JUDGMENT

Markandey Katju, J. - Leave granted.

2. These two appeals involve common questions of law and fact and hence are being disposed of by a common judgment.

3. Since the leading case is that of S.A. Builders [SLP(C) 21707-21710/2004], we shall be taking note of the facts of this case.

These appeals have been filed against the impugned judgment of the Punjab and Haryana High Court dated 13.5.2004 in Income Tax Appeal Nos. 6, 7, 119 and 120 of 2003, and the judgment dated 21.5.2004 in ITA No. 117/118 of 2003.

4. Heard learned counsel for the parties and perused the record. During the course of the proceeding for the relevant assessment year(s), the Assessing Officer under the Income Tax Act observed that the assessee had transferred a huge amount of Rs. 82 lakhs to its subsidiary company M/s. SAB Credits Limited out of the cash credit account of the assessee in which there was a huge debit balance. He, therefore, held that since the assessee had diverted its borrowed funds to a sister concern without charging any interest, proportionate interest relating to the said amount out of the total interest paid to the bank deserved to be disallowed. Accordingly, he disallowed a sum of Rs. 5