DCIT, Spl. Range, Patiala V. Punjab Tractors Ltd., Mohali

ITA 1031/CHANDI/1997

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0117 (ITAT-CHANDIGARH)
• Duration Of Justice: 18 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-03-2016
• Assessment Year: 1992-1993
• Appeal Filed On: 28-10-1997
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.1031/CHD/1997 (ASSESSMENT YEAR : 1992-93) ITA NO.8/CHD/1998 (ASSESSMENT YEAR : 1993-94) ITA NO.350/CHD/1998 (ASSESSMENT YEAR : 1994-95) ITA NO.200/CHD/1999 (ASSESSMENT YEAR : 1995-96) THE D.C.I.T., VS. PUNJAB TRACTORS LTD., SPL. RANGE, PHASE-IV, SAS NAGAR, PATIALA. MOHALI. PAN/GIR: 28-020-CZ-4911 AND ITA NO.603/CHD/2003 (ASSESSMENT YEAR : 1996-97) THE A.C.I.T., VS. PUNJAB TRACTORS LTD., CIRCLE PATIALA. PHASE-IV, SAS NAGAR, MOHALI. PAN/GIR: 28-020-CZ-4911 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANOJ MISHRA, DR RESPONDENT BY : NONE DATE OF HEARING : 14.03.2016 DATE OF PRONOUNCEMENT : 04.04.2016 2 O R D E R PER RANO JAIN, A.M . : THIS BUNCH OF FIVE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS), PATIALA DATED 13.8.1997, 24.10.1997, 9.1.1998, 16,12,1998 AND 7.8.2003 , RELATING TO ASSESSMENT YEARS 1992-93, 19 93-94, 1994-95, 1995-96 AND 1996-97 RESPECTIVELY. 2. IN ALL THE APPEALS, THE ISSUE IS COMMON AND, THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND AR E BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. SINCE ISSUE IS SAME IN ALL THE APPEALS, WE WILL REFER THE APPEAL OF THE REVENUE IN ITA NO.1031/CHD/ 1997 AND THE DECISION GIVEN IN THIS APPEAL SHALL APPLY T O OTHER CASES MUTATIS MUTANDIS ITA NO.1031/CHD/1997 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER MADE ADDITION OF AN AMOUNT OF RS.51,23,000/-, AMONGST OTHER ADDITIONS AND DISALLOWANCES ON ACCOUNT OF INTEREST ON BORROWED FU NDS LENT TO SWARAJ MAZDA LIMITED ( IN SHORT SML), A S ISTER CONCERN OF THE ASSESSEE, UNDER SECTION 36(1)( III) OF THE 3 INCOME TAX ACT, 1961 (IN SHORT THE ACT), VIDE HIS ORDER DATED 26.12.1994. BEFORE THE CIT (APPEALS), THE AS SESSEE CONTESTED THE SAID ADDITION ON TWO COUNTS, VIZ., TH E ASSESSEE HAD NOT INCURRED ANY INTEREST COST ON THE FUNDS LENT TO SML AND ALSO THE FUNDS WERE LENT OUT OF COMMERCIAL EXPEDIENCY. THE CIT (APPEALS), VIDE HIS ORDER DATED 13.8.1997, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE CIT (APPEALS) HELD THAT SINCE THERE WAS NO INTEREST OCCURRED ON THESE OUTLAYS, THE QUESTION OF DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT DO ES NOT ARISE. FURTHER, IT WAS ALSO HELD BY HIM THAT THE I NTEREST PAID ON BORROWED FUNDS CANNOT BE REDUCED IF THE LEN DING WAS WARRANTED BY THE BUSINESS EXIGENCY. THE DEPART MENT WENT IN APPEAL BEFORE THE I.T.A.T. AND THE I.T.A.T. DISMISSED THE APPEAL AND DECIDED THE ISSUE IN FAVOU R OF THE ASSESSEE, VIDE ORDER DATED 4.8.2003. IT WAS HE LD THAT THE FACT THAT THE ASSESSEE HAD NOT CHARGED ANY INTE REST ON THE AMOUNTS DUE FROM ANOTHER CONCERN, WOULD NOT ITS ELF JUSTIFY IN MAKING THE ADDITION ON NOTIONAL BASIS. AS AGAINST THIS ORDER THE DEPARTMENT PREFERRED AN APPE AL BEFORE THE HON'BLE HIGH COURT. THE HON'BLE HIGH CO URT VIDE ORDER DATED 21.1.2009 IN APPEAL NO.16 OF 2004 SENT THE MATTER BACK TO THE I.T.A.T. TO DECIDE THE ISSUE FROM THE VIEW OF BUSINESS EXPEDIENCY ALSO IN THE LIGHT O F THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F S.A. BUILDERS VS. CIT, 288 ITR 1 (SC) AND GRANTED LIBERTY 4 TO FILE ANY ADDITIONAL EVIDENCES WHICH THE PARTIES MAY FURNISH. THE I.T.A.T., IN PURSUANCE OF ORDER OF TH E HIGH COURT, VIDE ORDER SHEET ENTRY DATED 11.8.2009 GAVE DIRECTION TO THE ASSESSING OFFICER TO LOOK INTO THE MATTER AFRESH FROM THE VIEW OF BUSINESS EXPEDIENCY. THE ASSESSING OFFICER SENT A REMAND REPORT DATED 24.9.2 009 TO THE I.T.A.T. DURING THESE REMAND PROCEEDINGS, OPPORTUNITY WAS GIVEN TO THE ASSESSEE WHO HAD DULY FILED SUBMISSION TOGETHER WITH EVIDENCES IN THIS REGARD. AFTER CONSIDERING ALL THIS THE ASSESSING OFFICER WAS OF T HE OPINION THAT THERE WAS NO BUSINESS EXPEDIENCY WITH THE SISTER CONCERN, SML, IN LENDING INTEREST FREE ADVAN CES IN THE LIGHT OF PARAMETERS LAID DOWN BY THE HON'BLE SU PREME COURT IN THE CASE OF S.A. BUILDERS (SUPRA). HENCE , IT WAS PRAYED THAT DISALLOWANCE BE SUSTAINED. A COPY OF T HIS REMAND REPORT WAS PROVIDED TO THE ASSESSEE, WHO FIL ED ITS OBJECTIONS AGAINST THE SAME, VIDE LETTER DATED 6.10 .2009, WHEREBY A PARA-WISE REPLY TO THE ISSUES RAISED BY T HE ASSESSING OFFICER IN REMAND REPORT, WAS PROVIDED. A PARA-WISE COUNTER REPLY TO THESE SUBMISSIONS OF THE ASSESSEE WAS LATER ON GIVEN BY THE ASSESSING OFFICE R TO THE I.T.A.T., VIDE HIS LETTER DATED 25.7.2012, WHEREBY HE AGAIN PRAYED FOR CONFIRMATION OF ADDITION MADE UNDER SECT ION 36(1)(III) OF THE ACT. 5. IN THESE CIRCUMSTANCES, THE APPEAL WAS POSTED BEFORE US FOR HEARING. ON THE DATE OF HEAR ING, NONE 5 APPEARED ON BEHALF OF THE ASSESSEE. THE LEARNED D. R. VEHEMENTLY ARGUED AND MADE SUBMISSIONS ON THE BASIS OF TWO REMAND REPORTS FILED BY THE ASSESSING OFFICER B EFORE THE I.T.A.T. 6. WE HAVE HEARD THE LEARNED D.R., PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND HAVE TAKEN IN TO CONSIDERATION ALL MATERIAL AVAILABLE ON RECORD. TH E ONLY ISSUE TO BE ADJUDICATED BEFORE US IS THAT WHETHER T HE AMOUNT LENT TO SML BY THE ASSESSEE WAS ON ACCOUNT OF SOME BUSINESS EXPEDIENCY, SO AS TO COME UNDER THE A MBIT OF INTEREST ALLOWANCE UNDER SECTION 36(1)(III) OF T HE ACT. 7. IN THE REMAND PROCEEDINGS, THE ASSESSEE FILED DETAILED SUBMISSIONS BEFORE THE ASSESSING OFFICER V IDE ITS LETTER DATED 18.8.2009, IN ORDER TO PROVE THE BUSIN ESS EXPEDIENCY FOR LENDING MONEY TO SML. THE MAIN ARGU MENT MADE BY THE ASSESSEE WAS THAT IT HAD TO PROVIDE WRI TTEN UNDERTAKINGS TO THE PUBLIC FINANCIAL INSTITUTE (PFI ) THAT IT WOULD PROVIDE FUNDS TO SML AGAINST PROJECT OVERR UN OR CASH LOSSES. SINCE SML HAD ACCUMULATED LOSSES TO T HE TUNE OF RS.11.52 CRORES UPTO THE FINANCIAL YEAR 199 1-92, THE FUNDS FROM ASSESSEE HAVE TO BE GIVEN AND TAKEN BACK FROM TIME TO TIME. SECOND ARGUMENT WAS THAT SINCE SML IS A CUSTOMER OF PTL WHO SUPPLIES GEARS TO SML, IN ORDER TO GIVEN FINANCIAL SUPPORT TO ITS CUSTOMERS IS BUSI NESS PRUDENCE. THIRDLY, IT WAS STATED THAT DUE TO COMMON 6 ENQUITY STAKES IN SML, THE ASSESSEES MANUFACTURING TEAM HAD OPEN ACCESS TO VARIOUS MANUFACTURING FACILITIES AND TECHNICAL OFFICES OF MAZDA JAPAN AND THEIR SUPPLIER S. VARIOUS OTHER BENEFITS ARRIVED AT BECAUSE OF CONNEC TION WITH MAZDA JAPAN WERE EXPLAINED BY THE ASSESSEE. I T WAS STATED THAT CULTURE OF QUALITY ASSURANCE WAS LEARNT BY SML FROM MAZDA JAPAN. GEAR MANUFACTURING TECHNOLOG Y WAS UPGRADED TO MEET MAZDAS REQUIREMENT. SOME REDUCTION OF MANPOWER FOR RECEIPT INSPECTION OF MAT ERIAL AND SAVING OF TIME WERE ACQUIRED THROUGH INTERACTIO N WITH MAZDA JAPAN. THE UNDERSTANDING OF MAZDA DOL SYSTE M LED TO SAVINGS IN STORAGE SPACE REDUCTION IN WORKIN G CAPITAL REQUIREMENT RESULTING IN LESSER DAMAGES AND BETTER QUALITY. FOLLOWING THE CONCEPT OF MAZDA FIRST TIM E RIGHT AFTER STUDY, SML RESULTED INTO SAVINGS ON ACCOUNT O F LOSSES REJECTION AND LOWER WORK IN PROGRESS. IN VI EW OF ALL THIS, IT WAS SUBMITTED THAT THERE WAS BUSINESS EXPE DIENCY FOR LENDING MONEY TO SML. 6. WITH THESE SUBMISSIONS, AN AFFIDAVIT OF SHRI G. S. RIHAL, M.D. OF SML, WAS ALSO FILED BEFORE THE ASSES SING OFFICER, IN SUPPORT OF CONTENTIONS MENTIONED IN WRI TTEN SUBMISSIONS. AFTER CONSIDERING ALL THESE THE ASSES SING OFFICER VIDE LETTER DATED 19.9.2009 ASKED THE ASSES SEE TO FURNISH CERTAIN DETAILS AND EVIDENCE IN SUPPORT OF ITS CONTENTIONS AS PER ITS EARLIER WRITTEN SUBMISSIONS AND ALSO TO PRODUCE SHRI G.S. RIHAL FOR EXAMINATION. 7 7. THE ASSESSEE PRESENTED SHRI G.S. RIHAL FOR EXAMINATION AS ON 23.9.2009. A STATEMENT OF SHRI R IHAL WAS RECORDED BY THE ASSESSING OFFICER. AS PER THE ASSESSING OFFICER, SHRI RIHAL REITERATED THE SAME CONTENTIONS AS STATED BY HIM IN HIS AFFIDAVIT DATED 18.8.2009. REGARDING COPY OF WRITTEN UNDERTAKING, WHICH WAS NOT READILY AVAILABLE, IT WAS STATED THAT THE A UDITORS REPORT FOR FINANCIAL YEAR 1991-92 AT PAGE NO.24 CLE ARLY MENTION ABOUT THIS FACT. LEDGER ACCOUNT OF SML TO SHOW THE SALES TO SML WAS FILED. THE PROSPECTUS ISSUED AT THE TIME OF PUBLIC ISSUE OF SML WAS FILED TO SHOW THAT THE PTL IS HOLDING 29% OF SHARES. THE ASSESSING OFFICER WA S ALSO INVITED TO VISIT THE PLANT OF THE ASSESSEE TO SEE T HE SINGLE PIECE PRODUCTION CONCEPT. A COMPARATIVE CHART OF THE WIP AND THE RELATED PRODUCTION LEVEL FOR THE CONCERNED YEARS WAS ALSO FILED. FURTHER, IT WAS STATED THAT THE AS SESSEE WAS A GOVERNMENT COMPANY DURING THE RELEVANT ASSESSMENT YEAR AND THE SECRETARY, INDUSTRY TO GOVERNMENT OF PUNJAB WAS THE EX-OFFICIO CHAIRMAN OF THE COMPANY. 8. CONSIDERING ALL THE ABOVESAID SUBMISSIONS AND EVIDENCES, THE ASSESSING OFFICER IN HIS REMAND REPO RT DATED 24.9.2009, FILED BEFORE THE I.T.A.T., OPINED THAT THERE WAS NO BUSINESS EXPEDIENCY WITH THE SISTER CONCERN IN LENDING INTEREST FREE ADVANCES IN THE LIGHT OF 8 PARAMETERS LAID DOWN BY THE HON'BLE SUPREME COURT I N THE CASE OF S.A. BUILDERS PVT. LTD. (SUPRA). 9. ON PERUSAL OF THE SAID REMAND REPORT, WE SEE THAT THIS OPINION OF THE ASSESSING OFFICER IS FORME D ON THE BASIS OF THE FACT THAT IN THE ABSENCE OF THE COPY O F SUCH WRITTEN UNDERTAKING, IT CANNOT BE SAID THAT THE ASS ESSEE WAS UNDER ANY OBLIGATION TO ASSIST THE SML FINANCIA LLY. SECONDLY, AS REGARDS OTHER BENEFITS DERIVED BY THE ASSESSEE FROM SML, IT WAS STATED THAT IN THE ABSENC E OF ANY SUCH CORROBORATIVE EVIDENCE, THE SAME IS ALSO N OT PROVED. 10. THE ASSESSEE FILED A REJOINDER TO THIS REMAND REPORT VIDE ITS LETTER DATED 6.10.2009 BEFORE THE I .T.A.T., WHEREBY A PARA-WISE REPLY TO THE REMAND REPORT DATE D 24.9.2009 WAS GIVEN. ON PERUSAL OF THE SAID LETTER , WE FIND THAT IN SUBSTANCE, TWO SUBMISSIONS HAVE BEEN M ADE. FIRSTLY, IT WAS STATED THAT THE ASSESSEE HAS PROVI DED FINANCIAL ASSISTANCE TO SML, IN ITS TIME OF NEED IS CORROBORATED BY MENTIONING OF THE SAID FACT IN DIRE CTORS REPORT OF SML FOR FINANCIAL YEAR 1990-91. SECONDLY , AS REGARDS OTHER BENEFITS, IT WAS STATED THAT DIRECT A ND INDIRECT BENEFITS FROM RELATIONSHIP WITH SUBSIDIARY COMPANY NEED NOT BE QUANTIFIED IN EXACT MONETARY TE RMS. THE DEDUCTION SHOULD BE ALLOWED EVEN WHEN NO BENEF IT IS 9 DERIVED FROM SUCH A RELATIONSHIP. WHAT HAS TO BE S EEN IS THE DEPLOYMENT OF FUNDS FOR BUSINESS PURPOSES AND N OT FOR PERSONAL PURPOSES. 11. IN REPLY, ANOTHER REPORT DATED 25.7.2012, WAS FILED BY THE ASSESSING OFFICER, BEFORE THE I.T.A.T. ON PERUSAL OF THE SAME, WE OBSERVE THAT THE SUBMISSION S MADE IN EARLIER REPORT DATED 24.1.2009, WERE REITER ATED. 12. IN THE BACKGROUND OF THE ABOVE FACTS, IN ORDER TO ADJUDICATE THE ISSUE, AS DIRECTED BY THE HON'BLE HI GH COURT, FIRST WE HAVE TO SEE THE PARAMETERS LAID DOW N BY THE HON'BLE SUPREME COURT IN THE CASE OF S.A.BUILD ERS (SUPRA). THE HON'BLE SUPREME COURT STARTED WITH TH E PROVISIONS OF SECTION 36(I)(III) OF THE ACT, WHICH STATE THAT THE AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF BUSINESS OR PROFESSION. THE J UDGMENT OF THE APEX COURT IN THE CASE OF MADHAV PRASAD JAT IA VS. CIT (1979) 118 ITR 200 (SC) WAS ANALYZED BY LORDSHI PS. IN THIS JUDGMENT, THE PROPOSITION LAID DOWN WAS THA T THE EXPRESSION FOR THE PURPOSES OF BUSINESS IS WIDE I N SCOPE THAN THE EXPRESSION FOR THE PURPOSES OF EARNING IN COME, PROFITS OR GAINS. IF THE AMOUNT BORROWED WAS DONA TED FOR SOME SENTIMENTAL OR PERSONAL REASON, THE INTEREST U NDER SECTION 36(1)(III) OF THE ACT CANNOT BE ALLOWED. T HE RATIO OF THE JUDGMENT IS THAT THE BORROWED FUNDS ADVANCED TO A THIRD PARTY SHOULD BE FOR COMMERCIAL EXPEDIENCY IF IT IS SOUGHT TO BE ALLOWED UNDER SECTION 36(1)(III) OF TH E ACT. REFERENCE TO ANOTHER CASE OF ATHERTON VS. BRITISH 10 INSULATED & HELSBY CABLES LTD. (1925) 10 TC 155, WA S ALSO MADE FOR THE PROPOSITION THAT IN ORDER TO CLAIM DED UCTION, IT IS ENOUGH TO SHOW THAT MONEY IS EXPENDED, NOT OU T OF NECESSITY AND WITH A VIEW TO DIRECT AND IMMEDIATE B ENEFIT, BUT VOLUNTARILY AND ON GROUNDS OF COMMERCIAL EXPEDI ENCY AND IN ORDER TO INDIRECTLY FACILITATE THE CARRYING ON THE BUSINESS. REFERENCE WAS ALSO MADE TO MANY OTHER JUDGMENTS OF HON'BLE APEX COURT AS WELL AS OF VARIO US HIGH COURTS. AFTER THIS AND ALSO CONSIDERING THE SUBMISSION MADE BY THE LEARNED D.R., THE HON'BLE CO URT HELD AS UNDER : 32. WE WISH TO MAKE IT CLEAR THAT IT IS NOT OUR OPINION T HAT IN EVERY CASE INTEREST ON BORROWED LOAN HAS TO BE ALLOWED IF THE ASSESSEE ADVANCES IT TO A SISTER-CONCERN. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE RESPECTIVE CASE. FOR INSTANCE, IF THE DIRECTORS OF THE SISTER-CONCERN UTILIZE THE AMOUN T ADVANCED TO IT BY THE ASSESSEE FOR THEIR PERSONAL BENEFIT, OBVI OUSLY IT CANNOT BE SAID THAT SUCH MONEY WAS ADVANCED AS A ME ASURE OF COMMERCIAL EXPEDIENCY. HOWEVER, MONEY CAN BE SAID TO BE ADVANCED TO A SISTER-CONCERN FOR COMMERCIAL EXPEDIENC Y IN MANY OTHER CIRCUMSTANCES (WHICH NEED NOT BE ENUMERA TED HERE). HOWEVER, WHERE IT IS OBVIOUS THAT A HOLDING COM PANY HAS A DEEP INTEREST IN ITS SUBSIDIARY, AND HENCE IF TH E HOLDING COMPANY ADVANCES BORROWED MONEY TO A SUBSIDIARY AND THE SAME IS USED BY THE SUBSIDIARY FOR SOME BUSINESS PUR POSES, THE ASSESSEE WOULD, IN OUR OPINION, ORDINARILY BE ENTIT LED TO DEDUCTION OF INTEREST ON ITS BORROWED LOANS. 13. BEFORE ARRIVING AT THE ABOVE CONCLUSION, THE HON'BLE COURT HAS ALSO GIVEN TWO MORE IMPORTANT FIN DINGS WHICH WE WOULD LIKE TO QUOTE HERE : 11 23. THE EXPRESSION 'COMMERCIAL EXPEDIENCY' IS AN EXPRESSI ON OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRU DENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEG AL OBLIGATION, BUT YET IT IS ALLOWABLE AS A BUSINESS EXPEND ITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. 28. IT IS TRUE THAT THE BORROWED AMOUNT IN QUESTION WAS NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS, BUT HAD BEEN ADVANCED AS INTEREST-FREE LOAN TO ITS SISTER-CONCERN. H OWEVER, IN OUR OPINION, THAT FACT IS NOT REALLY RELEVANT. WHAT IS RELEVANT IS WHETHER THE ASSESSEE ADVANCED SUCH AMOUNT TO ITS SISTER- CONCERN AS A MEASURE OF COMMERCIAL EXPEDIENCY. 14. FROM THE ABOVE ANALYSIS, WHAT WE UNDERSTAND IS THAT FOR THE PURPOSES OF INTEREST TO BE ALLOWED UND ER SECTION 36(1)(III) OF THE ACT. (I) THE EXPENDITURE NEED NOT BE INCURRED UNDER ANY LEGAL OBLIGATION (II) THE FUN DS GIVEN TO SISTER CONCERN MAY NOT BE UTILIZED BY THE ASSESS EE FOR ITS OWN PURPOSE (III) IN CASE OF A HOLDING COMPANY GIVING FUNDS TO SUBSIDIARY COMPANY, WHERE HOLDING COMPANY HAS DEEP INTEREST IN SUBSIDIARY, INTEREST MAY GENERALLY BE ALLOWED. 15. ON THE BASIS OF ABOVE PARAMETERS, NOW WE ANALYZE THE FACTS OF THE PRESENT CASE, AS DESCRIBED ABOVE. THE FIRST CONTENTION OF THE ASSESSEE WAS THAT IT HA D TO PROVIDE UNDERTAKINGS TO THE PFIS TO PROVIDE FUNDS T O SML IN CASE OF PROJECT OVERRUNS OR CASH LOSSES. THE AS SESSING OFFICER IN REMAND PROCEEDINGS HAS REPEATEDLY STATED THAT THE COPY OF WRITTEN UNDERTAKING HAS NOT BEEN FILED BEFORE 12 US. HOWEVER, WE OBSERVE THAT EVEN IF NO SUCH UNDER TAKING WAS GIVEN BY THE ASSESSEE, AS LAID DOWN BY THE HON' BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS (SUPRA) , EVEN ONLY IF IT IS PROVED THAT THE ASSESSEE HAS GIVEN TH E SISTER CONCERN FINANCIAL ASSISTANCE IN ITS PHASE OF POOR F INANCIAL HEALTH, THAT WOULD SERVE THE PURPOSE FOR ALLOWING DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSEE IN HIS REPLY HAS STATED THAT AUDITORS REPORT FOR F INANCIAL YEAR 1990-91 AT PAGE 24 CLEARLY MENTIONS THIS FACT. WE HAVE PERUSED THE AUDITORS REPORT OF THE ASSESSEE COMPANY FOR FINANCIAL YEAR ENDING 31.3.1991. AT PO INT NO.3, IT STATES AS UNDER : 3. (A) UNDERTAKINGS HAVE BEEN GIVEN TO ALL INDIA FINANCIAL INSTITUTIONS AND/OR BANKS TO PROCURE FUNDS FOR SWARAJ MAZDA LIMITED AND SWARAJ ENGINES LTD. TO MEET THE SHORTFALL, IF ANY, IN FINANCING THE CAPITAL CO ST OF THE RESPECTIVE PROJECTS AND/OR WORKING CAPITAL. (B) IN ACCORDANCE WITH THE UNDERTAKINGS GIVEN TO ALL IN DIA FINANCIAL INSTITUTIONS AND/OR BANKS IN CONNECTION WITH RUPEE LOANS SANCTIONED TO SWARAJ MAZDA LIMITED AND SWARAJ ENGINES LIMITED, THE COMPANY HAS AGREED NOT TO DISPOSE OFF ITS SHAREHOLDING IN THE SAID COMPANIES. 16. FURTHER, PERUSAL OF THE DIRECTORS REPORT OF S ML, FOR FINANCIAL YEAR 1990-91, UNDER THE HEADING FINA NCE, IT IS STATED AS UNDER : DESPITE INTERNAL CASH GENERATIONS RISING TO RS. 34.5 M IL. COMPANY'S FINANCIAL POSITION REMAINED TIGHT FOR MOST O F THE YEAR. APART FROM A FLUCTUATING PATTERN OF SALES, ISS UES WERE COMPOUNDED BY SUBSTANTIAL INCREASE IN WORKING CAPITAL 13 NEEDS BECAUSE OF LARGE MARGINS IMPOSED BY RESERVE B ANK OF INDIA ON IMPORTS. INTERNAL GENERATIONS WERE ALSO APPLIED TOWARDS RE-PAYMENT OF FUNDED INTEREST TO THE FINANC IAL INSTITUTIONS AMOUNTING TO RS.19.2 MIL. TIMELY AND FULL FINANCIAL SUPPORT FROM PUNJAB TRACTORS LTD. WAS A M AJOR HELP IN TIDING OVER THE STIFF EXTRA CASH REQUIREMENTS. TIGHT-REIN POLICY PURSUED OVER THE PAST SEVERAL YEAR S IN RESPECT OF CAPITAL SPENDING WAS CONTINUED THIS YEAR AS WELL. O UTLAYS AT RS. 5.8 MIL. WERE ENTIRELY ON TOOLING AND OTHER AREAS R ELATED TO INDIGENIZATION. 17. FROM THE PERUSAL OF ABOVE, NO DOUBT REMAINS IN OUR MIND THAT THE AMOUNT WAS GIVEN TO SML BY THE ASSESSEE, INTEREST FREE, OUT OF BUSINESS EXPEDIENCY ONLY. THE COMPANY WAS GOING THROUGH A BAD PHASE OF POOR FINANCIAL HEALTH AND THE ASSESSEE HAD PROVIDED IT ASSISTANCE THROUGH THESE FUNDS. NOWHERE AT ANY STA GE FROM THE INITIATION OF ASSESSMENT PROCEEDINGS, NO ALLEGATION HAS BEEN LEVIED BY ANY OF THE AUTHORITIE S BELOW THAT THESE FUNDS WERE GIVEN OUT OF SOME PERSONAL RE ASON OR THESE FUNDS HAVE BEEN USED BY SML FOR ANY PURPOS E OTHER THAN BUSINESS PURPOSE. 18. THE SECOND CONTENTION OF THE ASSESSEE WAS THAT IT WAS DERIVING INDIRECTLY BENEFITS FROM THE TECHNO LOGY AND WORKING CULTURE, ETC. OF MAZDA FROM SML. IN HIS RE GARD, FROM BOTH THE REMAND REPORTS, WE SEE THAT THE ASSES SING OFFICER IS TRYING TO QUANTIFY THE BENEFITS DERIVED BY THE ASSESSEE. HOWEVER, WE SEE THAT IN VIEW OF THE JUDG MENT IN THE CASE OF ATHERTON VS. BRITISH INSULATED & HELSBY CABLES LTD. (SUPRA), WHICH HAS BEEN REFERRED TO BY THE APE X COURT 14 IN S.A. BUILDERS (SUPRA), IT HAS BEEN VERY CATEGORI CALLY HELD THAT THE PURPOSE FOR GIVING FUNDS SHOULD NOT NECESSARILY BE IMMEDIATE OR DIRECT BENEFIT TO THE A SSESSEE. IN VIEWS OF THIS, WE DO NOT FIND ANY NEED FOR THE A SSESSING OFFICER TO DO SUCH AN EXERCISE. 19. IN VIEW OF THE ABOVE, WE HOLD THAT THE AMOUNT ADVANCED BY THE ASSESSEE TO SML WAS OUT OF BUSINESS EXPEDIENCY. NO DISALLOWANCE IS TO BE MADE. 20. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF APRIL, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 4 TH APRIL, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH