material, and the sufficiency of the evidence is not subject to court scrutiny.
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