M/s. Anu's Laboratories Ltd., Hyderabad V. Addl.CIT, Range-1, Hyderabad

ITA 1016/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77981 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C P RAMASWAMI
• Keywords: Business income; Business expenditure; Scheme of amalgamation; Commercial expediency; Capital expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1016/HYD/2012 ASSESSMENT YEAR 2008-09 M/S. ANU'S LABORATORIES LTD., HYDERABAD PAN: AACCA0071G VS. THE ADDL. CIT RANGE-1 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI C.P. RAMASWAMI RESPONDENT BY: SRI SOLGY JOSE T. KOTTARAM DATE OF HEARING: 1 9 .0 6 .2014 DATE OF PRONOUNCEMENT: 27 .06.2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A)-II, HYDERABAD DATED 3.2.2012. 2. FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN PRODUCTION OF BULK DRUGS AND API AND FILED ITS RETU RN OF INCOME FOR A.Y. 2008-09 ON 30.9.2008 ADMITTING AN INCOME OF RS. 26,39,95,940. THE RETURN WAS PROCESS ED U/S. 143(1) ON 16.2.2010. THE AO MADE CERTAIN DISALLOWANCES OF WHICH DISALLOWANCE OF RS. 1,29,71, 323 ON ACCOUNT OF INTEREST FREE ADVANCES TO M/S. NITYA LABORATORIES LTD. WAS AGITATED ON FURTHER APPEAL BE FORE THE CIT(A). 3. DURING THE APPELLATE PROCEEDINGS BEFORE THE CIT(A), THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED M/S. NITYA 2 ITA NO. 1016/HYD/2012 M/S. ANU'S LABORATORIES LTD. ===================== LABORATORIES LTD., IS A BULK DRUG MANUFACTURING COM PANY, BECAME SICK AND CONSEQUENTLY BECAME DEFAULTER TO VARIOUS BANKS, FINANCIAL INSTITUTIONS AND CREDITORS . THE ASSESSEE COMPANY WAS ALSO IN THE BUSINESS OF MANUFACTURE AND SALE OF BULK DRUGS AND DRUG INTERMEDIATES AND WAS IN DEVELOPING STAGE HAVING GO OD ORDERS. THE ASSESSEE THOUGHT IT PRUDENT TO GET THE CONVERSION DONE THROUGH NITYA LABORATORIES LIMITED UNDER AN EXCLUSIVE ARRANGEMENT AND ACCORDINGLY NITY A LABORATORIES LIMITED HAS BEEN CARRYING OUT JOB WORK S EXCLUSIVELY TO THE ASSESSEE COMPANY. IN THIS PROCES S THE ASSESSEE HAS TO TAKE CARE OF VARIOUS REQUIREMENTS INCLUDING PAYMENT TO CREDITORS, CLEARING INSTITUTIO NAL LOANS AND MAKING INVESTMENT IN CAPITAL EXPENDITURE ACCORDING TO THE PRODUCTION REQUIREMENT AND PRODUCT MIX AS REQUIRED AND DECIDED BY THE ASSESSEE COMPANY FRO M TIME TO TIME. 4. THE AR SUBMITTED THAT FROM TIME TO TIME THE ASSESSEE MADE ON ACCOUNT PAYMENTS TO NITYA LABORATO RIES LIMITED TO TAKE CARE OF ITS WORKING CAPITAL REQUIRE MENTS SINCE THE TOTAL MANUFACTURING FACILITY OF NITYA LAB ORATORIES LIMITED IS USED BY THE ASSESSEE AND NITYA LABORATOR IES LTD IS NOT HAVING ANY WORKING CAPITAL FACILITY AND ADVANCES WERE MADE TO MAKE CAPITAL EQUIPMENT ADDITI ONS TO SUIT ASSESSEE'S MANUFACTURING REQUIREMENT AND TO TAKE CARE OF PAYMENTS TO OUTSIDE PARTIES INCLUDING BANKS AND FINANCIAL INSTITUTIONS. IT WAS POINTED OUT THAT BU T FOR THE ADVANCES MADE BY THE ASSESSEE TO M/S. NITYA LABORATORIES LTD., M/S. NITYA LABORATORIES LTD. WOU LD HAVE CLOSED ITS OPERATIONS WHICH IN TURN WOULD HAVE AFFECTED THE ASSESSEE'S BUSINESS. 3 ITA NO. 1016/HYD/2012 M/S. ANU'S LABORATORIES LTD. ===================== 5. THE AR SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE TOTAL ON ACCOUNT PAYMENTS TO NITY A LABORATORIES LIMITED IS RS. 15,22,09,739/- AND CRED IT FOR JOB WORK CHARGES IS RS. 8,60,54,039/-. THE ASSESSEE'S TOTAL SALE DURING THE YEAR IS RS. 167.34 CRORES. IT CONSISTS OF GOODS MANUFACTURED BY THE ASSESSEE AND SOLD OF RS. 120.47 CRORES AND GOODS MANUFACTURED BY NITYA LABORATORIES LTD ON JOB WORK BASIS WHICH IN TURN SOLD BY THE ASSESSEE OF RS. 46. 87 CRORES. THE ASSOCIATION WITH NITYA LABORATORIES LIMITED IS NOT ONLY RESTRICTED TO CUSTOMER-SUPPLIER RELATION AND IT IS BEYOND. THE ASSESSEE COMPANY IS A WIDELY HELD PUBLIC LIMITED AN D IS A MAJOR SHAREHOLDER IN NITYA LABORATORIES LIMITED HAVING AN EQUITY INVESTMENT OF RS. 2,69,21,100/- OUT OF THE TOTAL EQ UITY OF RS. 6,79,80,740/- NITYA LABORATORIES LIMITED. THE COMPA NY NITYA LABORATORIES LIMITED GOT AMALGAMATED WITH THE ASSES SEE COMPANY WITH EFFECT FROM 01-04-2009 UNDER THE SCHEM E OF AMALGAMATION DULY APPROVED BY THE HON'BLE HIGH COUR T OF ANDHRA PRADESH VIDE ORDER DATED 21-12-2010. 6. THE AR SUBMITTED THAT THE ASSESSING OFFICER IS NOT CORRECT IN SAYING THAT THE WORKING CAPITAL LOANS OB TAINED BY THE ASSESSEE HAVE BEEN UTILIZED FOR MAKING ADVAN CES TO NITYA LABORATORIES LIMITED SINCE THE LOAN AMOUNTS W ERE UTILIZED FOR SPECIFIED PURPOSES AS PER THE ARRANGEM ENT WITH LENDING BANKS AND INSTITUTIONS. THE ASSESSEE I S HAVING ACCUMULATED PROFITS IN 'RESERVES AND SURPLUS ' AND THE AGGREGATE OF SUCH PROFITS AS AT THE OPENING OF THE YEAR WAS RS. 23.67 CRORES AND AS THE YEAR END WAS RS. 43 .37 CRORES AND THE AGGREGATE AMOUNT OF EQUITY AND RESER VES AT THE YEAR END IS RS. 51.63 CRORES. AS MENTIONED EARL IER, THE ENTIRE MANUFACTURING FACILITY OF NITYA LABORATORIES LTD IS USED BY THE ASSESSEE. THE SALE OF THE PRODUCTS NAME LY SMO AND CIS+HYDROXY LACTOM EXCLUSIVELY MANUFACTURED 4 ITA NO. 1016/HYD/2012 M/S. ANU'S LABORATORIES LTD. ===================== BY NITYA LABORATORIES LTD FOR THE COMPANY AND THE S ALE VALUE OF THE SAID PRODUCTS CONSTITUTES 38% OF THE T OTAL SALES OF THE COMPANY. 7. THE LEARNED CIT(A) HELD THAT THE ASSESSEE DID NOT SUBSTANTIATE ITS CLAIM OF PAYMENT OF INTEREST FREE FUNDS TO M/S. NITYA LABORATORIES LTD., WITH ANY DOCUMENTARY EVIDENCE VIZ., CASH FLOW STATEMENT, BANK STATEMENT AND LEDGER COPIES, ETC. THE CIT(A) OBSERVED THAT THE A SSESSEE MADE ONLY GENERAL SUBMISSION. THE CIT(A) FURTHER OBSERVED THAT THE FACT M/S. NITYA LABORATORIES LTD. GOT AMALGAMATED WITH THE ASSESSEE W.E.F. 1.4.2009 HAS N O IMPLICATION ON THE BOOK RESULTS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE CIT(A) DID NOT ACCEP T THE ARGUMENT THAT INTEREST FREE LOANS WERE ADVANCED TO THE SISTER CONCERN WHICH ULTIMATELY GOT AMALGAMATED WIT H THE ASSESSEE-COMPANY. THE CIT(A) HELD THAT THERE IS NO COMMERCIAL EXPEDIENCY IN ADVANCING RS. 1522.09 LAKH S AGAINST JOB WORK CHARGES PAYABLE OF RS. 860 LAKHS. THE CIT(A) POINTED OUT THAT THE AO HAS STATED THAT FROM THE CASH FLOW STATEMENT, THE NET CASH GENERATED FROM OPERATION IS RS. 6,62,23,724. THE CIT(A) FURTHER O BSERVED THAT EACH ASSESSEE IS SEPARATE ENTITY AND IN THE NA ME OF COMMERCIAL EXPEDIENCY ONE ENTITY CANNOT TRANSFER IT S INTEREST BEARING FUNDS TO ANOTHER CONCERN. THE CIT (A) CONCLUDED THAT IN THE CASE OF THE ASSESSEE INTEREST BEARING FUNDS HAD BEEN TRANSFERRED TO THE SISTER CONCERN AN D IT WAS NOT THE CASE OF THE ASSESSEE TRANSFERRING 'RESE RVES AND SURPLUS' AND, THEREFORE, IN SUCH A SITUATION INTERE ST PAYABLE ON BORROWED CAPITAL TO THE EXTENT UTILISED FOR ADVANCING THE INTEREST FREE LOANS WILL NOT BE ADMIS SIBLE AS A DEDUCTION. THEREFORE, THE CIT(A) CONFIRMED THE 5 ITA NO. 1016/HYD/2012 M/S. ANU'S LABORATORIES LTD. ===================== DISALLOWANCE OF RS. 1,29,71,323 MADE BY THE AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LEARNED COUNSEL FOR THE ASSESSEE, SRI C.P. RAMASWAMI SUBMITTED THAT M/S. NITYA LABORATORIES LT D. IS A BULK DRUG MANUFACTURING COMPANY WHICH STARTED PRODUCTION IN THE YEAR 1997 AND BECAME SICK AND CONSEQUENTLY BECAME DEFAULTER TO VARIOUS BANKS, FIN ANCIAL INSTITUTIONS AND CREDITORS. THE ASSESSEE COMPANY W AS ALSO IN THE BUSINESS OF MANUFACTURING AND SALE OF B ULK DRUGS AND DRUG INTERMEDIATES AND WAS IN DEVELOPING STAGE HAVING GOOD ORDERS. FROM 2005, THE ASSESSEE-COMPAN Y M/S. ANU'S LABORATORIES LTD. HAD CARRIED OUT PART OF THE MANUFACTURING OPERATIONS ON JOB WORK BASIS WITH M/S . NITYA LABORATORIES LTD. 9. THE LEARNED COUNSEL FOR THE ASSESSEE STRESSED ON THE FACT THAT M/S. NITYA LABORATORIES LTD. HAD BEEN CARRYING ON JOB WORKS EXCLUSIVELY FOR THE ASSESSEE- COMPANY. IN THIS PROCESS THE ASSESSEE HAS TO TAKE CARE OF VARIOUS REQUIREMENTS INCLUDING PAYMENT TO CREDITORS , CLEARING INSTITUTIONAL LOANS AND MAKING INVESTMENT IN CAPITAL EXPENDITURE ACCORDING TO PRODUCTION REQUIRE MENT. HENCE THESE REQUIREMENTS ARE MET BY THE ASSESSEE AP ART FROM CONVERSION CHARGES. THE LEARNED COUNSEL FOR T HE ASSESSEE SUBMITTED THAT UNLESS THE REQUIREMENT OF M /S. NITYA LABORATORIES LTD., ARE MET BY THE ASSESSEE, H EAVY LOSSES WOULD BE INCURRED BY M/S. NITYA LABORATORIES LTD., WHICH WOULD HAVE RESULTED IN CLOSING DOWN OF M/S. N ITYA LABORATORIES LTD., AND IT IS NOT POSSIBLE FOR THE A SSESSEE TO CREATE SUCH HUGE PRODUCTION FACILITY. HENCE THE AS SESSEE 6 ITA NO. 1016/HYD/2012 M/S. ANU'S LABORATORIES LTD. ===================== TOOK A PRUDENT COMMERCIAL DECISION TO MAKE ADVANCES TO M/S. NITYA LABORATORIES LTD. 10. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE HAS A MAJOR SHAREHOLDING IN M/S. NITYA LABORATORIES LTD. HAVING EQUITY INVESTMENT OF RS. 2,69,21,100 OUT OF THE TOTAL EQUITY OF RS. 6,79,80, 740 OF M/S. NITYA LABORATORIES LTD. FURTHER IN THE SUBSEQU ENT YEAR, M/S. NITYA LABORATORIES LTD. GOT AMALGAMATED WITH THE ASSESSEE-COMPANY W.E.F. 1.4.2009 UNDER THE SCHE ME OF AMALGAMATION DULY APPROVED BY THE HONBLE HIGH COURT. AS A MATTER OF BUSINESS PRUDENCE THE AMOUNT S WERE ADVANCED TO M/S. NITYA LABORATORIES LTD. BY TH E ASSESSEE FOR CARRYING OUT THE MANUFACTURING OPERATI ONS ON JOB WORK BASIS. 11. ON THE OTHER HAND, THE LEARNED DR, WHILE SUPPORTING THE ORDER OF THE CIT(A), SUBMITTED THAT T H E A O HAS NOTED THAT DURING THE YEAR THE ASSESSEE AVAILED WORKING CAPITAL LOAN FROM THE BANKS TO THE EXTENT O F R S . 22,67,03,073/- AND WHEN SURPLUS FUNDS ARE AVAILABLE , THERE WAS NO NEED FOR THE ASSESSEE TO BORROW HEAVIL Y FROM BANKS AND PAY INTEREST OF RS. 3,76,62,677/- AND BILL DISCOUNTING CHARGES OF R S . 1,67,84,059/- AND THE AVERAGE RATE OF INTEREST PAID ON WORKING CAPITAL LOANS WAS ABOUT 16.6%. THERE IS NO COMMERCIAL EXPEDIENCY IN BORROWING HEAVILY FROM BANKS AND ADVANCING INTEREST FREE AMOU NTS TO ANOTHER CONCERN. THE A O HAS ALSO OBSERVED THAT EVEN TAX PAYMENT WAS POSTPONED BY THE ASSESSEE AND MAJOR PART OF TAX IS PAID IN SEVERAL INSTALMENTS FOR FEW YEARS AFTER THE END OF THE FINANCIAL YEAR. THEREFORE, IT WAS HELD BY THE AO THAT THE FUNDS ADVANCED TO M/S NITYA 7 ITA NO. 1016/HYD/2012 M/S. ANU'S LABORATORIES LTD. ===================== LABORATORIES LTD ARE LINKED WITH BORROWED FUNDS AND FROM THE CASH FLOW STATEMENT, THE NET CASH GENERATED FRO M OPERATIONS WERE SEEN TO BE RS. 6,62,23,724/- AND NO PRUDENT BUSINESSMAN WOULD ADVANCE FUNDS AT HIS OWN COST TO ANOTHER BUSINESS ENTITY, THAT TOO FREE OF I NTEREST AND ACCORDINGLY, THE A O CALCULATED INTEREST AT 16.6% ON THE AVERAGE BALANCES WITH M / S . NITYA LABORATORIES LTD. OF RS. 781.405 LAKHS WHICH WORKED OUT TO R S . 1,29,71,323/- AND THIS WAS DISALLOWED. 12. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT M / S . NITYA LABORATORIES LTD. HAS ENTERED INTO AN EXCLUSI VE ARRANGEMENT WITH THE ASSESSEE AND HAS BEEN CARRYING OUT JOB WORK OF THE ASSESSEE-COMPANY AS POINTED BY THE COUNSEL AT PAGE 47 OF THE PAPER BOOK. IN THIS PRO CESS, THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCED FROM TIME TO TIME TO M / S . NITYA LABORATORIES LTD. TO TAKE CARE OF THE WORKING CAPITAL REQUIREMENTS SINCE THE ENTIRE MANUFACTURING FACILITY OF M / S . NITYA LABORATORIES LTD. IS USED BY THE ASSESSEE. THE LEARNED COUNSEL POINTED OUT THAT ALL BILLS HAVE BEEN ADJUSTED AGAINST JOB WORK CHARGES AND HAVE BEEN ENCLOSED FROM PAGES 27 TO 92 OF THE P APER BOOK. THE WORKING CAPITAL FACILITY AND CAPITAL EQUI PMENT ADDITION FOR THE SAKE OF ASSESSEE'S MANUFACTURING REQUIREMENT HAD BEEN TAKEN CARE OF BY THE ASSESSEE ITSELF BY ADVANCING THESE LOANS. IT WAS A WELL THOUGHT OU T DECISION THAT BUT FOR THE ADVANCES GIVEN BY THE ASS ESSEE, M / S . NITYA LABORATORIES LTD. WOULD BE IN A POSITION TO CLOSE ITS OPERATIONS AND CANNOT TAKE CARE OF PAYMEN TS TO OUTSIDE PARTIES BEING BANKS AND FINANCIAL INSTITUTI ONS. FURTHER THE ASSESSEE COMPANY IS A WIDELY HELD PUBLI C LIMITED COMPANY AND MAJOR SHAREHOLDERS IN M / S . NITYA 8 ITA NO. 1016/HYD/2012 M/S. ANU'S LABORATORIES LTD. ===================== LABORATORIES LTD. ADDING EQUITY INVESTMENT OF RS. 2,69,21,100 OUT OF THE TOTAL EQUITY OF RS. 6,79,80, 740 OF M / S . NITYA LABORATORIES LTD. WE FIND THAT THE COMPANY M / S . NITYA LABORATORIES LTD. GOT AMALGAMATED WITH THE ASSESSEE-COMPANY W.E.F. 1.4.2009 AND THE SCHEME OF AMALGAMATION HAS BEEN APPROVED BY THE HONBLE HIGH COURT OF ANDHRA PRADESH. 13. IN THE CASE OF M/S. SA BUILDERS LTD. VS. CIT & ANR. (288 ITR 1) THE HONBLE SUPREME COURT OF INDIA HELD AS FOLLOWS: 'IN ORDER TO DECIDE WHETHER INTEREST ON FUNDS BORROWED BY THE ASSESSEE TO GIVE AN INTEREST FREE LOAN TO A SISTER CONCERN (E.G., A SUBSIDIARY OF THE ASSESSEE) SHOULD BE ALLOWED AS A DEDUCTION UNDER SECTION 36(1)(III) OF THE INCOME-TAX ACT, 1961, ONE HAS TO ENQUIRE WHETHER THE LOAN WAS GIVEN BY THE ASSESSEE AS A MEASURE OF COMMERCIAL EXPEDIENCY. THE EXPRESSION' COMMERCIAL EXPEDIENCY' IS ONE OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION, BUT YET IT IS ALLOWABLE AS BUSINESS EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. DECISIONS RELATING TO SECTION 37 WILL ALSO BE APPLICABLE TO SECTION 36(1)(III) BECAUSE IN SECTION 37 ALSO THE EXPRESSION USED IS 'FOR THE PURPOSE OF THE BUSINESS'. 'FOR THE PURPOSE OF BUSINESS' INCLUDES EXPENDITURE VOLUNTARILY INCURRED FOR COMMERCIAL EXPEDIENCY, AND IT IS IMMATERIAL IF A THIRD PARTY ALSO BENEFITS THEREBY. THE EXPRESSION 'FOR THE PURPOSE OF BUSINESS' IS WIDER IN SCOPE THAN THE EXPRESSION 'FOR THE PURPOSE OF EARNING PROFITS'. TO CONSIDER WHETHER ONE SHOULD ALLOW DEDUCTION UNDER SECTION 36(1)(III) OF INTEREST PAID BY THE ASSESSEE ON AMOUNTS BORROWED BY IT FOR ADVANCING TO A SISTER CONCERN, THE AUTHORITIES AND THE COURTS SHOULD EXAMINE THE PURPOSE OF WHICH THE ASSESSEE ADVANCED THE MONEY AND WHAT THE SISTER CONCERN DID WITH THE MONEY. THAT THE BORROWED AMOUNT IS 9 ITA NO. 1016/HYD/2012 M/S. ANU'S LABORATORIES LTD. ===================== NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BUT HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SISTER CONCERN IS NOT RELEVANT. WHAT IS RELEVANT IS WHETHER THE AMOUNT WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PROFITS. ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND PURPOSE OF THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF) THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM-CHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFITS.' 14. ANALYSING THE FACTS OF THE CASE FROM THE ANNUAL REPORTED SUBMITTED, WE FIND THAT THE ASSESSEE'S TOT AL SALES DURING THE YEAR IS RS. 167.34 CRORES WHICH CONSISTS OF GOODS MANUFACTURED BY THE ASSESSEE-COMPANY AND SALE S OF RS. 120.47 CRORES AND GOODS MANUFACTURED BY M / S . NITYA LABORATORIES LTD. ON JOB WORK BASIS, WHICH IN TURN SOLD BY THE ASSESSEE AT RS. 46.87 CRORES. WE ALSO NOTE THAT THE ASSESSEE IS HAVING ACCUMULATED PROFITS IN 'RESERVES AND SURPLUS' AND AT THE OPENING OF THE YE AR IT IS AT RS. 23.67 CRORES AND AT THE YEAR ENDING IT IS AT RS. 43.37 CRORES AND THE AGGREGATE AMOUNT OF EQUITY AND RESERVES AT THE YEAR ENDING IS RS. 51.63 CRORES. T HE SALE VALUE OF THE PRODUCTS EXCLUSIVELY MANUFACTURED BY M / S . NITYA LABORATORIES LTD. FOR THE ASSESSEE-COMPANY CONSTITUTES 38% OF THE TOTAL SALES OF THE ASSESSEE- COMPANY. HENCE WE ARE OF THE OPINION THAT FOR THE SAKE OF COMMERCIAL EXPEDIENCY AND OUT OF BUSINESS PRUDENCE THE ASSESSEE HAS ADVANCED THESE AMOUNTS TO M / S . NITYA LABORATORIES LTD. THE ASSESSEE'S APPEAL IS ALLOWED . 10 ITA NO. 1016/HYD/2012 M/S. ANU'S LABORATORIES LTD. ===================== 15. FOLLOWING THE RATIO OF HONBLE SUPREME COURT'S DECISION IN THE CASE OF SA BUILDERS LTD. (SUPRA), W E HAVE TO ANSWER THE QUERY WHETHER THE AMOUNTS WERE ADVANC ED BY THE ASSESSEE AS A MEASURE OF COMMERCIAL EXPEDIEN CY IN AFFIRMATIVE. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2014 SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 27 TH JUNE, 2014 TPRAO COPY TO: 1 . M/S. ANU'S LABORATORIES LTD., C/O. DR. C.P. RAMA- SWAMI, ADVOCATE, FLAT NOS. 102 & 303, GITANJALI APT S., PLOT NO. 108, SRINAGAR COLONY, HYDERABAD-500 073. 2 . THE ADDL. CIT, RANGE-1, HYDERABAD. 3 . THE CIT(A)-II, HYDERABAD. 4 . THE CIT-I, HYDERABAD. 5 . THE DR, B-BENCH, ITAT, HYDERABAD.