M/s. Maximaa Systems Ltd., Valsad V. The ACIT., Valsad Circle, Valsad

ITA 1120/AHD/2014

AI Insights

The case involves multiple appeals by M/s. Maxima Systems Ltd. against the orders of the Principal Commissioner of Income Tax, Valsad, and the Commissioner of Income Tax (Appeals). The appeals pertain to the assessment years 2009-10, 2010-11, and 2011-12. The primary issues revolved around the reopening of assessments under section 147 of the Income Tax Act based on information from the Sales Tax Department regarding bogus purchases, and the application of section 263 which led to the setting aside of the original assessments. The Tribunal dismissed the appeals, agreeing with the lower authorities that the assessments were not conducted properly and required re-examination.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 301920 (ITAT-SURAT)
• Duration Of Justice: 8 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-10-2022
• Assessment Year: misc
• Appeal Filed On: 14-07-2014
• Other Referred Cases: State of West Bengal v. Mir Mohammad Omar, Triveni Enoch Works Ltd. v. CIT, S.A. Builders Ltd. Vs. CIT, Madhav Prasad Jatia v. CIT, K. Somasundaram & Bros v. CIT, Punjab Stainless Steel Industries Vs. CIT, CIT Vs Accelerated Freeze Drying Co.Ltd., Highways Construction Co. Pvt. Ltd. Vs CIT, CIT Vs India Silk House, Marolia & Sons Vs CIT, Tirupati Trading Co Vs CIT, CIT Vs Sujanni Textiles (P) Ltd., CIT Vs H.R. Sugar Factory (P) Ltd., CIT Vs P Ganu Rao and Sons, CIT Vs Swapna Roy
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained investment; Revision of order; Depreciation; Principle of natural justice; Period of limitation; Scheme of amalgamation; Assessment record; Commercial expediency; Onus to prove; Time period of passing order; Capital expenditure
• Section: 147; 37; 263; 143(3); 115JB; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA Nos.202 to 203/SRT/2018 Assessment Years: (2010-11 to 2011-12) (Virtual Court Hearing) M/s. Maxima Systems Ltd., B-1, Yash Kamal, Tithal Road, Valsad. Vs. The PCIT, Valsad Circle, Valsad. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCM5861H (Appellant) (Respondent) आयकर अपील सं./ITA No.1120/AHD/2014 Assessment Year: (2009-10) (Virtual Court Hearing) M/s. Maxima Systems Ltd., B-1, Yash Kamal, Tithal Road, Valsad. Vs. The ACIT, Valsad Circle, Valsad. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCM5861H (Appellant) (Respondent) Assessee by Shri Kishor Mali, CA Respondent by Shri Ashok B. Koli, CIT-DR Date of Hearing 18/10/2022 Date of Pronouncement 29/11/2022 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeals filed by the assessee, pertaining to Assessment Years (AYs) 2009-10, 2010-11 and 2011-12, are directed against the separate orders passed by the Learned Principal Commissioner of Income Tax, Valsad [in short “the ld. PCIT”], under section 263 of the Act and order passed by the CIT(A), vide orders dated 15.01.2018 and 06.02.2014, respectively. Page | 2 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. 2. Learned Counsel for the assessee, Shri Kishor Mali, at the outset states that assessee is not providing documents and evidences and not cooperative to run these appeals. They have no any instruction from the assessee, therefore they have withdrawn their power of attorney. These cases were listed for hearing on several occasions in the past. However, the Ld. Counsel for the assessee was taking adjournments on various grounds. Finally, Ld. Counsel for the assessee submitted that he has withdrawn the power of attorney (authority to run these appeals). These cases were fixed for hearing again on 18.10.2022, as a final opportunity. On the date of hearing, the Ld. Counsel for the assessee, Shri Kishor Mali, from the office of Shri Sapnesh Sheth, submits that assessee has not provided any supporting documents/evidences, therefore considering the undesirable attitude of the assessee, the Ld. Counsel has been withdrawn the letter of authority, to argue these cases. 3. We have heard Learned Departmental Representative (Ld. DR) for the Revenue and perused the material available on record. 4. First we shall take grounds of appeal raised by the assessee in ITA No. 202/SRT/2018 for AY.2010-11, which reads follows: “1. On the facts and circumstances of the case as well as law on the subject, Commissioner of Income-tax has erred in passing revisionary order u/s 263 of the Act setting aside the order of Id. assessing officer passed u/s 143(3) r.w.s. 147 of the Act dated 31.03.2016 for the year under consideration although said order is neither erroneous nor prejudicial to the interest of revenue. 2. On the facts and circumstances of the case as well as law on the subject, the learned Pr. Commissioner of Income Tax has erred in passing order u/s 263 of the I.T. Act after the expiry of limitation period provided under sub-section (2) of section 263 of the I.T. Act as original order u/s 143(3) of the Act was passed on 25.03.2013. 3. It is therefore prayed that order passed by Pr. Commissioner of Income-tax u/s 263 of the I.T. Act setting aside the order of assessing officer and directing assessing officer to make fresh investigations on various issues may please be quashed. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” Page | 3 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. 5. Brief facts qua the issue are that assessee company filed its return of income for A.Y. 2010-11 on 30.09.2010 declaring total loss of Rs.2,92,08,140/-. The assessee`s case was selected for scrutiny and order u/s 143(3) of the I.T Act, 1961 was passed by AO on 25/03/2013, determining total loss at Rs.2,88,89,807/- after making addition of Rs.3,18,333/-. Thereafter, the case was re-opened u/s 147 of the Income Tax Act, 1961 on the basis of information received from Sales Tax Department, that the assessee has made bogus purchases amounting to Rs.36,86,015/- from Prakash Steel and Alloy and M/s Shankeshwar Sales Corporation. The assessment u/s 143(3) r.w.s. 147 of the I.T. Act was passed on 28.03.2014 determining total loss at Rs.2,52,03,792/- after making addition on account of bogus purchases. Subsequent to the same, again the case was reopened u/s 147 of the I T Act on the basis of information received from Sales tax Department, Mumbai that during the year under consideration, the assessee has made bogus purchase amounting to Rs.69,16,000/- from M/s Shreyansh Corporation. The assessment u/s 143(3) r.w.s. 147 of the IT Act, 1961 was passed on 31/03/2016 determining the total loss at Rs.2,22,88,682/- after making addition on account of bogus purchase of Rs.69,19,458/-. 6. Later on, ld PCIT exercised jurisdiction under section 263 of the Act. The ld PCIT after going through the report of the AO, and examination of the assessment records of the AO, it was observed by ld PCIT that assessment framed by the ACIT, Valsad Circle, Valsad suffers from errors/mistakes. Therefore, ld PCIT issued a notice u/s. 263 dated 30.11.2017 which is reproduced below: "4. After going through the report of the AO, the Range head and examination of the assessment record of the AO, it is seen that the assessment framed by the ACIT, Valsad Circle, Valsad suffers from following errors mistakes which make it not only erroneous but also prejudicial to the interest of revenue. The order is erroneous as well as prejudicial to the interest of revenue on account of the following: (i) On verification of the case records, it is found that the assessee has debited Rs.15,88,91,051/- as extraordinary items. As per notes on accounts, it is mentioned that it included loss of Rs.9,89,42,500/- on account of sale of Page | 4 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. investment in shares of Rs.9,99,40,000/-. It was however noticed from computation of income filed by the assessee that there was loss of only Rs.9,97,500/- (9,99,40,000 - 9,89,42,500) on sale of such shares as exhibited in the report of the AO. It's indicated that claim of the assessee that there was loss of Rs.9,89,42,500/- on sale of shares was not genuine and actual loss was of only Rs.9,97,500/- as such difference of Rs.9,79,45,000/-(9,89,42,500-9,97,500) was treated as income of the assessee and no deduction is allowed from such income in view of the ratio laid down by the jurisdictional High Court. (ii) Further, it is found that the assessee has claimed depreciation of Rs.1,48,00,473/- on goodwill @25% of Rs.5,92,01,892/-. The same was allowed by the Assessing Officer. It was however noticed that said goodwill was not purchased but generated in the books of the assessee as a result of issue of shares of assessee-company to shareholder of the amalgamated, companies in excess of net worth of amalgamated companies in excess of net worth of amalgamated companies. As goodwill was not purchase but created itself in the books of the company, it was not to be treated as intangible assets and hence depreciation is not allowable. It is also worth mentioned that in para 12.6 of scheme of amalgamation approved by the Gujarat High Court, it is stated that it is provided that the excess of the value of net assets of the transferor companies over the paid up value of shares to be issued and allotment pursuant, to the terms of clause, shall be credited in the books of transferee company to a separate account to be named and styled as "Amalgamation Reserve Account". The said account shall be considered as a free reserved and shall form a part of the net worth of Transferee Company. The assessee company, instead of doing so, credited the amount of goodwill in books and claimed depreciation on it and the AO had also allowed the same. (iii) Furthermore, it is also found that extraordinary item of Rs.15,88,91,051/- debited to P & L account also includes loss of software of Rs.74,48,532/-. Amount written off Gyandeep of Rs.2,00,000/- and WIP purchase of Capital Asset of Rs.1,78,44,637/- was remained to be verified during all assessment proceedings made in the assessee's case. Thus, it was required to be ascertained that these expenditures related to business of assessee and were also not of the nature of capital expenditure. 5. Therefore, in view of the observations in para-4, the order of the AO is erroneous as well as prejudicial to the interest of revenue due to almost complete absence of any inquiry on the above mentioned issues necessitating the revision of the order of the AO by invoking the provisions of section 263 of the I. T. Act. 6. You are, therefore, required to show-cause as to why the said assessment order be not revised by invoking the provisions of 263 of I.T. Act, 1961. The hearing in your case is being fixed on 08.12.2017 at 10.00 A.M. Please note that the required details should be submitted after numbering the documents enclosed and indexing the same in the forwarding/covering letter.” Page | 5 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. 16. Therefore, in view of the above factual matrix and legal propositions, it is prima facie proved that the assessment order dated 31/03/216 u/s. 143(3) r.w.s 1474 has been passed by the Assessing Officer without making any inquiries whatsoever in respect of the issues as mentioned hereinabove. Therefore, the assessment order of the AO dated 31/03/2016 is hereby set-aside and to be made afresh after giving proper/due opportunity to the assessee.” 7. Based on the above show cause notice and after hearing the assessee, the ld PCIT reached on the conclusion that order passed by the AO is erroneous and prejudicial to the interest of Revenue. We have heard the Ld. DR for the Revenue and perused the order of ld. PCIT, passed under section 263 of the Act and we have observed that there is no infirmity in the order of ld. PCIT, therefore we confirm the order passed by the ld. PCIT under section 263 of the Act. 8. In the result, the appeal filed by the assessee in ITA No. 202/SRT/2018, is dismissed. 9. Now, we shall take assessee’s appeal in ITA No.203/SRT/2018 for AY.2011-12 wherein the grounds of appeal raised by the assessee are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the learned Pr. Commissioner of Income-tax, has erred in passing revisionary order u/s 263 of the I.T. Act setting aside the order of ld. Assessing officer passed u/s 143(3) r.w.s. 147 of the Act dated 31.03.2016 for the year under consideration although said order is neither erroneous nor prejudicial to the interest of revenue. 2. It is therefore prayed that order passed by Pr. Commissioner of Income-tax u/s 263 of the I.T. Act setting aside the order of assessing officer and directing assessing officer to make fresh investigations on various issues may be please be quashed. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 10. Succinct facts qua the issue are that assessee- company filed its return of income for A.Y. 2011-12 on 28.09.2011 declaring total income NIL after adjusting brought forward previous losses and taxes paid u/s 115JB of the I.T. Act, amounting to Rs.9,89,391/-. The assessment u/s 143(3) r.w.s. 147 of the I.T. Act was finalized by the assessing officer on 31.03.2016, determining total loss at Rs.1,72,55,859/-. Page | 6 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. 11. Later on, Ld. PCIT has exercised jurisdiction under section 263 of the Act. After going through the report of the AO, and examination of the assessment records of the AO, it was observed by ld PCIT that assessment framed by the ACIT, Valsad Circle, Valsad suffers from errors/mistakes, which make it not only erroneous but also prejudicial to the interest of revenue. Therefore, ld PCIT issued a show cause notice u/s 263 of the Act, dated 30.11.2017, which is reproduced below: "No. Pr. CIT/VLS/HQ/263/MS/2017-18 To, The Principal Officer, M/s. Maxima Systems Ltd. B-1, Yosh Kamat, Tithal Road, Valscd-396001 Sub: - Notice u/s. 263 of the I. T. Act in your case i.e. M/s. Maxima Systems Ltd., (PAN:-MBCM5861H) for the A.Y. 2011-12-reg. 2. In this case, the assessee company filed its return of income for A.Y. 2011-12 declaring total income NIL after adjusting brought forward previous losses and taxes paid u/s 115JB of the I.T. Act amounting to Rs.9,89,391/-. The assessment u/s 143(3) r.w.s. 147 of the I.T. Act was finalized by the AO on 31.03.2016 determining total loss at Rs.1,72,55,859/-. The AO i.e. ACIT, Valsad Circle, Valsad and the Range head i.e. Jt. CIT, Valsad Range, Valsad vide their letters dated 10.10.2017 & 23.10.2017 respectively, have proposed that the assessment order in this case is erroneous as well prejudicial to the interest of revenue and therefore, the same should be revised u/s 263 of the I.T. Act, 1961. After going through the report of the AO, the Range head and examination of the assessment record of the AO, it is seen that the assessment framed by the ACIT, Valsad Circle, Valsad suffers from following errors/mistakes which make it not only erroneous but also prejudicial to the interest of revenue. The order is erroneous as well as prejudicial to the interest of revenue on account of the following: (i) On verification of the case records, it was found that the assessee company has claimed depreciation of Rs.1,11,00,355/- on goodwill @ 25% of Rs.4,44,01,419/-which was allowed by the AO. It was however noticed that the said goodwill was not purchased but generated in books of the assessee company as a result of issue of shares of assessee-company to shareholder of amalgamated companies in excess of net worth of amalgamated companies. As goodwill was not purchased but created itself in books of account of company, it was not to be treated as intangible assets and depreciation was not allowable, it is also worth mentioned that in para 12.6 of scheme of amalgamation approved by the Gujarat High Court, it is stated that the excess of the value of net assets of the transferor companies over the paid up value of shares to be issued and Page | 7 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. allotment pursuant to the terms of clause 11 above, shall be credited in the books of the transferee company to a separate account to be named and styled as "Amalgamated Reserves Account". The said account shall be considered as a free reserve and shall part of the net worth of Transferee Company. The assessee company, instead of doing so, credited the amount as goodwill and claimed depreciation on it and the AO had also allowed the same. (ii) Further, there is a mistake in allowance of carry forward of unabsorbed depreciation and mistake in computation of income. Therefore, in view of the observations in para-4, the order of the AO is erroneous as well as prejudicial to the interest of revenue due to almost complete absence of any inquiry on the above mentioned issues necessitating the revision of the order of the AO by invoking the provisions of section 263 of the I.T. Act. You are, therefore, required to show-cause as to why the said assessment order be not revised by invoking the provisions of 263 of I.T. Act, 1961. The hearing in your case is being fixed on 08.12.2017 at 11.00 A.M. Please note that the required details should be submitted after numbering the documents enclosed and indexing the same in the forwarding/covering letter. You can attend the hearing either personally or through your duly authorized representative or can file written submissions on or before the stipulated date and time of hearing. 12. In response to the notice, the assessee submitted its reply before the ld PCIT. 13. The ld PCIT after considering the reply of the assessee, held that assessment order dated 31/03/2016 u/s 143(3) r.w.s 147 has been passed by the AO without making any inquiries whatsoever in respect of the issues as mentioned hereinabove. Therefore, the assessment order of the AO dated 31/03/2016 was set-aside by ld PCIT and directed the AO to make afresh order after giving proper opportunity to the assessee. 14. We have heard ld DR for the Revenue and gone through the order of ld. PCIT and noted that there is no infirmity in the order passed by the ld. PCIT, hence we confirm the order of ld. PCIT passed under section 263 of the Act. 15. In the result, the appeal filed by the assessee in ITA No.203/SRT/2018 is dismissed. Page | 8 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. 16. Now, we shall take assessee’s appeal in ITA No.1120/AHD/2014 for AY.2009-10, wherein the grounds of appeal raised by the assessee are as follows: “1. In view of the facts and circumstances of the case, the CIT(A) ought to have deleted the disallowance of Rs.15,98,701/- out of interest expenses of the appellant for the alleged diversion of funds for alleged non business purpose and hence Your Appellant prays that the same be deleted and the amount be allowed as deduction as claimed. 2. Such other relief(s) to which the appellant may be lawfully entitled to.” 17. We have heard Ld. DR for the Revenue and observed that ld. CIT(A) has passed the detailed order, for the issue under consideration, observing as follows: “DECISION 6.1 The appellant was provided many opportunities as mentioned again earlier but no compliance was made. The appellant was given opportunities on 25.04.2012, 09.10.2012, 21.08.2013, 04.09.2013 and 22.01.2014. The appellant was provided with five opportunities to furnish the details but no compliance was made. Sr. No. Date of Notice Date of Compliance Reasons for adjournment 1 16.04.2012 25.04.2012 No compliance was made 2 21.09.2012 09.10.2012 No compliance was made 3 12.08.2013 21.08.2013 Preparation was not complete 4 21.08.2013 04.09.2013 No compliance was made 5 30.12.2013 22.01.2014 No compliance was made On the basis of the above facts, it is evident and clear that the appellant is not interested in filling any details during the appellate proceedings and avail the opportunity under the Principles of Natural Justice. The appellant had made no compliance even during the assessment proceedings. The conduct of the appellant shows that he has no respect for the legal proceedings and is habitual offender in not complying with the various proceedings under the Income Tax Act. No further opportunity is being provided as the appellant has already been granted 5 opportunities. Hence this appeal is being decided on the basis of the material available on record. 6.2 I have considered the assessment order as well as the submissions of the appellant filed during the assessment proceedings. The Grounds of appeal- Ground No. 1 pertains to making a disallowance of interest expenses claimed by the appellant treating the same as diversion of borrowed funds to advance the interest free sum to Maxima Infoways Pvt. Ltd. On the perusal of the facts, it is observed that the appellant advanced Rs.2,42,85,350/- to Maxima Infoways Pvt. Ltd. The claim of the appellant that this advance was given for share application money was found to be false. It was found that the funds were Page | 9 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. transferred to Maxima Infoways Pvt. Ltd. for non-business purpose and therefore the interest expenses of Rs.15,98,701/- was disallowed. In spite of several opportunities given to the appellant during the assessment proceedings no details were furnished regarding the purpose and objective of advancing the funds of Rs.3,42,85,350/-. 6.2.1 During the appellate proceedings also, in spite of several opportunities provided to the appellant no details were given. The onus was on the appellant to prove that the funds advanced have been made for business purposes keeping in view the commercial expediencies. The primary onus is on the appellant to prove the advancement of loan was for commercial expediencies supported with evidences. In the instant case, even during the appellate proceedings also the appellant did not furnish any explanation or evidence. The conduct of the appellant shows that he is not interested in discharging the burden of proof. The expression ‘burden of proof’ really means two different things. It means sometimes that a partly is required to prove an allegation before judgment can be given in his favour. It also means that on a contested issue, of the two contending parties has to introduce evidence. In the first sense, if the burden is not discharged, the party must eventually fail. In the second case, where the parties have joined issue and have led evidence and the conflicting evidence can be weighed to determine which way to issue can be decided, the question of burden of proof becomes an abstract question and is therefore academic. The section 102 of the Evidence Act provides that the burden of proof lies on that party who would fail if no evidence at all were given on either side. Thus, if an assessee claims that money or bullion found in his possession at the time of the search or survey does not belong to him but someone else, the onus is on him to establish it because the ordinary presumption is that he is the owner as the money etc. was found in his possession. Similarly, in all cases where a particular receipts is sought to be taxed as income, the initial onus is on the Assessing Officer to prove that it is taxable. Where, however, the assessee claims exemption, the burden is on the assessee, as in case of cash credits etc., u/s. 68 or unexplained investment u/s 69, the initial burden of proof is on the assessee to show that the cash credit is genuine or the investment is not unexplained. The AO should, therefore, always examine as to who has to discharge the burden of proof. It may also be noted that in the course of assessment, the burden of proof may shift from one to the other. For instance, if the assessee discharges his initial burden to proof, the onus shifts to the Assessing Officer who must bring out facts to refute assessee’s version. 6.2.2 The proceedings under the Income Tax Act are civil proceedings. The degree of proof required in assessment proceedings is based on the Principles of Preponderance of Probability, unlike in criminal proceedings where proof beyond reasonable doubt is insisted upon. It is open to the Assessing Officer to probabilise his stand and show its preponderance where conclusive proof is not forthcoming. The observations of the Supreme Court in State of West Bengal v. Mir Mohammad Omar and Others JT 2000 (9) SC 467 made in the context of a criminal case are relevant for our purpose. “The pristine rule that the burden of proof in on the prosecution to prove the guilt of the accused should not be taken as a fossilized doctrine as though it Page | 10 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. admits of no process of intelligent reasoning. The doctrine of presumption is not alien to the above rule, nor would it impair the temper of the rule. On the other hand, if the traditional rule relating to burden of proof of the prosecution is allowed to be wrapped in pedantic coverage the offenders of serious offences would be the major beneficiaries and the society would be the casualty....” 6.2.3 The appellant been unable to provide any details regarding the nature and purpose of advancing such loans to the sister concern. The only important issue in such a situation is the principle of commercial expediency and business interest. In absence of any details and evidences regarding the claim of the appellant that the advances were for commercial expediency, it is difficult to consider the contention of the appellant in a favorable manner. Such a claim or submission at the best is self-serving statement which is not supported by any evidences or documents. It is well-settled law that in order to claim deductions on interest paid, the nexus has to be proved that the available funds were advanced for the purpose of business. In this case, if the appellant had not given the advances to the sister concern, then this fund would have been available with him for meeting out the liabilities. It was found that the book results show that money has not been advanced as share application money, as per the accounting results of both the companies. The appellant in spite of several opportunities during the assessment as well as appellate proceedings was unable to furnish any evidence or proof to substantiate his claim that these advances were for business expediencies. The various courts have upheld the principle that commercial and business expediency if established for the advancing of loan, then the interest payment is allowable, which is not the fact in the instant case. 6.3.1 In the case of Triveni Enoch Works Ltd. v. CIT 167 ITR 742, the Hon'ble Allahabad High Court had placed the onus on the assessee to prove the loan advance were for business purpose and, it was held that nexus between the loans advance and business connection needs to be proved to claim the deduction. 6.3.2 The Hon. Supreme Court in the case of S.A. Builders Ltd. Vs. CIT(SC) 288 ITR 1CSC) elaborated on the concept of commercial expediency “In Madhav Prasad Jatia v. CIT AIR 1979 SC 1291, the Supreme Court held that the expression 'for the purpose of business' occurring under the provision of section 36(1)(iii) is wider in scope than the expression ‘for the purpose of earning income profits or gains’, and this has been the consistent view of the Supreme Court .[para 20] The test in such a case was really whether this was done as a measure of commercial expediency.[Para 21] The 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 business’. It has been consistently held in decisions relating to commercial expediency, and it is immaterial if a third party also benefits thereby. [Para 22] Page | 11 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. In Atherton vs. British Insulated & Helsby Cables Ltd. [1925] 10 TC 155, it was held by the House of Lords that in order to claim a deduction, it is enough to show that the money is expended, not of necessity and with a view to direct and immediate benefit, but voluntarily and on grounds of commercial expediency and in order to indirectly facilitate the carrying on of the business. [Para 23] The expression ‘commercial expediency’ is an expression 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, yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency.[Para 25] Thus, the ratio of Madhav Prasad Jatia (supra), is that the borrowed fund advanced to a third party should be for commercial expediency, if it is sought to be allowed under section 36(1)(iii). [para 27] It is not in every case that 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 amount advanced as a measure of commercial expediency. However, money can be said to be advanced to a sister concern for commercial expediency in many other circumstances. Whether holding company, has a deep interest in its subsidiary, and the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the holding company would ordinarily be entitled to deduction of interest on its borrowed loans. [para 35] 6.3.3 Similar view has been taken by various courts in the case of –  K. Somasundaram & Bros, v. CIT 238 ITR 939 (Madras),  Punjab Stainless Steel Industries Vs. CIT(Del) 324 ITR 396  CIT Vs Accelerated Freeze Drying Co.Ltd. (Ker.) 324 ITR 316  Madhav Prasad Jatia Vs CIT(SC) 118 ITR 200  Highways Construction Co. Pvt. Ltd. Vs CIT(Gau) 199 ITR 702  CIT Vs India Silk House (Mad) 152 ITR 79  Marolia & Sons Vs CIT (AII)129 ITR 475  Tirupati Trading Co Vs CIT(Cal) 242 ITR 13  CIT Vs Sujanni Textiles (P) Ltd. (Mad) 225 ITR 560  CIT Vs H.R. Sugar Factory (P) Ltd. (All) 187 ITR 363  CIT Vs P Ganu Rao and Sons (Mad) 185 ITR 324  CIT Vs Swapna Roy (All) 331 ITR 367 6.4 Hence in view of the above facts and discussions, it is evident that the appellant has been unable to prove the nexus between the funds advanced to sister concern and business expediency during the assessment proceedings as well as appellant proceedings. In absence of the nexus of the funds advanced with commercial/business expediency, the Assessing Officer had rightly disallowed the claim of interest expenses of Rs.15,98,701/- and the addition is upheld and ground of the appeal id dismissed. (Confirmed – Rs.15,98,701/-) 7. In the result, this appeal is dismissed.” Page | 12 202-203/SRT/2018 & 1120/AHD/2014/AYs.2009-10 to 2011-12 M/s. Maxima Systems Ltd. 18. We have heard ld DR for the Revenue and gone through the order passed by the ld. CIT(A). From the above order of ld CIT(A), it is vivid that assessee has been unable to prove the nexus between the funds advanced to sister concern and business expediency during the assessment proceedings as well as appellant proceedings, therefore, ld CIT(A) has rightly confirmed the addition made by the assessing officer. Thus, we have observed that there is no infirmity in the order passed by the ld. CIT(A). That being so, we decline to interfere in the order passed by the ld. CIT(A) and dismiss the appeal of the assessee. 19. In the result, appeals filed by assessee (in ITA No. 1120/AHD/2014) is dismissed. 20. In the combined result, these three appeals filed by the assessee are dismissed. Registry is directed to place one copy of this order in all appeals folder / case file(s). Order is pronounced on 29/11/2022 by placing the result on the Notice Board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 29/11/2022 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat