1. Having heard learned counsel for the parties in this appeal, which pertains to the assessment year 2005-06, we frame the following substantial question of law:-

“Whether the Income Tax Appellate Tribunal was right in dismissing the appeal of the Revenue and was correct in holding that the Assessing Officer had rightly disallowed the interest of Rs.63,08,097/- and Rs.2,23,787/- paid to bank on account of interest free loan of Rs.28,00,000,00/- granted to sister companies?”

2. Before examining the aforesaid issue, we record that the Revenue has raised another issue/aspect, which relates to failure of the assessee to deduct tax at source on payment of US $ 86250 (Rs.75,90,001/-) on two occasions to M/s. HOK International (Beijing) Limited for the architectural work undertaken by them.

3. The tribunal has referred to the Article 14 of the Double Taxation Avoidance Agreement between India and China, which reads:-

“ARTICLE 14 - Independent Personal Services

“1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that Contracting State except in one of the follow