Sanjay Garg, Panipat V. ACIT, Panipat

ITA 1285/DEL/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0682 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 03-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Assessee Lawyers: SATISH K GOEL
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G DELHI) BEFORE SHRI A.D. JAIN AND SHRI A.K. GARODIA ITA NO. 1285(DEL)2009 ASSESSMENT YEAR: 2006-07 SANJAY GARG, C/O M/S. GUPTA SPUNTEX, ASSTT.COMM ISSIONER OF I. TAX, SHIV NAGAR, PANIPAT. V. PANIPAT CIRCLE, PANIPAT. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SATISH K. GOEL, ADVOCATE RESPONDENT BY: SHRI KIS HORE B., DR ORDER PER A.D. JAIN, J.M . THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006- 07, RAISING THE FOLLOWING GROUNDS:- 1. THAT THE ORDER OF THE LD. CIT(A) IS AGAINST LAW AND FACTS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E OF THE APPELLANT THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ORDE RS OF THE LD. ACIT IN CAPITALIZING REPLACEMENT EXPENSES OF BURNT TRANSFOR MER AMOUNTING TO ` 7,44,859/- OUT OF MACHINERY REPAIRS EXPENSES IS ALT OGETHER ARBITRARY, ILLEGAL, VOID AND UNCALLED FOR. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT THE ORDER OF THE LD. CIT(A) IN CONFIRMING DISALLOWANCE OF INTEREST AMOUNTING TO ` 7,27,500/- FOR ALLEGED NON CHARGING OF INTEREST ON ADVANCES TO SISTER CONCERNS IS ALTOGETHER ARBITRARY , ILLEGAL AND UNCALLED FOR. ITA 1285(DEL)09 2 2. GROUND NO. 1 IS GENERAL. 3. APROPOS GROUND NO.2, THE ASSESSEE CLAIMED REPAI R AND MAINTENANCE EXPENSES OF ` 56,35,237/-. THE AO OBSERVED THAT THE DETAILS OF SUCH EXPENSES INCLUDED COST OF ONE 1,000 KVA KIRLOSKAR M AKE TRANSFORMER COSTING ` 7,44,859/-. THE AO ASKED THE ASSESSEE TO SHOW C AUSE AS TO WHY THE COST OF THIS TRANSFORMER BE NOT DISALLOWED, BE ING CAPITAL IN NATURE. THE ASSESSEE CONTENDED THAT THE EXPENSES OF ` 7,44,859/- PERTAINED TO REPLACEMENT EXPENSES OF TRANSFORMER, AS THE SAME WA S FOUND UNSERVICEABLE AND UNREPAIRABLE, AS PER REPORTS OF REPAIR AGENCIE S; AND THAT SINCE THE TRANSFORMER WAS A VITAL PART OF THE MACHINERY, REPL ACEMENT THEREOF WAS AN INTEGRAL PART OF REPAIRS, TO BE ALLOWED AS PER THE PROVISIONS OF SECTION 31 OF THE I.T. ACT. 4. DISAGREEING WITH THE EXPLANATION OFFERED BY THE ASSESSEE, THE AO OBSERVED THAT THE EXPENSE ON THE COST OF NEW TRANSF ORMER WAS CLEARLY CAPITAL IN NATURE, SINCE THE EXPENSE HAD BEEN INCURRED ON A CQUIRING, EXTENDING OR IMPROVING A FIXED ASSET WHICH WOULD PROVIDE BENEFIT TO THE ASSESSEE FOR MANY YEARS AND WAS OF A LASTING NATURE. AS SUCH, THE AO CAPITALIZED THE COST OF TRANSFORMER. DEPRECIATION AT THE RATE OF 15% WAS, HOWEVER, ALLOWED. ITA 1285(DEL)09 3 5. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) UPHELD THE DISALLOWANCE, OBSERVING THAT THE TRANSFORMER IS A S EPARATE AND INDEPENDENT MACHINE IN ITSELF; THAT IT REGULATES THE FLUCTUATIO NS IN ELECTRICITY SUPPLY ALSO AND IT CANNOT BE SAID THAT IT IS A PART OF ANY OTHE R MACHINERY; THAT MERELY SINCE THE OLD TRANSFORMER HAD BEEN REPLACED, IT WOU LD NOT MEAN THAT THE NEW TRANSFORMER WAS NOT A CAPITAL ASSET, BECAUSE THE OL D TRANSFORMER HAD BEEN REPLACED AND NOT A PART THEREOF, DUE TO WHICH, THE EXPENDITURE WAS DEFINITELY CAPITAL IN NATURE. 6. AGGRIEVED, THE ASSESSEE HAS RAISED GROUND NO.2 B EFORE US. 7. CHALLENGING THE IMPUGNED ORDER, THE LEARNED COUN SEL FOR THE ASSESSEE HAS ARGUED THAT THE LD. CIT(A) HAS ERRED IN CONFIRM ING THE ACTION OF THE AO IN CAPITALIZING THE REPLACEMENT EXPENSES OF BURNT T RANSFORMER OUT OF MACHINERY REPAIR EXPENSES; THAT WHILE DOING SO, THE LD. CIT(A) HAS FAILED TO APPRECIATE, AS CONTENDED BEFORE HIM, THAT THE ASSES SEE DERIVES INCOME FROM MANUFACTURE OF YARN FROM COTTON AND COTTON WASTE, T HE MACHINERY EMPLOYED IN THE MANUFACTURING PROCESS REQUIRES AN UNINTERRUP TED REGULAR SUPPLY OF ELECTRICITY AT A MEASURED AND FIXED VOLTAGE, THERE ARE A NUMBER OF FLUCTUATIONS IN THE ELECTRICITY SUPPLY WHICH HAS TO BE REGULATED LEST THE WHOLE YARN MACHINERY BE DAMAGED, FOR REGULAR SMOOTH AND E FFICIENT RUNNING OF THE YARN MACHINERY BY WAY OF AN ASSURED CHANNEL DISTRIB UTION OF ELECTRICITY, A ITA 1285(DEL)09 4 TRANSFORMER IS NECESSARY AND SO, A TRANSFORMER IS AN ESSENTIAL MACHINERY INGREDIENT FOR THE ASSESSEE, THE OLD TRANSFORMER O F THE ASSESSEE BECAME IRREPARABLE AND UNSERVICEABLE, THE ASSESSEE GOT THE TRANSFORMER INSPECTED AND CHECKED THROUGH A REPAIR AGENCY, WHO REPORTED THE T RANSFORMER TO BE TOTALLY BURNT AND DAMAGED, DUE TO HIGH VOLTAGE AND LOW LEVE L OF OIL AND COULD NOT BE REPAIRED AND WOULD HAVE TO BE REPLACED, THE ASSESSE E FEARING DAMAGE TO ITS VITAL MACHINERY, REPLACED THE TRANSFORMER, NO NEW A SSET HAD BEEN ACQUIRED BY REPLACING THE DAMAGED, UNSERVICEABLE AND IRREPAI RABLE OLD TRANSFORMER, NO IMPROVEMENT OR EXTENSION WAS MADE, THE TRANSFORMER IS NOT AN INDEPENDENT MACHINE IN YARN MANUFACTURE REPAIR AND IS RATHER A NECESSARY INGREDIENT FOR THE SMOOTH RUNNING OF THE MACHINERY, THE EXPENDITUR E WAS INCURRED FOR PRESERVING AND MAINTAINING THE ALREADY EXISTING ASS ET, THE EXPENDITURE COULD NOT BE TREATED AS CAPITAL EXPENDITURE; AND THAT THE LD. CIT(A) HAS FAILED TO CONSIDER THE CASE LAW RELIED ON BEFORE HIM. 8. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY REL IED ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT THE TRANSFORMER WAS A SEPARATE AND INDEPENDENT MACH INE IN ITSELF OR THAT IT WAS PART OF ANY OTHER MACHINERY; THAT THE OLD TRANS FORMER WAS REPLACED AS A WHOLE AND THAT IT WAS NOT THAT A PART THEREOF WAS C HANGED; AND THAT, AS SUCH, ITA 1285(DEL)09 5 THE EXPENDITURE INCURRED BY THE ASSESSEE FOR REPLAC EMENT OF THE TRANSFORMER HAS BEEN CORRECTLY TREATED AS CAPITAL IN NATURE. 9. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. IT IS UNDISPUTED THAT IT WAS THE WHOLE TRANSFORMER UNI T WHICH WAS REPLACED BY THE ASSESSEE. THE ISSUE IS AS TO WHETHER THE EXPE NSES THEREON ARE CAPITAL OR REVENUE IN NATURE AS PER SECTION 31 OF THE ACT, ACC ORDING TO WHICH, IN RESPECT OF REPAIRS OF MACHINERY USED FOR THE PURPOSES OF TH E BUSINESS, THE AMOUNT PAID ON ACCOUNT OF CURRENT REPAIRS THERETO SHALL BE ALLOWED. THE EXPLANATION TO SEC. 31 STATES THAT THE AMOUNT PAID ON ACCOUNT OF CURRENT REPAIRS SHALL NOT INCLUDE ANY EXPENDITURE IN THE NA TURE OF CAPITAL EXPENDITURE. THE AUTHORITIES BELOW HAVE TREATED THE EXPENDITURE AS CAPITAL EXPENDITURE, WHEREAS THE ASSESSEE CONTENDS IT TO BE A REVENUE EX PENDITURE. 10. IN COMMISSIONER OF INCOME TAX V. UDAIPUR DISTI LLERY CO. LTD.(NO.3) 268 ITR 451(RAJ), IT HAS BEEN HELD THAT IF AN ITEM OF EQUIPMENT CAN BE USED INDEPENDENTLY, ITS PURCHASE WOULD BE A CAPITAL INVESTMENT, BUT IF ITS PURCHASE IS AS A PART OF THE EXISTING PLANT AND MACHINERY, THE SAME MAY BECOME A REPLACEMENT OF A PART OF THE EXISTING PLAN T BY WAY OF ITS MAINTENANCE AND REPAIRS ON ACCOUNT OF WEAR AND TEAR ; THAT IF ITS PURCHASE IS FOR INSTALLING A NEW INSTRUMENT INDEPENDENTLY OF AN Y EXISTING PLANT, IT MAY AMOUNT TO ACQUISITION OF A NEW CAPITAL ASSET; THAT, ON THE OTHER HAND, IF IT IS ITA 1285(DEL)09 6 PURCHASED TO BE USED FOR THE RUNNING OF THE EXISTIN G PLANT AND MACHINERY FOR ITS EFFICIENT AND SMOOTH RUNNING, IT MAY AMOUNT TO REVENUE EXPENDITURE; AND THAT THE FINDING OF THE TRIBUNAL THAT THE PURCHASE OF THE TRANSFORMER WAS A CASE OF REPLACEMENT OF OLD TRANSFORMER FOR EFFICIEN T AND SMOOTH RUNNING OF THE ASSESSEES CHANNEL DISTRIBUTION BOARD OF ELECTR ICAL CIRCUIT COULD NOT BE HELD ERRONEOUS. 11. NO DECISION TO THE CONTRARY HAS BEEN CITED. 12. IN THE PRESENT CASE, UNDISPUTEDLY, THE ASSESSEE DERIVES INCOME FROM MANUFACTURE OF YARN FROM COTTON AND COTTON WASTE. THE MACHINERY USED IN THE MANUFACTURING PROCESS REQUIRES AN UNINTERRUPTED REGULAR SUPPLY OF ELECTRICITY AT A MEASURED AND FIXED VOLTAGE. THE RE ARE NUMEROUS FLUCTUATIONS IN THE ELECTRICITY SUPPLY. SUCH FLUC TUATIONS HAVE TO BE REGULATED IN ORDER TO SAVE THE ENTIRE YARN MACHINERY FROM DAM AGE. A TRANSFORMER IS ABSOLUTELY NECESSARY FOR SUCH REGULATED CONTINUOUS SUPPLY OF ELECTRICITY. THAT BEING SO, IN KEEPING WITH COMMISSIONER OF INC OME TAX V. UDAIPUR DISTILLERY CO. LTD.(NO.3) (SUPRA), A TRANSFORMER I S A NECESSARY MACHINERY INGREDIENT. THEREFORE, EXPENDITURE ON REPLACEMENT OF THE ASSESSEES OLD UNSERVICEABLE , IRREPAIRABLE BURNT TRANSFORMER CANN OT BY ANY MEANS BE HELD TO BE A CAPITAL EXPENDITURE. WE HOLD ACCORDINGLY. SINCE THE EXPENDITURE ITA 1285(DEL)09 7 HAS BEEN HELD TO BE A REVENUE EXPENDITURE, NO DEPRE CIATION CAN BE CLAIMED THEREON. GROUND NO. 2 IS, THEREFORE, ACCEPTED. 13. SO FAR AS REGARDS GROUND NO.3, THE ASSESSEE, IN HIS PROFIT AND LOSS ACCOUNT, HAD DEBITED AN AMOUNT OF ` 14,36,089/- ON ACCOUNT OF INTEREST PAID TO BANK AND SMT. ARUNA GUPTA, CREDITOR. THE AO OB SERVED FROM THE LIST OF OTHER DEBTORS, THAT THERE WERE DEBIT BALANCES OF HU GE AMOUNTS IN THE ACCOUNTS OF THE FOLLOWING PARTIES:- ` M/S. DEEPAK SPINNING MILL 10,00,000/-PAID ON 29.3 .2006 M/S. GARG SPINNING MILLS 54,00,000/-AS PER COPY OF A/C M/S. GUPTA SPINNING MILLS 31,37,883/- - DO- M/S. GUPTA SPINNING&WEAVING 84,11,000/- -DO- M/S. SHIV TRADING CO. 50,09,764/- -DO- M/S. VICKY SPINNING MILLS 1,08,25,070/- -DO - 14. ON QUERY, THE ASSESSEE SUBMITTED COPIES OF ACCO UNT OF THESE PARTIES AND VICE VERSA. FROM THESE ACCOUNTS, THE AO OBSER VED THAT THE ASSESSEE HAD ADVANCED HEAVY AMOUNTS OTHER THAN FOR SALES OR PUR CHASES MADE TO TWO SISTER CONCERNS OF HIS CONCERNS, NAMELY, M/S. GARG SPINNING MILLS AND M/S. GUPTA SPINNING & WEAVING MILLS. IT WAS SEEN FROM THE COPY OF ACCOUNT OF M/S. GUPTA SPINNING MILLS IN THE BOOKS OF THE ASSES SEE AND VICE VERSA, THAT THE CONCERN M/S. GUPTA SPUNTEX HAD MADE SALES OF ` 51,06,795/- TO M/S. GARG SPINNING MILLS FROM 1.4.2005 TO 25.7.2005. B ESIDES, THE ASSESSEE HAD GIVEN ADVANCES, AS FOLLOWS, TO M/S. GARG SPINNING M ILLS:- ITA 1285(DEL)09 8 PAID ` RECEIVED ` 45,00,000/- ON 27.9.05 11,00,0 00/- ON 28.9.05 6,00,000/- ON 9.12.05 8,00,000/- ON 7.12.05 19.00,000/- ON 14.12.05 8,00,000/- ON 30.12.05 10,00,000/- ON 11.01.06 6,00,000/- ON 2.1.06 7,00,000/- ON 17.1.06 4,00,000/- ON 18.1.06 17,00,000/- ON 24.01.06 5,00,000/- ON 6.2.06 4,00,000/- ON 20.03.06 7,00,000/- ON 1.3.06 5,00,000/- ON 5.3.06. IT WAS SEEN THAT AN AMOUNT OF ` 34 LAKHS OF THE ASSESSEE REMAINED INTEREST FREE WITH M/S. GARG SPINNING MILLS FROM 28.9.05 TO 31.3.06 AND AN AMOUNT OF ` 11 LAKHS OF THE ASSESSEE REMAINED INTEREST FREE WIT H M/S. GUPTA SPINNING MILLS FROM 14.12.05 TO 31.3.06. 15. FURTHER, THE ASSESSEE HAD MADE ADVANCES TO M/S. GUPTA SPINNING&WEAVING MILLS. THE ASSESSEE HAD MADE SA LES OF ` 18,14,730/- UPTO 5.8.05. THIS AMOUNT HAD BEEN RECEIVED UPTO 2 7.9.05. THEREAFTER, THE ASSESSEE HAD ADVANCED AND RECEIVED THE FOLLOWING AM OUNTS:- PAID ` RECEIVED ` 3.10.05 35,00,000/- 20,00,000/- ON 9.12.05 4.10.05 50,85,000/- 47,000 /- ON 18.1.06 9.12.05 20,000/- 13.12.05 2,80,000/- 6.1.06 55,000/- 14.3.06 18,000/- 27.3.06 15,00,000/- DR.BALANCE 84,11,000/- . ITA 1285(DEL)09 9 FROM THIS, THE AO OBSERVED THAT A SUM OF ` 85.85 LAKHS OF THE ASSESSEE HAD REMAINED WITH M/S. GUPTA SPINNING&WEAVING MILLS FR OM 4.10.05 TO 9.12.05 AND A SUM OF ` 65 LAKHS OF THE ASSESSEE HAD REMAINED WITH M/S. VICKY SPINNING MILLS FROM 9.12.05 TO 31.3.06. 16. THE ASSESSEE WAS ASKED BY THE AO AS TO WHY INTE REST ON DEBTORS HAD NOT BEEN CHARGED AND WHY INTEREST PAID TO BANK BE N OT DISALLOWED PROPORTIONATELY. 17. IN RESPONSE, THE ASSESSEE SUBMITTED THAT HE HAD UNSECURED LOAN OF ` 42,75,000/- FROM SHRI RAM DHAN DASS; THAT THERE WER E SUNDRY CREDITORS OF ` 2,29,03,973/-; THAT THE ASSESSEES OWN CAPITAL WAS OF ` 1,00,41,472/-; THAT THE DEBTORS WERE MOSTLY IN THE NATURE OF TRADE; THA T ALL THE PARTIES WERE BEING ASSESSED IN THE SAME BRACKET OF TAX; AND THAT NON-C HARGING OF INTEREST WOULD NOT HAVE SERVED ANY PURPOSE FOR THE ASSESSEE. 18. THE AO, HOWEVER, DID NOT AGREE WITH THE STAND T AKEN BY THE ASSESSEE. THE AO RELIED ON CIT V. ABHISHEK INDUS TRIES LTD. 286 ITR 1(P&H). IT WAS OBSERVED THAT THE ASSESSEE CONCERN WAS UTILIZING C.C. LIMIT FROM SBI, OVER DRAFT LIMIT, TERM LOAN AND KVP LOAN FROM HDFC, ETC. AND WAS PAYING HEAVY INTEREST ON THESE LOANS. THE AS SESSEE, DURING THE YEAR, PAID INTEREST OF ` 14,36,089/- TO BANK AND SMT. ARUNA GUPTA; THAT INT EREST BEARING FUNDS HAD THUS CLEARLY BEEN UTILIZED BY TH E ASSESSEE TO SISTER ITA 1285(DEL)09 10 CONCERNS FOR THEIR BUSINESS; AND THAT DEDUCTION FOR THE SAME COULD NOT BE ALLOWED. THE AO DISALLOWED ` 2,42,500/- ON ACCOUNT OF ADVANCE MADE TO M/S. GARG SPINNING MILLS AND ` 4,85,000/- ON ACCOUNT OF ADVANCE TO M/S. GUPTA SPINNING & WEAVING MILLS OUT OF THE INTEREST CLAIMED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. THE TOTAL DISALLO WANCE CAME TO ` 7,27,500/-. THE LD. CIT(A) UPHELD THE ORDER OF THE AO IN THIS R EGARD. IT WAS HELD THAT THE ADVANCES MADE BY THE ASSESSEE WERE INTEREST FRE E ADVANCES FOR BUSINESS PURPOSE. MUNJAL SALES CORPORATION V. CIT, 298 IT R 298(SC) RELIED ON BY THE ASSESSEE, WAS DISTINGUISHED OBSERVING THAT THAT DECISION HAD BEEN RENDERED IN THE PECULIAR FACTS OF THAT CASE, WITH R EGARD TO SECTIONS 30 TO 38 READ WITH SECTION 40 OF THE I.T. ACT, WHICH PROVISI ONS WERE NOT APPLICABLE TO THE CASE OF THE ASSESSEE AND THAT THEREIN, ABHISHE K INDUSTRIES LTD. (SUPRA), HAD NOT BEEN OVERRULED. IT WAS ALSO OBSERVED THAT IN THE ASSESSEES CASE IT WAS CLEAR THAT THE ASSESSEE HAD PAID INTEREST ON BO RROWED FUNDS, WHEREAS INTEREST FREE ADVANCES WERE MADE TO SISTER CONCERNS FOR BUSINESS PURPOSES. THE LD. CIT(A) ALSO PLACED RELIANCE ON CIT V. AVER Y CYCLE INDUSTRIES LTD. 298 ITR 239(P&H). 19. AGGRIEVED, THE ASSESSEE HAS TAKEN UP GROUND NO. 3 BEFORE US. ITA 1285(DEL)09 11 20. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ARGUED THAT IN THE COURSE OF ITS BUSINESS ACTIVITIES, THE ASSESSEE HAD MADE S ALES TO M/S. GARG SPINNING MILLS AND M/S. GUPTA SPINNING & WEAVING MILLS; THAT THE ASSESSEE HAD MADE CERTAIN ADVANCES TO THESE CONCERNS DURING THE YEAR ALSO; THAT THE ASSESSEE HAD HIS OWN CAPITAL OF ` 1,00,41,472/-; THAT THE ASSESSEE HAD UNSECURED LOAN FROM SHRI RAM DHAN DASS, FATHER OF A PARTNER, AMOUNTING TO ` 42,75,000/-, ON WHICH, NO INTEREST HAD BEEN PAID; THAT THE ASSESSEE HAD SUNDRY CREDITORS OF ` 2,29,03,973/-, ON WHICH, NO INTEREST HAD BEEN PAID; THAT THE DEBTORS WERE MOSTLY IN THE NATURE OF TRADE; THAT ALL THE PARTIES WERE BEING ASSESSED IN THE SAME BRACKET OF TAX; THAT NON-CHARGING OF INTEREST WOULD NOT SERVE ANY PURPOSE FOR THE ASSESSEE; THAT THE MONEY HAD NOT BE EN ADVANCED TO SISTER CONCERNS OUT OF BORROWED FUNDS; THAT THE FINDING OF THE AO THAT INTEREST BEARING FUNDS HAD BEEN UTILIZED FOR MAKING THE ADVA NCES TO SISTER CONCERNS FOR THEIR BUSINESS, WAS INCORRECT; AND THAT AS AVAI LABLE FROM THE ACCOUNT, NO INTEREST BEARING FUNDS HAD BEEN ADVANCED TO SISTER CONCERNS AND THE ASSESSEE HAD MADE ADVANCES OUT OF HIS OWN FUNDS AND NOT OUT OF INTEREST BEARING DEPOSITS RECEIVED. THE LEARNED COUNSEL FOR THE AS SESSEE HAS PLACED ON RECORD COPIES OF ORDER DATED 12.2.2010 PASSED BY TH E F BENCH OF THE DELHI TRIBUNAL IN THE CASE OF THE ASSESSEES BROTHER, RAJ EEV GARG, C/O M/S. GARG SPINNING MILLS, PANIPAT, IN ITA NO. 1067(DEL)2009, FOR ASSESSMENT YEAR ITA 1285(DEL)09 12 2006-07. IT HAS BEEN CONTENDED THAT IN THAT CASE, UNDER EXACTLY SIMILAR CIRCUMSTANCES, THE MATTER HAS BEEN REMITTED TO THE FILE OF THE AO TO EXAMINE THE FACTUAL ASPECT OF THE MATTER AS TO WHETHER INTE REST BEARING FUNDS HAD BEEN UTILIZED FOR THE PURPOSE OF MAKING INTEREST FREE AD VANCES OR NOT AND THEN TO DECIDE THE ISSUE AS PER LAW. THE LEARNED COUNSEL HAS REQUESTED THAT AS SUCH, THE CASE OF THE PRESENT ASSESSEE ON THE ISSUE AT HA ND BE ALSO SIMILARLY REMANDED TO THE FILE OF THE AO FOR FRESH EXAMINATIO N AND DECISION. 21. THE LD. DR, HAS, ON THE OTHER HAND, PLACED STRO NG RELIANCE ON THE IMPUGNED ORDER IN THIS REGARD. 22. HAVING HEARD THE PARTIES ON THIS ISSUE, WE FIND THAT INDEED, NEITHER OF THE AUTHORITIES BELOW HAS EXAMINED THE I SSUE AS TO WHETHER ANY INTEREST BEARING FUNDS WERE UTILIZED FOR MAKING INT EREST FREE ADVANCES . THIS, DESPITE THE FACT THAT ALL THE NECESSARY DETAILS WER E BEFORE THE AO. RATHER, THE ASSESSEE HAD MAINTAINED THROUGHOUT THAT ONLY NO N INTEREST BEARING FUNDS WERE UTILIZED FOR ADVANCING THE INTEREST FREE FUNDS . THE RELEVANT DATA THEREOF WAS ALSO PLACED BEFORE THE AUTHORITIES BELO W. IT CANNOT BE GAINSAID THAT IN CASE ANY INTEREST BEARING FUNDS WERE UTILIZ ED FOR THE PURPOSE OF MAKING INTEREST FREE ADVANCES, NO ADDITION COULD B E MADE ON THIS ACCOUNT. ITA 1285(DEL)09 13 23. UNDER EXACTLY SIMILAR CIRCUMSTANCES, IN THE CAS E OF RAJEEV GARG (SUPRA), THE TRIBUNAL HAS REMITTED THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE FACTUAL ASPECT OF THE MA TTER AND THEN TO DECIDE THE ISSUE AS PER LAW, ON GIVING THE ASSESSEE A REASONAB LE OPPORTUNITY OF HEARING. THE FACTS HEREIN BEING EXACTLY SIMILAR, THIS ISSUE IS REMITTED TO THE FILE OF THE AO, FOLLOWING THE AFORESAID TRIBUNAL ORDER IN THE C ASE OF RAJEEV GARG(SUPRA), WITH SIMILAR DIRECTIONS. THE AO SHA LL EXAMINE THE FACTS AS TO WHETHER NO INTEREST BEARING FUNDS WERE UTILIZED FOR THE PURPOSE OF MAKING INTEREST FREE ADVANCES. THE ASSESSEE SHALL BE AFF ORDED ADEQUATE OPPORTUNITY OF HEARING . THEREAFTER, THE AO SHALL DECIDE THE MATTER IN ACCORDANCE WITH LAW. 24. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7.01.2011. SD/- SD/- (A.K. GARODIA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07.01.2011 *RM ITA 1285(DEL)09 14 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR