ACIT, Ludhiana V. Sh. Suraj Dev Dada, Ludhiana

ITA 109/CHANDI/2012

• Counselvise Citation: 10921514 RSA 2012
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Keywords: Deemed dividend; Commercial expediency
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.109/CHD/2012 ASSESSMENT YEAR: 2008-09 ACIT, CIRCLE-V, V SHRI SURAJ DEV DADA, LUDHIANA. PROP. DADA MOTORS, SAVITRI COMPLEX, DHOLEWAL CHOWK, LUDHIANA. PAN: ABPPD-2272B (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI MANJEET SINGH ASSESSEE BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 08.08.2012 DATE OF PRONOUNCEMENT : 22.08.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 30.11.2011 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. (A) THAT THE LD. CIT(A)-II, LUDHIANA, ON FACTS AS WELL AS IN LAW, HAS ERRED IN HOLDING THAT PROVISI ONS OF SECTION 2(22)(E) ARE NOT ATTRACTED IN THIS CASE. (B) THE LD. CIT(A)-II, LUDHIANA HAS FAILED TO A PPRECIATE THAT ANY DEBIT BALANCE IN THE ACCOUNT OF THE ASSESS EE IN THE BOOKS OF ACCOUNT OF THE COMPANY CONSTITUTES DEE MED DIVIDEND U/S 2(22)(E) OF THE ACT. 2 (A) THAT THE LD. CIT(A)-II, LUDHIANA, ON FACT S AS WELL AS IN LAW, HAS ERRED IN PARTLY DELETING THE DISALLO WANCE MADE BY THE A.O U/S 14-A OF THE I.T.ACT 1961 READ WITH RULE 8D OF I.T.RULES. 2 (B) THAT THE LD. CIT(A)-II, LUDHIANA HAS FAILE D TO APPRECIATE THAT ONCE IT IS HELD THAT DISALLOWANCE U /S 14A IS CALLED FOR, THE SAME HAS TO BE COMPUTED AS PER R ULE 8D AND NOT OTHERWISE. 3. THAT THE LD. CIT(A)-II, LUDHIANA, ON FACTS AS WELL AS IN LAW, HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE A.O U/S 36(L)(III) OF THE I.T.ACT, 1961. 4. THAT THE ORDER OF THE CIT (A)-II, LUDHIANA BE S ET ASIDE AND THAT OF THE A.O. BE RESTORED. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED. 3. IN GROUND NO.1, REVENUE CONTENDED THAT CIT(A) ER RED IN HOLDING THAT PROVISIONS OF SECTION 2(22)(E) ARE NOT ATTRACTED IN THIS CASE. LD. CIT(A), FURTHER ERRED IN NOT PROPER LY APPRECIATING THAT ANY DEBIT BALANCE, IN THE ACCOUNT OF THE ASSES SEE IN THE BOOKS OF ACCOUNT OF THE COMPANY, CONSTITUTES DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE AO. HOWEVER, L D. 'AR' SUPPORTED THE FINDINGS OF THE CIT(A) AND PLACED RE LIANCE ON THE DECISION IN THE CASE OF CIT V LAKRA BROTHERS (2007) 106 TTJ 250 (CHD). LD. 'AR', FURTHER, PLACED RELIANCE ON P AGE 1 OF THE PAPER BOOK, WHEREIN DETAILS OF YEAR END BALANCES OF LOAN DUE TO M/S DADA MOTORS PVT. LTD. AND INTEREST RECEIVED FRO M IT, ARE FURNISHED. THE CONTENTS OF PAGE 1 OF THE PAPER BOO K ARE REPRODUCED HEREUNDER : DADA MOTORS DETAIL OF YEAR END BALANCES OF LOAN DUE TO M/S DADA MOTORS PVT. LTD. AND INTEREST RECEIVED FROM IT PARTI- CULARS AS ON 31.03.2004 AS ON 31.03.2005 AS ON 31.03.2006 AS ON 31.03.2007 AS ON 31.03.2008 LOAN OUTSTANDI NG NIL 3,40,00,000 NIL 3,92,00,000 1,30,00,000 PARTI- CULARS DURING 2003-2004 DURING 2004-2005 DURING 2005-2006 DURING 2006-07 DURING 2007-2008 3 INTEREST RECEIVED 11,44,796 33,31,943 58,11,351 27,55,304 26,32,504 NOTE -$ THE AMOUNT HAD BEEN ADVANCED BY SH. SURAJ DEV D ADA TO M/S DADA MOTORS PVT. LTD. SINCE 1992. THE SAME WAS CONTINUED THEREAFTER; THOUGH IN SOME YEARS ON THEIR LAST DATES THE BALANCE OF THE LOAN DUE TO THE COMPANY IS NIL, BUT IN EVERY NEXT YEAR THE AMOUNT IS LENT TO THE COMPANY AGAIN. THE INTEREST O N SUCH LOANS HAS BEEN RECEIVED BY THE ASSESSEE EVERY YEAR AFTER DEDUCTION OF TDS BY T HE COMPANY. THUS, THERE IS A RELATION OF BORROWER AND LENDER AND HENCE, IT IS A BUSINESS TRANSACTION. 5. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, RELEVANT PAGES OF THE PAPER BOOK AND DECISION RELIE D UPON BY LD. 'AR'. IN THE COURSE OF ASSESSMENT PROCEEDIN GS, AO FOUND THAT M/S DADA MOTORS PVT. LTD. HAD GIVEN LOAN TO THE ASSESSEE APPELLANT, ON VARIOUS DATES, AMOUNTING TO RS.2.60 LACS. IT WAS ALSO FOUND BY THE AO THAT THE ASSESSE E APPELLANT HAD ALSO GIVEN LOAN TO M/S DADA MOTORS PV T. LTD. THE AO SOUGHT EXPLANATION OF THE ASSESSEE APPELLANT FOR THE PURPOSE OF APPLICABILITY OR OTHERWISE OF THE PROVIS ION OF SECTION 2(22)(E) OF THE ACT. BEFORE AO, IT WAS CON TENDED THAT THE TRANSACTIONS ARE BUSINESS TRANSACTIONS, AS BORROWER AND LENDER. IT WAS CONTENDED BEFORE AO, T HAT THE ASSESSEE APPELLANT PROVIDED LOAN TO THE COMPANY, ON WHICH THE COMPANY HAD PAID INTEREST. IT WAS FOUND AT ONE POINT OF TIME, THAT SHRI SURAJ DEV DADA GOT CERTAIN SUM FROM THE COMPANY MORE THAN THE AMOUNT, THE COMPANY OWED TO H IM, WHICH REMAINED WITH THE ASSESSEE FOR CERTAIN DAYS O N WHICH THE ASSESSEE APPELLANT PAID INTEREST TO THE COMPANY . APPELLANT FURTHER CONTENDED THAT THE TRANSACTIONS REPRESENTED BUSINESS TRANSACTIONS, AS BORROWER AND LENDER, IN RESPECT OF THE ASSESSEE AS WELL AS THE SAID COMP ANY. HOWEVER, THE AO DID NOT ACCEPT THE EXPLANATION FILE D BY THE 4 ASSESSEE AND MADE THE ADDITION U/S 2(22)(E) OF THE ACT, AMOUNTING TO RS.2.75 LACS. LD. CIT(A), ON APPRECIA TION OF THE LEGAL AND FACTUAL MATRIX OF THE CASE AND THE DE CISIONS RELIED UPON BY THE ASSESSEE APPELLANT BEFORE HIM, D ELETED THE IMPUGNED AMOUNT. FINDINGS OF THE CIT(A), AS RE CORDED IN PARA 4 OF THE APPELLATE ORDER, ARE REPRODUCED HE REUNDER : 4. I HAVE GONE THROUGH THE ASSESSMENT ORDER PAS SED BY THE ASSESSING OFFICER AND REPLY SUBMITTED BY THE COUNSEL OF THE A PPELLANT. I AM OF CONSIDERED OPINION THAT SECTION 2(22)(E) OF THE ACT IS A DEEMING PROVISION WHICH ASSUMES EXISTENCE OF CERTAIN FACTS IF THE CONDITIONS SPECIFIED IN A PARTICULAR SECTION ARE FULFILLED. WE AGREE THAT THESE PROVISIONS ARE TO BE CONSTRUED STRICTLY. THIS LEGAL FICTION HAS TO BE CARRIED OUT TO LOGICAL ENDS AND NOT TO ILLOGICAL LE NGTH. THE COPY OF ACCOUNT OF THE APPELLANT IN THE BOOKS OF THE COMPAN Y CLEARLY SHOWS THAT APPELLANT HAS RUNNING CURRENT ACCOUNT WITH THE COMP ANY AND IN FACT APPELLANT HAD BEEN ADVANCING MONIES TO THE COMPANY AS AND WHEN REQUIRED FOR THE PURPOSE OF BUSINESS OF THE COMPANY . IT WAS ONLY FOR 55 DAYS IN BETWEEN THE YEAR THAT BALANCE OF APPELLANT IN BOOKS OF ACCOUNTS TURNED CREDIT . IT IS BEYOND DOUBT THAT THIS SECTIO N CAN BE INVOKED TO CURTAIL THE MISUSE OF THE FUNDS BELONGING TO A PRIV ATE LIMITED COMPANY BY ITS SHAREHOLDERS BUT NOT WHEN THERE IS RUNNING C URRENT ACCOUNT OF APPELLANT WITH THE COMPANY AND APPELLANT HAS IN FAC T FOR MOST THE TIME HAS LENT THE MONEY TO THE COMPANY. THIS SECTION HAD BEEN INSERTED DUE TO STOP THE MISUSE OF THE TAXING PROVISIONS BY THE ASSESSES BY TAKING THE FUNDS OUT OF THE COMPANY BY WAY OF LOANS OR ADVANCE S INSTEAD OF DIVIDENDS AND THUS AVOID TAX. BUT IN THIS CASE WHER E THERE IS NO SUCH INTENTION OF THE APPELLANT AND HE HAD IN FACT ADVAN CED MONEY TO THE COMPANY, CREDIT IN THAT ACCOUNT FOR SOME DAYS CANNO T BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E). IT IS EVIDENT FACT TH AT THE APPELLANT IN REAL SENSE NOT DERIVED ANY BENEFIT FROM THE FUNDS O F THE COMPANY AND THEREFORE BY NO STRETCH OF IMAGINATION IT CAN BE SA ID THAT THE COMPANY HAS DISBURSED OR GIVEN DIVIDEND TO ITS SHAREHOLDER/ DIRECTOR IN THE GUISE OF LOAN. IT WILL BE TRAVESTY LAW TO APPLY THE PROVI SIONS OF SECTION 2(22)(E) OF THE ACT TO THE FACTS OF THE PRESENT CAS E WHETHER INFACT THE PERSON CONCERNED HAS NOT GAINED ANY BENEFIT FROM TH E FUNDS OF THE 5 COMPANY AND THE ONE HAS TO CONSIDER TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE APPLYING PROVISION S OF THIS SECTION. HENCE PROVISIONS OF SECTION 2(22)E COULD NOT BE INV OKED WHEN THERE IS A GENUINE BUSINESS TRANSACTION BETWEEN TWO ENTITIES AND FUNDS OF THE APPELLANT DIRECTOR WERE IN FACT LYING WITH THE COMP ANY FOR MOST OF THE TIME 4.1 IN VIEW OF THE ABOVE DISCUSSION POSITION OF T HE CASE, THE ADDITION MADE BY THE AO IS NOT SUSTAINABLE AND DESE RVES TO BE DELETED. HENCE, THE SAME IS HEREBY DELETED. THEREFORE, THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 6. A BARE PERUSAL OF THE CONTENTS OF PAGE 1 OF THE PAPER BOOK, AS REPRODUCED ABOVE, REVEALS THAT THE ASSESSE E APPELLANT HAS BEEN LENDING MONEY, TO THE COMPANY AN D RECEIVING INTEREST THEREON. THE INTEREST AMOUNT, A S SHOWN IN THE CHART, HAS BEEN RECEIVED BY THE APPELLANT EV ERY YEAR AFTER DEDUCTION OF TDS BY THE COMPANY. THEREFORE, SUCH TRANSACTIONS OF MONEY LENDING AND RECEIVING INTERES T BY THE ASSESSEE APPELLANT ARE BUSINESS TRANSACTIONS. A PE RUSAL OF THE COPY OF ACCOUNT IN THE BOOKS OF M/S DADA MOTORS PVT. LTD. (PROPRIETARY CONCERN OF SHRI SURAJ DEV DADA ), LEDGER; M/S DADA MOTORS PVT. LTD CO. FROM 01.04.2007 TO 31.3.2008, REVEALS THAT THERE IS DEBIT BALANCE IN T HIS ACCOUNT EXCEPT ON CERTAIN DATES, THERE IS A CREDIT BALANCE. 7. BEFORE CIT(A), IT HAS BEEN SUBMITTED BY THE APPE LLANT THAT COMPANY STYLED AS M/S DADA MOTORS PVT. LTD., R AISED LOANS FROM THE MARKET AS WELL AS FROM THE BANKS, TO MEET ITS BUSINESS NEED. SIMILARLY, COMPANY TOOK LOANS FROM SHRI SURAJ DEV DADA PROP. M/S DADA MOTORS FOR THE BUSINE SS PURPOSE AND PAID INTEREST ON THE SUM. AT A PARTICU LAR POINT OF TIME, IN MID OF THE YEAR UNDER APPEAL, SHRI SURA J DEV 6 DADA GOT SOME AMOUNTS MORE THAN WHAT THE COMPANY OW E TO HIM, FOR THE URGENCY OF THE BUSINESS NEED, ON WHICH HE PAID INTEREST, TO THE COMPANY. IN SUCH A FACT-SITUATION AND HAVING REGARD TO THE LEGISLATIVE INTENT, THE PROVIS ION OF SECTION 2(22)(E) ARE NOT APPLICABLE TO THIS CASE. SIMILAR SUBMISSIONS WERE MADE BY THE ASSESSEE APPELLANT BEF ORE THE AO, INDICATING THAT THE APPELLANT HAS PAID INTEREST TO THE ASSESSEE COMPANY ON MARKET RATES, AS HE PAID TO THE LENDERS FROM THE MARKET. AO PRODUCED A COPY OF ACCOUNT OF M /S DADA MOTORS PVT. LTD., IN BOOKS OF ACCOUNT OF M/S D ADA MOTORS, PROPRIETARY CONCERN OF THE ASSESSEE APPELLA NT, WHEREFROM IT IS EVIDENT THAT ON 1.4.2007, THERE WAS A DEBIT BALANCE AND ON 31.3.2007 ALSO, THERE WAS A DEBIT BA LANCE. IT IS MENTIONED THAT DEBIT AND CREDIT BALANCES IN THIS ACCOUNT, REPRESENTS MONEY BORROWED FROM THE COMPANY OR LENT TO THE COMPANY BY THE ASSESSEE APPELLANT, AND ON SUCH AMOU NT, INTEREST HAD BEEN PAID BY THE APPELLANT OR THE COMP ANY, AS THE CASE MAY BE. LD. 'AR' PLACED RELIANCE, ON THE D ECISION OF CHANDIGARH BENCH OF THE TRIBUNAL, IN THE CASE OF DC IT V LAKRA BROTHERS (SUPRA) AND RELEVANT PART OF THE SAM E IS REPRODUCED HEREUNDER : DIVIDENDDEEMED DIVIDEND UNDER S. 2(22)(E)DEBT/AD VANCES IN THE REGULAR COURSE OF BUSINESSSEC. 2(22)(E) SPEAKS OF LOANS AND ADVANCES FOR THE INDIVIDUAL BENEFIT OF SHAREHOLDERSADVANCES MADE DU RING THE ORDINARY COURSE OF BUSINESS FOR BUSINESS EXPEDIENCIES DO NOT CONSTI TUTE LOAN' FOR PURPOSES OF S. 2(22)(E) AND CANNOT BE TAXED AS DEEMED DIVIDEND HELD : THE IMPORTANT WORDS IN THE SECTION ARE LOAN OR ADVA NCE AND FOR THE INDIVIDUAL BENEFIT OF SUCH SHAREHOLDERS. THE LOAN IS SOMETHING DIFFERENT FROM DEBT. FOR A LOAN THERE MUST BE A LENDER, BORROWER AS WELL AS A CONTRACT/AGREEMENT BETWEEN THE PARTIES FOR THE RETURN 7 OF THE LOAN AMOUNT. EVERY SALE OF GOODS ON CREDIT D OES NOT AMOUNT TO A TRANSACTION OF LOAN. IN THE CASE OF ASSESSEE, THERE WAS A DEBIT BA LANCE ON ACCOUNT OF THE ADVANCE PAID BY AEPL AND THIS WAS PURELY ADVANCE DURING THE ORDINAR Y COURSE OF BUSINESS FOR BUSINESS EXPEDIENCIES. IT CANNOT BE SAID THAT THERE WAS INTE NTION OF THE COMPANY TO GIVE A LOAN. AO HAS NEVER DOUBTED THE SEQUENCE OF MARKET SERVICE , EXHIBITION AT HOTEL AND EXECUTION OF ORDERS IN PURSUANCE OF THE ADVANCE. IT WOULD HAV E BEEN A DIFFERENT STORY IF AEPL WOULD HAVE MADE THE PAYMENT BY WAY OF LOAN OR ADVAN CE TO THE PARTNERS OF THE ASSESSEE NOT FOR THE PURPOSE OF BUSINESS, BUT FOR T HEIR INDIVIDUAL BENEFIT. NO SPECIFIC DEFECT HAS BEEN POINTED OUT IN THE CONCLUSION OF TH E CIT (A). THE SAME IS UPHELD. LAKHMI CHAND MUCHHAL VS CIT (1961) 43 ITR 315 (MP) AND CIT VS. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. (1975) 101 ITR 502 (GUJ) RELIED ON. 8. A BARE PERUSAL OF THE DECISION RELIED UPON BY LD . 'AR' REVEALS THAT THE PROVISION OF SECTION 2(22)(E) OF T HE ACT ARE NOT APPLICABLE TO THE BUSINESS TRANSACTIONS. SIMIL ARLY, THE DECISION OF THE DELHI HIGH COURT, SUPPORTS THE CONT ENTIONS OF THE ASSESSEE IN THE MATTER. THE HON'BLE HIGH CO URT HELD IN THE CASE OF CIT V RAJ KUMAR (2009) 318 ITR 462 ( DEL). THE HEAD-NOTES OF THE SAME ARE REPRODUCED HEREUNDER : COMPANY-DIVIDEND-DEEMED DIVIDEND-SCOPE OF SECTION 2(22)(E)-ADVANCE TO SHAREHOLDER-MEANING OF ADVANCE IN SECTION 2(22)(E)-TRADE ADVANCES-NOT ASSESSABLE AS DEEMED DIVIDEND-INCOME-TAX ACT,1961, S. 2(22)(E). HELD, THAT THE TRADE ADVANCES GIVEN TO THE ASSESSEE BY C COULD NOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). 8(II) SIMILARLY, HON'BLE DELHI HIGH, COURT IN ANO THER DECISION, REITERATED THE SIMILAR PROPOSITION, IN TH E MATTER OF BUSINESS TRANSACTIONS, IN THE CASE OF CIT V CREATIV E DYEING AND PRINTING P.LTD. (2009) 318 ITR 476 (DELHI). TH E RELEVANT PART IS REPRODUCED HEREUNDER: DIVIDEND-DEEMED DIVIDEND-ADVANCE TO ASSESSEE BY SISTER CONCERN HOLDING 50 PER CENT OF SHAREHOLDING IN ASSESSEE FOR MODERNIZATION PROJECT-ADVANCE TO BE ADJUSTED AGAINST DUES FOR JOB WORK TO BE DONE BY ASSESSEE-IS A BUSINESS TRANSACTION-ADVANCE NOT ASSESSABLE AS DEEMED DIVIDEND-INCOME-TAX ACT,1961, S. 2(22)(E). 8 HELD, DISMISSING THE APPEAL, THAT THE AMOUNTS ADVAN CED FOR BUSINESS TRANSACTION BETWEEN THE ASSESSEE-COMPA NY AND P DID NOT FALL WITHIN THE DEFINITION OF DEEMED DIVIDEND UNDER SECTION 2(22)(E). 9. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSIO NS AND HAVING REGARD TO THE DECISIONS DISCUSSED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A), AS THE TRANSACTIONS ARE IN THE NATURE OF BUSINESS TRANSACTIONS. THE RE VENUE HAS FAILED TO REBUT THE FACTUM OF RECEIPT AND PAYMENT O F INTEREST IN THE CASE, BEING COMMERCIAL TRANSACTIONS. THEREFORE, FINDINGS OF THE CIT(A) ARE UPHELD. 10. IN GROUND NO.2, REVENUE CONTENDED THAT CIT(A) E RRED ON FACTS AND IN LAW, IN PARTLY DELETING THE DISALLOWAN CE MADE BY THE A.O U/S 14-A OF THE I.T.ACT 1961 READ WITH RULE 8D OF I.T.RULES. 11. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND THE RELEVANT RECORD AND FOUND THAT THE AO HAS RIGHTLY INVOKED THE PROVISIONS OF RULE 8D IN COMPUT ING THE DISALLOWANCE IN THE MATTER. IT IS MENTIONED THAT R ULE 8D IS APPLICABLE TO THIS ASSESSMENT YEAR, 2008-09. LD. C IT(A), FAILED TO ADJUDICATE, ON THE ISSUE OF DISALLOWANCE, IN THE LIGHT OF RULE 8D AND ADJUDICATED THE ISSUE IN GENERAL TERMS, IN T HE LIGHT OF SECTION 14A OF THE ACT. IN VIEW OF THIS, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE BE RESTORED TO TH E FILE OF THE CIT(A), FOR THE PURPOSE OF COMPUTING THE DISALLOWAN CE, WITHIN THE CONTEMPLATION OF RULE 8D. ACCORDINGLY, ISSUE I S RESTORED TO THE FILE OF CIT(A), TO ADJUDICATE THE ISSUE, IN THE LIGHT OF RULE 8D, IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF T HE ACT, AFTER AFFORDING PROPER OPPORTUNITIES TO BOTH THE PA RTIES. THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTIC AL PURPOSES. 9 12. IN GROUND NO.3, REVENUE CONTENDED THAT CIT(A) E RRED ON FACTS AS WELL AS IN LAW, IN DELETING THE DISAL LOWANCE MADE BY THE A.O U/S 36(L)(III) OF THE ACT. 13. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, IT TRANSPIRED THAT THE ISSUE IS SQUARELY COVERED BY TH E DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NO. 783/ CHD/2011 AND ITA NO. 789/CHD/2011, ORDER DATED 21.10.2011. THE ISSUE BEFORE THE BENCH WAS AS UNDER : 1.(A)THAT THELD CIT(A)-II LUDHIANA ON FACTS AS WEL L AS IN LAW, HAS ERRED IN DELETING THE DISALLOWANCE OF RS.3,60,000/- MADE U/S 36(I)(III) OF THE INCOME-TAX ACT,1961. (B) THE LD. CIT(A)-II LUDHIANA HAS ERRED IN DELE TING THE ABOVE DISALLOWANCE DESPITE THE FACT THAT THE ASSESSEE HAS BEEN UNABLE TO EXPLAIN THE PURPOSE OF GIVING THE ADVANCE OF M/S NALANDA SPINNERS. 14. THE RELEVANT AND OPERATIVE PART OF THE DECISION OF THE TRIBUNAL, AS RECORDED IN PARA 13 OF THE ORDER, IS R EPRODUCED HEREUNDER : 13. WE HAVE CONSIDERED THE RIVAL SUBMISSI ONS AND HAVE PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE . REPLY FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER IS SELF-EXPLANATORY. THE ASSESSING OFFICER INTEREST OF RS. 3,60,000/- ON NOTIONAL BASIS ON THE GROUND T HAT THE LOAN ADVANCED TO THE NALANDA SPINNERS LTD WAS WITHOUT AN Y COMMERCIAL EXPEDIENCY. THERE IS NO DISPUTE THAT THE LOAN WAS ADVANCED BY THE ASS ESSEE ON 27.3.2006, I.E. DURING THE ASSESSMENT YEAR 2006-07. IT IS ALSO AP PARENT FROM RECORD THAT THE PRINCIPAL AMOUNT OF THE SAID LOAN WAS RECOVERED AFT ER FILING RECOVERY SUITE IN CIVIL COURT. IT IS ALSO APPARENT FROM RECORD THAT T HE ASSESSEE MANAGE TO GET PART PAYMENT VIDE CHEQUES ON DIFFERENT DATES LEAVING BAL ANCE TO THE TUNE OF RS. 7,50,000/-. CONSIDERING THE ENTIRE FACTS AND CIRCUM STANCES OF THE PRESENT CASE, WE ARE OF THE VIEW THAT SINCE THE PRINCIPAL AMOUNT WAS AT STAKE, THERE WAS NO OCCASION FOR THE ASSESSEE TO CHARGE INTEREST ON THE ADVANCED AMOUNT. AT THIS STAGE, WE MAY ALSO OBSERVE THAT THERE IS NO MATERIAL ON RECOR D TO CONTROVERT THE EXPLANATION OF THE ASSESSEE. WE, THEREFORE, U PHOLD THE ORDER OF CIT(A) IN HOLDING THAT THE ASSE'SSEE HAS NOT CHARGED ANY INTE REST ON THE AMOUNT ADVANCED 10 TO. M/S NALANDA SPINNERS, THEREFORE, THE ASSESSING OFFICER'S ACTION TO CHARGE INTEREST ON NOTIONAL BASIS IS NOT SUSTAINABLE. IN V IEW OF THE ABOVE, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS GROUND NO.L OF THE REVE NUE'S APPEAL.. 15. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND THE RELEVANT RECORD AND FOUND THAT THE ISSUE IN QUESTION IS COVERED BY THE DECISION OF THE BENCH , AS REPRODUCED ABOVE, IN ASSESSEE'S OWN CASE. RESPECTF ULLY FOLLOWING THE DECISION, THIS GROUND OF APPEAL OF TH E REVENUE IS DISMISSED. 16. GROUND NOS. 4 & 5 ARE GENERAL IN NATURE AND NEE D NO SEPARATE ADJUDICATION. 17. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22.08.2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 22.08.2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH