M/s. Chemical Construction International Pvt. Ltd., New Delhi V. ACIT, New Delhi

CO 151/DEL/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8353 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 23-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARUN SEEM
• Assessee Lawyers: A K CHADHA
• Keywords: Capital asset; Bad and doubtful debts; Difference of opinion; Assessment record; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NOS. 1104 & 1105/DEL/2012 A.YRS. : 2003-2004 & 2008-09 ACIT, CIR. 3(1), NEW DELHI VS. M/S CHEMICAL CONSTRUCTION INTERNATIONAL PVT. LTD., 205, KUSAL BAZAAR, 32-33, NEHRU PLACE, NEW DELHI 19 (PAN/GIR NO. : AAACC0282M) AND C.O. NO. 151/DEL/2012 (IN ITA NO. 1105/ DEL/2012) A.Y. 2008-09 M/S CHEMICAL CONSTRUCTION VS. ACIT, CIRCLE 3(1) INTERNATIONAL PVT. LTD., NEW DELHI 205, KUSAL BAZAAR, 32-33, NEHRU PLACE, NEW DELHI 19 (PAN : AAACC0282M) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. A.K. CHADHA, CA DEPARTMENT BY : SH. TARUN SEEM, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM THESE APPEALS BY THE REVENUE AND CROSS OBJECTION B Y THE ASSESSEE EMANATE OUT OF ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR A.YRS. 2003-04 & 2008-09 AND THE APPE ALS WERE HEARD TOGETHER AND THEY ARE BEING CONSOLIDATED FOR THE S AKE OF CONVENIENCE AND DISPOSED OF BY THIS COMMON ORDER. ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 2 I.T.A. NO. 1104/DEL/2012 (A.Y. 2003-04) 2. THE ISSUES RAISED IN THE REVENUES APPEAL READ AS UNDER:- (1) THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE INITIATION OF REASSESSMENT PROCEEDING IS NOT SUSTAINABLE IN LAW. (2) THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF ` 78,10,046/- ON ACCOUNT OF BAD DEBTS WRITTEN OFF. (3) THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. IN THIS CASE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 27.11.2003 DECLARING TAXABLE INCOME OF ` 1,25,93,12 0/-. THE SCRUTINY ASSESSMENT IN THIS CASE WAS COMPLETED ON 30.3.2006 WHEREIN INCOME OF THE ASSESSEE WAS ASSESSED AT ` 12618280/-. ASSES SING OFFICER FURTHER NOTED THAT ON PERUSAL OF ASSESSMENT RECORDS REVEALS THAT ASSESSEE HAD DEBITED ` 7810046/- ON ACCOUNT OF BAD DEBTS WRITTEN OFF WHICH ARE OF PRIOR PERIOD, THE SAME WAS NOT ADDED BA CK TO THE INCOME OF THE ASSESSEE BY THE AO. ACCORDINGLY, THE CASE W AS REOPENED U/S. 147. ASSESSEE IN THIS REGARD OBJECTED THE REOPENIN G IN THIS CASE AND STATED THAT HE HAS DISCLOSED FULLY AND TRULY ALL MA TERIAL FACTS NECESSARY FOR THE ASSESSMENT AT THE TIME OF ORIGINAL ASSESSMEN T AND THERE WAS NO REASONS TO BELIEVE NOR THERE WAS ANY MATERIAL ON THE BASIS OF WHICH THERE WAS ANY ESCAPEMENT OF INCOME. THE ASSESSING OFFICER WAS NOT CONVINCED BY THE ABOVE SUBMISSIONS OF THE ASSESSEE. HE PROCEEDED ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 3 TO MAKE THE REASSESSMENT. HE ADDED THE BAD DEBT WR ITTEN OFF AMOUNTING TO ` 7810046/- TO THE INCOME OF THE ASSESSE E. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) ASS ESSEE SUBMITTED THAT ALL RELEVANT MATERIAL WERE PLACED BEFORE THE ASSESSING OFFICER AND THE SAME WERE DULY TAKEN COGN IZANCE BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS MADE ALL REQUISITE ENQUIRIES AND THEREAFTER THE CLAIM OF BAD DEBT WAS A CCEPTED. THEREFORE, IT WAS ARGUED THAT REOPENING IN THE PR ESENT CASE WAS NOT SUSTAINABLE AS IT WAS BASED ON MERE CHANGE OF OPINIO N ON THE FACTS AND MATERIAL ALREADY AVAILABLE ON RECORD. 4.1 LD. COMMISSIONER OF INCOME TAX (A) IN THIS REGAR D, NOTED THAT GENESIS OF REOPENING WAS TO BE FOUND IN THE TAX AUD IT REPORT FURNISHED IN FORM NO. 3CD BY THE TAX AUDITORS. COL. 22(B), OF THE FORM 3CD REPORT STATES THAT A SUM OF ` 7810046/- BEING BAD DE BTS PERTAINING TO PRIOR PERIOD HAS BEEN DEBITED. TAKING COGNIZANCE OF THIS OBSERVATION OF THE AUDITORS, THE ASSESSING OFFICER IN THE COUR SE OF ORIGINAL ASSESSMENT PROCEEDINGS HAD ASKED THE ASSESSEE COMPAN Y TO JUSTIFY (A) THE CLAIM OF BAD DEBTS WRITTEN OFF AND (B) THE B ASIS ON WHICH THE AMOUNT OF ` 7810046/- PERTAINING TO PRIOR PERIOD HAD BEEN CLAIMED IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN RESPONSE TO THE AFORESAID, A DETAILED REPLY WAS FILED ON BEHALF OF THE ASSESSEE COMPANY VIDE ITS LETTER DATED 7.12.2005 WH EREIN COMPLETE DETAILS ALONG WITH JUSTIFICATION REGARDING CLAIM OF BAD DEBTS WRITTEN OFF WAS FURNISHED. CONSIDERING THE ABOVE, LD. COMMISSIO NER OF INCOME TAX (A) HELD THAT THE ISSUE OF BAD DEBTS IN THIS CA SE WAS RAISED AND EXAMINED BY THE ASSESSING OFFICER. THEREAFTER HAVING TAKING INTO CONSIDERATION THE EXPLANATION AND DOCUMENTS FURNISHE D BY THE ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 4 ASSESSEE COMPANY, THE ASSESSING OFFICER DID NOT FIN D IT APPROPRIATE TO MAKE ANY DISALLOWANCE. THEREFORE, LD. COMMISSIONER OF INCOME TAX (A) HELD THAT THE HE WAS IN AGREEMENT WITH THE LD. COUNSEL OF THE ASSESSEE COMPANY THAT THE REOPENING OF THE ASSESS MENT WAS BASED ON CHANGE OF OPINION OR REVIEW OF HIS OWN DECISION ON THE SAME FACTS OF THE CASE. LD. COMMISSIONER OF INCOME TAX (A) FURTHER NOTED THAT THE FACT THAT THE AUDITORS HAVE MADE AN OBSERVATIO N IN FORM NO. 3CD THAT THE AMOUNT OF ` 7810046/- WAS PERTAINING TO TH E PRIOR PERIOD WAS ALSO DULY TAKEN INTO ACCOUNT BY THE ASSESSING OFFI CER AND DETAILED ENQUIRIES WERE MADE AT THE TIME OF ORIGINAL ASSESSME NT. THEREFORE, LD. COMMISSIONER OF INCOME TAX (A) HELD THAT IN THE AB SENCE OF ANY FRESH CREDIBLE AND COGENT MATERIAL BEING GATHERED BY THE ASSESSING OFFICER, NO REOPENING OF EARLIER ASSESSMENT WAS PERMISSIBLE IN LAW. HENCE, LD. COMMISSIONER OF INCOME TAX (A) HELD THAT I NITIATION OF RE- ASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS NOT SUSTA INABLE IN LAW. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE NOTE THAT ON THE ISSUE OF BAD DEBT WAS DULY ENQUIRED UPON BY THE ASSESSING O FFICER IN THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT. IN THE TA X AUDIT REPORT AS PER COL. 22(B), IT WAS MENTIONED THAT ` 7810046/- WERE B AD DEBTS PERTAINING TO PRIOR PERIOD. TAKING COGNIZANCE OF T HIS OBSERVATION IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, ASSE SSEE WAS ASKED TO JUSTIFY (A) THE CLAIM OF BAD DEBTS WRITTEN OFF AND (B ) THE BASIS ON WHICH THE AMOUNT OF ` 7810046/- PERTAINING TO PRIOR PERIOD HAD BEEN CLAIMED IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YE AR UNDER ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 5 CONSIDERATION. IN RESPONSE TO THE AFORESAID, A D ETAILED REPLY WAS GIVEN ON BEHALF OF THE ASSESSEE COMPANY VIDE ITS LE TTER DATED 7.12.2005 WHEREIN COMPLETE DETAILS ALONG WITH JUSTIF ICATION REGARDING CLAIM OF BAD DEBTS WRITTEN OFF WAS FURNISHED AS UNDE R:- BAD DEBTS WRITTEN OFF REASONS FOR THE BAD DEBTS WRITTEN OFF DURING THE YE AR 2003- 04 ARE ENCLOSED HEREWITH AS PER ANNEXURE-A ATTACHED . LEDGER ACCOUNT OF EACH PARTY SHOWING THE DETAILS OF AMOUNT NOT RECOVERED IS ENCLOSED WITH THE COPY OF PROJECT WISE TRADING ACCOUNT, WHICH SHOWS THE YEAR OF CLOSING OF THE PROJECTS AND REVENUE SHOWN IN THE BOOKS OF ACCOUNT B Y THE ASSESSEE. A PROJECT WISE BRIEF SUMMARY IS GIVEN BELOW. AJANTA SOYA LTD. THERE WAS NO WRITTEN AGREEMENT WITH THIS PARTY BECA USE A SMALL ITEM OF ` 250,000/- EXCLUDING SALES TAX WAS SUP PLIED TO THIS CUSTOMER IN THE ASSESSMENT YEAR 2002-03. SA LES TAX OF ` 10,000/- WAS NOT PAID BY THE PARTY THEY ARGUED THAT ITEM WAS TO BE SUPPLIED INCLUSIVE OF TAX ON ` 250,00 0/- AND THEREFORE SALES TAX WAS NOT REIMBURSED BY THE CUSTO MER WHICH HAS BEEN WRITTEN OFF. BAJWA AGRO INDUSTRIES LTD. OUT OF TOTAL SALE PROCEEDS OF ` 2,29,00,000/- A SUM OF ` 28,19,827/- WHICH WAS KEPT AS RETENTION MONEY BY TH E CUSTOMER HAD TO BE WRITTEN OFF BECAUSE THE CUSTOMER REFUSED TO RELEASE THE MONEY ON THE FOLLOWING GROUND S: ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 6 1. THE PLANT SUPPLIED BY THE ASSESSEE DID NOT PERFORM ACCORDING TO THE PARAMETERS LAID DOWN IN THE CONTRACT. THE ASSESSEE HAD SEVERAL MEETINGS WITH THE CUSTOMER AND HAD CORRESPONDENCE WITH IT BUT OF NO AVAIL. 2. FURTHER THE CUSTOMER HAS ALSO FILED SUIT AGAINST THE ASSESSEE FOR RECOVERY OF FURTHER SUM OF ` 6,70,000/ - FOR ENGAGING THE SERVICES OF OUTSIDE FIRM TO RECTIF Y DEFECT PURPORTED TO HAVE OCCURRED IN THE INSTALLATION OF THE ABOVE PLANT. THIS WAS RESISTE D BY THE ASSESSEE. DUE TO THE ABOVE THE ASSESSEE FEELS IT WAS POINTLESS CARRYING THE ABOVE DEBIT IN ITS BOOKS AND THE AMOUNT WAS TRANSFERRED TO BAD DEBTS ACCOUNT DURING THE YEAR UNDER ASSESSMENT. CHAND VANASPATI LTD. THIS PROJECT WAS CLOSED IN THE ASSESSMENT YEAR 1995- 96. TOTAL CONTRACT VALUE OF ` 158,00,000/- WAS SH OWN AS SALES IN REVENUE ACCOUNT. COPY OF TRADING ACCOU NT EXTRACTED FROM THE BALANCE SHEET OF RELEVANT YEAR A ND LEDGER ACCOUNT OF CUSTOMER IS ENCLOSED HEREWITH FOR YOUR KIND PERUSAL. WE FOUND THAT CHAND VANASPATI HAS GONE INTO LIQUIDATION THEREFORE ASSESSEE WAS FORCED TO WRITE OFF BALANCE AMOUNT AS NOT RECOVERABLE IN CASE ANY AMOUNT IS SUBSEQUENTLY RECOVERED FROM THE LIQUIDATOR ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 7 IT WILL BE OFFERED TO TAX BY THE ASSESSEE. CORRESPONDENCE ON THE MATTER IS ENCLOSED. DIAMOND AGRO INDUSTRIES LTD. TOTAL CONTRACT VALUE OF THIS PROJECT WAS ` 205,00,0 00/- SALES WERE SHOWN IN THE ASSESSMENT YEAR 1995-96. SMALL PART OF RETENTION MONEY ` 300,000/- WAS TO BE RECEIVED. IN THE ASSESSMENT YEAR 2003-04 IT WAS FOUND THAT COMPANY IS UNABLE TO HONOUR THE DEBTS DUE TO BANKRUPTCY. THEREFORE ASSESSEE ULTIMATELY DECIDED TO WRITE OFF THE RETENTION MONEY AS BAD DEBTS. CORRESPONDENCE ON THE MATTER IS ENCLOSED. GOETZE INDIA LTD. THIS PROJECT WAS ESTABLISHED FOR BY ESCORTS FOR PROCESSING 400 TONE PER DAY MUSTERED OIL AT ALWAR (RAJASTHAN) HAVING A TOTAL CONTRACT VALUE OF ` 271.0 0 LAKHS. IN COMPARISON TO THE TOTAL CONTRACT VALUE A SMALL A MOUNT OF ` 401,402/- AGAINST RETENTION MONEY WAS NOT RELE ASED BY THE CUSTOMER AFTER WAITING A REASONABLE TIME WITH N O RESPONSE FROM THE CUSTOMER, THE BALANCE WAS WRITTE N OFF. PRASHANT INDIA LTD. THE PROJECT WAS DISPUTED WITH THE CUSTOMER ON THE MATTER OF SATISFACTORY TRIAL RUN. MATTER WAS PRES ENTED BEFORE THE SOLVENT EXTRACTION ASSOCIATION OF INDIA. VARIOUS EVIDENCES OF THE DISPUTE ARE ENCLOSED HEREWITH FOR YOUR ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 8 KIND PERUSAL. RETENTION MONEY FORFEITED BY THE CUS TOMER HAS BEEN WRITTEN OFF IN THE A.Y. 2003-04. OTHER PROJECTS OTHER PROJECT INVOLVES THE RETENTION MONEY WHICH WA S FORFEITED BY THE CUSTOMER. AS PER NATURE OF THE BUSINESS RETENTION IS AN INHERENT LOSS IN THE CONTRACT ACCO UNTING. COPY OF CORRESPONDENCE MADE TO THE PARTIES FROM TIME T O TIME TO RECOVER THE OUTSTANDING BALANCES ARE ENCLOS ED WITH ANNEXURE. STATEMENT SHOWING THE DETAILS OF BAD DEBTS WRITTEN OFF DURING THE A.Y. 2003-04 S.NO. NAME OF PROJECT SALES VALUE PROJECT CLOSED IN A.Y. AMOUNT W/OFF 1 AJANTA SOYA LTD. 250000 2002-03 10000 2 BAJWA AGRO OILS LTD. 22900000 1997-98 2819827 3 CHAND VANSPATI 15800000 1995-96 1170163.75 4 DIAMOND AGRO INDUSTRIAL LTD. 20500000 1995-96 300000 5 GOETZE INDIA LTD. 27150000 1995-96 401402 6 JINDAL PROTEINS LTD. 5600000 1999-2000 388390 7 N.K. OIL INDUCT LTD. 13000000 1998-99 478081 8 NUTECH AGRO OILS LTD. 4297915 1996-97 255783 9 PRASHANT INDIA LTD. 5900000 1998-99 1318385 10 RAJ SOLVEX INDUCT LTD. 13520770 1999-2000 268014 11 VRV BREVERIES & BOTTLING 6875000 1996-97 400000 ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 9 6.1 ASSESSING OFFICER HAS DULY CONSIDERED THE AFOR ESAID REPLY AND HAVING SATISFIED HIMSELF WITH REGARD TO THE ADMISSIBI LITY OF THE BAD DEBTS, ASSESSING OFFICER DID NOT MAKE ANY ADDITION IN THE ORIGINAL ASSESSMENT. 6.2 THUS, WE ARE IN AGREEMENT WITH THE LD. COMMISSI ONER OF INCOME TAX (A) FINDING THAT THE ISSUE OF BAD DEBTS WAS RA ISED AND EXAMINED BY THE ASSESSING OFFICER AND THEREBY HAVING CONSI DERED THE EXPLANATIONS AND DOCUMENTS OF THE ASSESSEE COMPANY, H E DID NOT FIND IT APPROPRIATE TO MAKE ANY DISALLOWANCE / ADDITION. THUS, WE AGREE WITH THE LD. COMMISSIONER OF INCOME TAX (A) THAT REOP ENING IN THIS CASE WAS BASED ON CHANGE OF OPINION OR REVIEW OF H IS OWN ORDER BY THE ASSESSING OFFICER ON THE SAME SET OF FACTS. 6.3 WE FURTHER NOTE THAT THE FACT THAT AUDITORS HA VE MADE AN OBSERVATION IN FORM NO. 3CD THAT THE AMOUNT OF ` 78 10046/- WAS PERTAINING TO THE PRIOR PERIOD WAS ALSO DULY TAKEN INTO ACCOUNT BY THE ASSESSING OFFICER AND DETAILED ENQUIRIES WERE MADE AT THE TIME OF ORIGINAL ASSESSMENT. HENCE, WE ARE IN AGREEMENT WIT H THE LD. COMMISSIONER OF INCOME TAX (A) HELD THAT IN THE ABSE NCE OF ANY FRESH CREDIBLE AND COGENT MATERIAL BEING GATHERED BY THE A SSESSING OFFICER, NO REOPENING OF EARLIER ASSESSMENT WAS PERMISSIB LE IN LAW. IN THIS REGARD, WE PLACE RELIANCE UPON THE HONBLE APEX CO URT DECISION IN THE CASE FORAMER FRANCE : 264 ITR 566 (SC) WHEREIN IT WAS HELD THAT THE ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 10 REASSESSMENT ON CHANGE OF OPINION IS NOT PERMISSIBLE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CO MMISSIONER OF INCOME TAX (A) AND HOLD THAT THE RE-ASSESSMENT PR OCEEDINGS IN THE CASE OF ASSESSEE COMPANY FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION WAS NOT SUSTAINABLE IN LAW. 6.4 SINCE WE HAVE ALREADY QUASHED THE REASSESSMENT ON ACCOUNT OF JURISDICTION ITSELF, THE ISSUE ON THE MERIT RAISED I N THE APPEAL IS NOW ONLY ACADEMIC. HENCE, THE SAME IS NOT BEING DEALT W ITH. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. I.T.A. NO. 1105/DEL/2012 (A.Y. 2008-09) 8. THE GROUNDS RAISED IN THE APPEAL READ AS UNDER: - 1) THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED ON FACTS AND IN LAW IN DELETING DISALLOWANCE OF ` 20,16,607 /- ON ACCOUNT LOSS IN CONTRACT RECEIPTS. 2) THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED ON FACTS AND IN LAW IN DELETING DISALLOWANCE OF EXPENDITURE OF ` 10,12,000/- INCURRED ON GOLD SPONSORED FEE AND REG ISTRATION FEE FOR THE CONFERENCE ON BIO DIESEL. 3) THE APPELLANT CRAVES LEAVE FOR RESERVING THE R IGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF T HIS APPEAL. ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 11 9. APROPOS GROUND NO. 1 THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS O F DRAWING, DESIGN, ENGINEERING AND SUPPLY OF MACHINERY AND EQUI PMENTS FOR EDIBLE OIL AND BIO DIESEL PLANTS. DURING THE ASSTT. PROCEEDINGS, IT WAS NOTICED BY THE LD. ASSESSING OFFICER THAT THE APPEL LANT COMPANY HAD CLAIMED LOSS OF ` 20,16,607/- AGAINST THE PROJECT UN DERTAKEN ON BEHALF OF M/S. GODREJ AGROVET LIMITED. ACCORDINGLY, THE APP ELLANT COMPANY WAS REQUIRED TO FURNISH THE NECESSARY DETAILS OF TH E LOSS IN QUESTION AND JUSTIFICATION FOR ADMISSIBILITY THEREOF. IN RESP ONSE TO THE AFORESAID, A REPLY WAS FILED ON BEHALF OF THE APPELLANT COMPANY VIDE LETTER DATED 14.12.2010. IN THE SAID REPLY, IT WAS STATED ON BEH ALF OF THE APPELLANT COMPANY THAT THE LOSS IN QUESTION PERTAINS TO THE SU PPLY AND ERECTION OF PLANT AND MACHINERY OF M/S. GODREJ AGROVET LIMITED DURING THE FINANCIAL YEAR 2006-07 AND 2007-08. IT WAS EXPLAINE D THAT DURING THE F.Y. 2006-07, THE APPELLANT HAD COMPLETED THE PROJECT OF M/S. GODREJ AGROVET LIMITED AND RECORDED SALES OF RS.4,05,62,254 /- AND GP OF RS. 32,06,679 WAS DISCLOSED THEREON. IT WAS SUBMITTED THAT THERE WERE CERTAIN DEFECTS IN THE PROJECT COMPLETED IN THE CASE OF M/S. GODREJ AGROVET LIMITED A ND NECESSARY RECTIFICATION/REMOVAL OF DEFECTS HAD TO BE UNDERTAK EN DURING THE F.Y. 2007-08 RELEVANT TO THE ASSTT YEAR UNDER CONSIDERAT ION. THE TOTAL COST OF RECTIFICATION OF DEFECTS AMOUNTED TO RS. 27,19,50 7 AGAINST WHICH ONLY A SUM OF RS.7,02,900/- WAS REIMBURSED BY M/S. GODREJ AGROVET LIMITED. THE RESULTANT LOSS OF RS. 20,16,607/- WA S DEBITED BY THE APPELLANT COMPANY TO THE PROFIT AND LOSS ACCOUNT FOR THE F.Y. 2007-08 RELEVANT TO THE ASSTT YEAR UNDER CONSIDERATION. THE AFORESAID EXPLANATION OF THE APPELLANT COMPANY WAS NOT FOUND A CCEPTABLE BY THE ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 12 ASSESSING OFFICER AND THE SAME WAS REJECTED. THE REAFTER, THE LD. AO MADE THE IMPUGNED ADDITION. 10. CONSIDERING THE ASSESSEES SUBMISSIONS IN THIS REGARD LD. COMMISSIONER OF INCOME TAX (A) HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT COMPANY AND THE FINDINGS RECORDED BY THE LD. AO. ON CONSIDERATION, I FIND TH AT THE CLAIM OF LOSS OF RS.2016607/- HAS BEEN SUSTAINE D BY THE APPELLANT COMPANY IN THE NORMAL COURSE OF BUSINESS. IT IS A ESTABLISHED BUSINESS PRACTICE THA T IN CASES OF SETTING OF PLANT AND MACHINERY/ MANUFACTURING UNITS, NORMALLY, PERFORMANCE GUARANTEE AND WARRANTY AGREEMENTS ARE EXECUTED BETWEEN THE SUPPLIER OF PLANT AND MACHINERY AND THE BUYER. THEREFORE, ANY DEFECTS/MISTAKES POINTED OUT/DETECTED DURING THE CURRENCY OF WARRANTY/PERFORMANCE GUARANTEE, IT IS THE CONTRACTUA L OBLIGATION ON THE PART OF THE SUPPLIER TO REMOVE TH OSE DEFECTS. IN THE PRESENT CASE ALSO, THE LOSS OF RS.2016607/- HAS BEEN SUSTAINED BY THE APPELLANT COMPANY ON ACCOUNT OF RECTIFICATIONS CARRIED OUT WIT H RESPECT TO THE PALM OIL MILL ESTABLISHED AT POTHAPALL I (ANDHRA PRADESH) AND SUPPLY OF HYDRAULIC BUNCH HOPPER AND SKID STEER SYSTEM. THE COMPLETE DESCRIPTION OF SPA RES/SYSTEM INSTALLED DURING THE F. Y. 2007-08 RELEVANT TO THE ASSTT YEAR UNDER CONSIDERAT ION HAVE BEEN FURNISHED BY THE APPELLANT COMPANY AND ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 13 REPRODUCED IN THIS ORDER IN PARA 3.5 ABOVE. IN THIS FACT SITUATION, I DO NOT FIND MYSELF IN AGREEMENT WITH TH E LD. AO THAT THE APPELLANT COMPANY HAS NOT ESTABLISHE D THE FACTUM THE LOSS BEING SUSTAINED IN THE COURSE O F NORMAL BUSINESS ACTIVITIES. ON A PERUSAL OF THE PAPE R BOOK FILED BEFORE ME, I FIND THAT THE APPELLANT COMPANY HAS FURNISHED DETAILED EXPLANATION IN REGARD TO TRANSACTIONS WITH M/S. GODREJ AGROVET LIMITED AND LOSS OF RS. 20,16,607/- VIDE LETTER DATED 14.12.201 0. IN THE SAID LETTER, IT HAS BEEN CLEARLY STATED THAT IN THE F.Y, 2006-07, THE APPELLANT COMPANY HAD NOT CREATED ANY PROVISION FOR CARRYING OUT RECTIFICATIONS/REMOVA L OF DEFECTS ETC. AND THEREFORE, THE ACTUAL EXPENSES NET OF REIMBURSEMENT MADE BY M/S. GODREJ AGROVET LIMITED WAS ONLY CLAIMED IN THE YEAR OF INCURRING OF EXPENDITURE OF RS.27,90,507/-. IN VIEW OF THE AFORESAID, I HAVE NO HESITATION IN HOLDING THAT THE FINDING OF THE-LD.AO THAT NECESSARY DETAILS HAVE NO T BEEN MADE AVAILABLE TO HIM IS OPPOSED TO THE FACTS O N RECORDS. ACCORDINGLY, THE DISALLOWANCE OF ` 20,16,6 07/- IS BEING DELETED. 11. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPE AL BEFORE US. 12. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT O F THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND OURSE LVES IN AGREEMENT WITH THE LD. COMMISSIONER OF INCOME TAX (A) THAT THE CLAIM OF LOSS OF ` RS.2016607/- WAS SUSTAINED BY THE ASSESSEE COMPANY I N THE NORMAL COURSE OF BUSINESS. WE NOTE THAT IT IS AN ESTABLI SHED BUSINESS PRACTICE ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 14 THAT IN CASES OF SETTING UP OF PLANT AND MACHINERY/ MANUFACTURING UNITS, NORMALLY, PERFORMANCE GUARANTEE AND WARRANTY A GREEMENTS ARE EXECUTED BETWEEN THE SUPPLIER OF PLANT AND MACHINERY AND THE BUYER. THEREFORE, ANY DEFECTS/MISTAKES POINTED OUT/DETECTED DURING THE CURRENCY OF WARRANTY/PERFORMANCE GUARANTEE, IT IS TH E CONTRACTUAL OBLIGATION ON THE PART OF THE SUPPLIER TO REMOVE THO SE DEFECTS. IN THE PRESENT CASE WE ALSO NOTE THAT THE LOSS OF RS.20,1 6,607/- WAS SUSTAINED BY THE ASSESSEE COMPANY ON ACCOUNT OF RECT IFICATIONS CARRIED OUT WITH RESPECT TO THE PALM OIL MILL ESTABLISHED AT POTHAPALLI (ANDHRA PRADESH) AND SUPPLY OF HYDRAULIC BUNCH HOPPER AND SK ID STEER SYSTEM. IN ASSESSMENT YEAR 2007-08 THE ASSESSEE COMPANY HAD RECEIVED TWO PURCHASE ORDERS ON 31.7.2006 AND 11.1.2007 FOR ` 38 ,50,00,00/- AND ` 47,72,250/- RESPECTIVELY TO ESTABLISH PALM OIL MILL AT POTHAPALLI (ANDHRA PRADESH). THE ASSESSEE COMPANY STARTED THE PROJECT IN FINANCIAL YEAR 2006-07 AND CONDUCTED TRIAL RUN ON 15.3.2007. ON C OMMISSIONING THE PLANT, THE ASSESSEE COMPANY RAISED AN AGGREGATE BI LL OF ` 4,05,62,254/- AND AGAINST WHICH COST OF ` 3,73,55, 575/- WAS DEBITED. THUS, THE PROJECT UNDERTAKEN ON BEHALF OF M/S GODREJ AGROVET LTD. HAD RESULTED INTO PROFIT OF ` 32,06,679/- IN F.Y. 2006-0 7 AND THE SAME WAS OFFERED TO TAX IN THE RETURN OF INCOME FOR THE A.Y. 2007-08. 12.1 SUBSEQUENTLY, THE ASSESSEE COMPANY RECEIVED CER TAIN COMPLAINTS REGARDING SETTING UP OF PALM OIL MILLS AT POTHAPALLI (A.P.) AND AS PER THE AGREEMENT BETWEEN THE ASSESSEE AND M/S GODREJ AGROVET LIMITED, THE ASSESSEE COMPANY WAS UNDER OBLIGATION TO REMOVE / CAR RY OUT RECTIFICATION WITH RESPECT TO THE PROJECT COMPLETED IN F.Y. 2006-07. WE FURTHER NOTE THAT THE ASSESSEES SUBMISSION THAT AS PER THE FINAL PERFORMANCE GUARANTEE EXECUTED BY THE ASSESSEE COMPA NY WITH M/S GODREJ AGROVET LIMITED ON 24.8.2007 AND AS PER THE ME CHANICAL ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 15 WARRANTY UNDERTAKEN FOR A PERIOD OF 12 MONTHS FROM TH E DATE OF COMMISSIONING OF THE PLANT, THE ASSESSEE COMPANY WAS OBLIGED TO UNDERTAKEN RECTIFICATIONS AND REMOVE DEFECTS, ETC. U PTO 31.3.2008. THUS, WE FIND OURSELVES IN AGREEMENT WITH THE LD. COMMISSIONER OF INCOME TAX (A)S OBSERVATION THAT IT HAS NOT BEEN E STABLISHED BY THE ASSESSING OFFICER THAT THE ASSESSEE COMPANY HAD IN CURRED THE LOSS IN NORMAL BUSINESS ACTIVITY. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A), HENCE, WE UPHOLD THE SAME. 13. APROPOS GROUND NO. 2 ON THIS ISSUE DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD INCURRED A SUM OF RS. 10.12 LACS ON ACCOUNT OF PAYMENT OF MEMBERSHIP FEE AND REGISTRATION FEE TO BIO DIESEL ASSOCIATION. ACCORDIN GLY, THE ID. ASSESSING OFFICER REQUIRED THE ASSESSEE COMPANY TO EXPLAIN AS TO WHY THE AMOUNT IN QUESTION SHOULD NOT BE DISALLOWED AS CAPI TAL EXPENDITURE. IN RESPONSE TO THE AFORESAID, IT WAS EXPLAINED ON B EHALF OF THE APPELLANT THAT THE ASSESSEE COMPANY HAS CLAIMED RS. 1 0 LACS ON ACCOUNT OF GOLD SPONSORSHIP FEE FOR ATTENDING CONFE RENCE HELD BY BIO DIESEL ASSOCIATION AND THE BALANCE OF RS. 12000/- HA S BEEN PAID FOR REGISTRATION ETC. IT WAS SUBMITTED THAT THE EXPENDIT URE IN QUESTION WAS RECURRING IN NATURE AND THE APPELLANT COMPANY HAS TO MAKE SUCH PAYMENTS ON YEAR TO YEAR BASIS TO CATER THE QUALITY PRODUCTS FOR ITS CUSTOMERS. IT WAS ARGUED THAT THE PAYMENT OF RS. 10. 12 LACS HAS NOT RESULTED INTO ACQUISITION OF ANY CAPITAL ASSET NOR ANY RIGHT OF PERMANENT CHARACTER HAS BEEN OBTAINED AS A RESULT OF THE AFORESAID PAYMENT. IT WAS ARGUED THAT THE SAID EXPENDITURE WAS INCURRED WITH A ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 16 VIEW TO ASSIST/FACILITATE THE TRADING OPERATIONS OF THE APPELLANT COMPANY. IT WAS THEREFORE SUBMITTED THAT THE PAYMENT I N QUESTION WAS ALLOWABLE U/S 37(1) OF THE IT ACT. 1961. HOWEVER, T HE AFORESAID EXPLANATION DID NOT FIND FAVOUR WITH THE ID. AO AND THE SAME WAS REJECTED. THE CASE OF THE ID. AO WAS THAT THE PAYME NT OF RS. 10 LACS FOR SECURING MEMBERSHIP OF BIO DIESEL ASSOCIATION WAS A B ENEFIT OF ENDURING NATURE AND HENCE, THE SAME WAS TO BE TREAT ED AS CAPITAL EXPENDITURE. 14. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) NOTED THAT ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SUBSTANTIATE HIS FINDING THAT THE EXPENDITURE H AS SECURED ANY BENEFIT OF ENDURING NATURE TO THE ASSESSEE COMPANY. ACCORDINGLY, LD. COMMISSIONER OF INCOME TAX (A) HELD THAT THE EXP ENDITURE WAS NOT OF CAPITAL NATURE AND HENCE THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER WAS DELETED. 15. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 16. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE NOTE THAT THE EXPENDITURE IN THIS CASE HAS BEEN INCURRED IN CONNECTION WITH ENAB LING ENGINEERS AND OTHER TECHNICAL STAFF TO PARTICIPATE IN CONFERENCE S AND DISCUSSIONS ORGANIZED BY THE BIO DIESEL ASSOCIATION OF INDIA. THE DISCUSSION HELD IN THE CONFERENCES WERE ACADEMIC IN NATURE AND HIGH LIGHT THE CONSTRAINTS FACED BY THE INDUSTRY AND THE NEW TECHN OLOGIES AND TRENDS EMERGING AS A RESULT OF GLOBALIZATION OF ECONOMY. THE PROBLEM FACED IN DAY TO DAY WORKING OF BIO DIESEL INDUSTRY ALSO C OME UP FROM DISCUSSIONS AND SUGGESTIONS MADE DURING SUCH DISCUS SIONS HELP THE TECHNICAL STAFF IN SOLVING THE DAY TO DAY PROBLEMS. THEREFORE, WE ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 17 AGREE WITH THE LD. COMMISSIONER OF INCOME TAX (A) TH AT IT WAS WITH A VIEW TO UPDATE THE KNOWLEDGE OF ENGINEERS AND TECHN ICAL STAFF AND THEREFORE, HAS TO QUALIFY AS REVENUE EXPENDITURE. ACCORDINGLY, WE DO FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIO NER OF INCOME TAX (A), HENCE, WE UPHOLD THE SAME. 17. IN THE RESULT, THE REVENUE APPEAL STANDS DISMISS ED. 18. ASSESSEES CROSS OBJECTION NO. 151/DEL/2012 (A.Y. 2008-09) 19. THE GROUNDS RAISED IN THE C.O. READ AS UNDER:- 1) THAT LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN CONFIRMING DISALLOWANCE OF ALLEGED INTEREST OF ` 87, 448/- IN RESPECT OF SISTER CONCERNS WHEN, ON THE CONTRARY, T HE COMPANY HAD OWN FUNDS OF ` 3,85,51,138/- AND THERE W AS NO FINDING OF NEXUS BETWEEN BORROWED FUNDS WITH ADVANC ES OF ` 10,93,100/- GIVEN TO SISTER CONCERNS AND LD. COMMI SSIONER OF INCOME TAX (A) ERRED IN NOT CONSIDERING JURISDICT IONAL DELHI HIGH COURT JUDGEMENT IN THE CASE OF C.I.T. VS. TIN BOX COMPANY REPORTED IN 260 ITR 634 (DEL) 2) THAT THE APPELLANT COMPANY CRAVES LEAVE TO ADD, ALTER, DELETE, AMEND, MODIFY OR VARY CROSS OBJECTIONS BEFO RE OR AT THE TIME OF HEARING OF APPEAL. 20. IN THIS CASE IN THE COURSE OF ASSESSMENT PROCE EDINGS IT WAS NOTICED BY THE ID. ASSESSING OFFICER THAT THE ASS ESSEE COMPANY HAS GRANTED UNSECURED INTEREST FREE LOANS TO ITS SISTER CONCERNS, NAMELY, M/S ASIAN SPICE EXTRACTS LTD. AND M/S. TERRA SAFE TE CHNOLOGIES (P) LTD. HE FURTHER NOTICED THAT A SUM OF RS. 2,22,62,252/- WAS RECOVERABLE FROM ANOTHER SISTER CONCERNS NAMELY M/S CHEMICAL CONS TRUCTION (P) ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 18 LTD. THEREFORE, HE WAS OF THE VIEW THAT PART OF THE INTEREST PAYMENT OF RS. 1,13,13,951- WAS DISALLOWABLE PROPORTIONATELY O N ACCOUNT OF INTEREST FREE ADVANCES GIVEN TO THE SISTER CONCERNS . ACCORDINGLY, THE APPELLANT COMPANY WAS REQUIRED TO FURNISH EXPLANATIO N IN THIS REGARD. IN RESPONSE TO THE AFORESAID, A DETAILED REPLY WAS FILED ON BEHALF OF THE APPELLANT COMPANY VIDE LETTER DATED 14.12.2010. IT W AS EXPLAINED THAT THE AMOUNT OF RS. 2,22,62,252/- WAS OUTSTANDING AGA INST M/S. CHEMICAL CONSTRUCTION (P) LTD. AS ON 31.03.2008. THE ADVANCE IN QUESTION WAS MADE AGAINST PURCHASE OF EQUIPMENTS AND MATERIAL FRO M THE SAID CONCERN. IT WAS EXPLAINED THAT AS AGAINST THE ADVAN CE OF RS. 2,22,62,252/-, EQUIPMENT/MATERIAL OF RS. 3,28,19,738 /- WAS ACTUALLY PURCHASED FROM THE AFORESAID CONCERN IN THE IMMEDIAT ELY SUCCEEDING YEAR. THEREFORE, IT WAS SUBMITTED THAT THE ADVANCES MADE TO THE SISTER CONCERNS WERE RELATING TO NORMAL BUSINESS OF THE AP PELLANT COMPANY AND THEREFORE, NO DISALLOWANCE WAS CALLED FOR. HOWE VER, THE AFORESAID EXPLANATION WAS NOT ACCEPTED BY THE AO AND THE SAME WAS REJECTED. THEREAFTER, THE DISALLOWANCE IN QUESTION HAS BEEN MA DE BY THE ASSESSING OFFICER. 20.1 IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. COMMISSIONER OF INCOME TAX (A), IT WAS ARGUED BY THE ID. COUNSEL THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING D ISALLOWANCE OF RS. 56,86,768/- ON ADHOC BASIS. IT WAS SUBMITTED THAT TH E ADVANCES TO ASIAN SPICES EXTRACTS LTD., TERRA SAFE TECHNOLOGY ( P) LTD. AND CHEMICAL CONSTRUCTION CO. (P) LTD. WERE MADE IN NORMAL COURSE O F BUSINESS AND THUS, WERE COMMERCIAL LOANS AND NOT INTEREST FREE LO ANS AS HELD BY THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE APPELLA NT COMPANY IS IN THE BUSINESS OF SETTING UP OF BIG MANUFACTURING UNIT S AND FOR THIS PURPOSE REQUIRES SUPPLY OF SPARE PARTS, EQUIPMENTS AND SERVICES OF ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 19 ENGINEERS AND TECHNICAL STAFF. THE AFORESAID THRE E COMPANIES HAVE BEEN SUPPLYING THESE NECESSARY SERVICES TO THE ASS ESSEE COMPANY AND AGAINST RENDERING OF SUCH SERVICES PAYMENT OF A DVANCES BECOMES A BUSINESS NECESSITY. THEREFORE, THE ADVANCES IN QUESTION HAVE BEEN MADE AS A BUSINESS NECESSITY AND NOT WITH A VIEW TO GIVE ANY UNDUE ADVANTAGE TO THE SAID CONCERNS. FURTHER, THE ADVANC ES GIVEN TO THE SISTER CONCERNS HAVE NOT RESULTED INTO ANY FINANCIA L BURDEN TO THE APPELLANT COMPANY AS THE INTEREST FREE FUNDS FAR EXC EED THE TOTAL AMOUNT OF ADVANCES GIVEN TO THE SISTER CONCERNS. 21. CONSIDERING THE ABOVE, LD. COMMISSIONER OF INCOM E TAX (A) HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT COMPANY AND THE FINDINGS RE CORDED BY THE ID. AO. ON CONSIDERATION, I FIND THAT THE ID . AO HIMSELF HAS ADMITTED THAT THE ADVANCE OF RS. 2,22,62 ,252/- WAS GIVEN BY THE APPELLANT COMPANY TO M/S. CHEMICAL CONSTRUCTION CO. (P) LTD. AGAINST SUPPLY OF PLANT AN D MACHINERY AND EQUIPMENTS. THEREFORE, THE ADVANCE WAS GIVEN BY THE APPELLANT AS A COMMERCIAL ADVANCE ARISI NG OUT OF BUSINESS NECESSITY IN THE CASE OF THE ASSESSEE C OMPANY. THEREFORE, THERE WAS NO JUSTIFICATION FOR MAKING DISALLOWANCE OF RS. 4,99,230/- ON AN ADHOC BASIS IN RELATION TO THE ADVANCE GIVEN TO M/S CHEMICAL CONSTRUCTION CO. (P) LTD. ACCORDINGLY, THE DISALLOWANCE TO THE EXTENT O F ` 4,99,230/- IS BEING DELETED. HOWEVER, AS REGARDS B ALANCE DISALLOWANCE OF ` 87,448/- MADE ON ACCOUNT OF ADVAN CES GIVEN TO M/S TERRA SAFE TECHNOLOGY (P) LTD. AND ASI AN SPICE ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 20 EXTRACTS LTD., I FIND THAT THE APPELLANT COMPANY HAS NOT ESTABLISHED ANY BUSINESS PURPOSE IN THE AFORESAID C ASES. THEREFORE, THE DISALLOWANCE OF ` 87,448/- IS JUSTIF IED AND BEING SUSTAINED. 22. AGAINST THE ABOVE ORDER THE ASSESSEE FILED CROS S OBJECTION BEFORE US. 23. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT T HE ASSESSEE HAS INTER-ALIA SUBMITTED BEFORE THE AUTHORITIES BELOW THAT ADVANCE TO SISTER CONCERNS WAS GIVEN IN THE NORMAL COURSE OF B USINESS OF THE ASSESSEE. FURTHER, IT HAS BEEN SUBMITTED THAT THE ASSESSEE HAS ADEQUATE SURPLUS FUNDS WHICH WAS NOT CARRYING ANY I NTEREST TO GIVE AS ADVANCE TO SISTER CONCERNS. MOREOVER, THE ASSESSEE SUBMITTED THAT IT IS SETTLED LAW THAT WHERE THE ASSESSEE HAS MIXED, OW NED AND BORROWED FUNDS AND INTEREST FREE ADVANCES HAS BEEN GIVEN TO THE SISTER CONCERN THEN THE PRESUMPTION SHOULD BE TAKEN THAT SA ID ADVANCES HAVE BEEN ADVANCED OUT OF OWN FUNDS AND UNTIL AND U NLESS THERE IS A FINDING THAT THERE WAS DIRECT NEXUS BETWEEN BORROWE D AND INTEREST FREE ADVANCES NO DISALLOWANCE OF INTEREST CAN BE MADE. THE ASSESSEE COMPANY WAS MAINTAINING AN OVERDRAFT A/C WHICH HAS B EEN VERIFIED BY THE ASSESSING OFFICER AND IT CAN BE OBSERVED THAT THE ASSESSEE COMPANY HAD MIXED OWN AND BORROWED FUNDS AND THERE WA S NO NEXUS BETWEEN THE BORROWED AND INTEREST FREE ADVANCES GIV EN TO SISTER COMPANY. THEREFORE, WE AGREE WITH ASSESSEES SUBMISS IONS THAT NO DISALLOWANCE OF INTEREST COULD BE MADE IN THE LIGHT OF DELHI HIGH COURT JUDGEMENT IN CASE OF C.I.T. VS. TIN BOX CO. REPORTED IN 260 ITR 634 (DEL.). ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 21 24. WE FIND THAT THE ASSESSEES SUBMISSIONS THAT IT HAS SUFFICIENT SURPLUS FUNDS TO GIVE AS ADVANCE TO SISTER CONCERN HAS NOT BEEN REBUTTED BY THE AUTHORITIES BELOW. MOREOVER, THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF C.I.T. VS. TIN BO X CO. REPORTED IN 260 ITR 634 (DEL.) ABOVE ALSO SUPPORTS THE CASE OF THE ASSESSEE. UNDER THE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION, THA T THERE IS NO COGENT BASIS OF THE DISALLOWANCE OF ` 87,448/- AND ACCORDINGLY, WE HOLD THAT THE SAID INTEREST WAS PROPERLY ALLOWABLE IN TH E HANDS OF THE ASSESSEE AND WE SET ASIDE THE ORDERS OF THE AUTHORI TIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 25. IN THE RESULT, THE I.T.A. NOS. 1104/DEL/2012 (A. Y. 2003-04) & 1105/DEL/2012 (2008-09) FILED BY THE REVENUE STAND D ISMISSED AND CROSS OBJECTION NO. 151/DEL/2012 (A.Y. 2008-09) FIL ED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/2/2013. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 08/2/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES