Dy.CIT, Central Circle-9, Hyderabad V. M/s Malaprabha Greenfields Private Limited, Hyderabad

ITA 1879/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82273 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 30-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1879/HYD/2013 ASSESSMENT YEAR : 2010-11 DY. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 9, HYDERABAD. M/S MALAPRABHA GREENFIELDS PVT. LTD., HYDERABAD PAN AAECM8680R (APPELLANT) (RESPONDENT) REVENUE BY SHRI SOLGY JOSE T. KOTTARAM ASSESSEE BY SHRI K.C. DEVDAS DATE OF HEARING 04-08-2014 DATE OF PRONOUNCEMENT 28-08-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-VII, HYDERABAD DATED 30/09/2013 FOR THE A SSESSMENT YEAR 2008-09. 2. GROUNDS RAISED BY THE DEPARTMENT ARE AS UNDER: 1. THE LD. CIT(A)-VII, HYDERABAD HAS ERRED IN BOTH FACTS AND IN LAW. 2. THE LD. CIT(A)-VII, HYDERABAD OUGHT TO HAVE APPR ECIATED THE FACT THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO WAS RIGHT IN CHARGING INTEREST ON THE MONIES GIVEN BY IT AS ADVANCES. 3. THE LD. CIT(A)-VII, HYDERABAD OUGHT TO HAVE APPR ECIATED THE FACT THAT THE ASSESSEE COMPANY HAS NEITHER WRITTEN OFF THE ADVANCES NOR HAS MADE ANY PROVISION FOR DOUBTFUL DE BTS EVEN IN SUBSEQUENT YEARS. ALSO, THE ASSESSEE COMPANY HAS AP PROACHED JUDICATURE FOR JUSTIFICATION OF THEIR CLAIM OF HAVI NG ADVANCED THE MONIES ALONG WITH INTEREST (TERMED BY THE COMPANY A S DAMAGES) FROM THE RECIPIENT COMPANY I.E. M/S SCSL WHICH HAS 2 ITA NO. 1879/HYD/2013 M/S MALAPRABHA GREENFIELDS PVT. LTD. MERELY PLACED THESE AMOUNTS UNDER SUSPENSE WITHOU T DENYING HAVING RECEIVED THESE MONIES BY IT. 3. THE ONLY ISSUE WHICH EMANATES FROM THE GROUND RA ISED IS IN RESPECT OF DELETION OF THE ADDITION MADE BY THE AO ON ACCOUNT OF ACCRUAL OF INTEREST ON THE ALLEGED ADVANCES MADE TO M/S SATYAM COMPUTERS SERVICES LTD. (IN SHORT SCSL). 4. BRIEFLY THE FACTS ARE, ASSESSEE IS ONE OF THE 3 7 COMPANIES ESTABLISHED BY SHRI RAMALINGA RAJU, THE ERSTWHILE C HAIRMAN OF M/S SCSL AND HIS FAMILY MEMBERS. FOR THE AY UNDER DISPU TE, ASSESSEE FILED ITS RETURN OF INCOME ON 29/08/2008 DECLARING TOTAL INCOME AT RS. NIL. THOUGH, INITIALLY RETURN WAS PROCESSED U/S 143 (1) OF THE ACT, SUBSEQUENTLY ASSESSEES CASE WAS SELECTED FOR SCRUT INY ASSESSMENT. DURING THE SCRUTINY ASSESSMENT PROCEEDING, THE AO N OTICED THAT DURING FY 2007-08 CORRESPONDING TO AY 2008-09, ASSE SSEE HAD ADVANCED AN AMOUNT OF RS. 359,900,000/- TO M/S SCSL . HOWEVER, INTEREST ACCRUED/RECEIVED ON SUCH ADVANCES WAS NOT SHOWN IN ASSESSEES BOOKS OF ACCOUNT. HE FURTHER NOTICED TH AT IN AUGUST, 2009, ASSESSEE HAS RAISED A CLAIM ON M/S SCSL FOR P AYMENT OF ADVANCES ALONG WITH INTEREST @ 18% PER ANNUM FROM T HE DATE OF ADVANCE IN THE FORM OF DAMAGES. THEREAFTER, ASSESSE E HAD ALSO INITIATED LEGAL PROCEEDING TO RECOVER THE ADVANCES ALONG WITH RIGHT TO RECEIVE INTEREST BY FILING A SUIT BEFORE THE CITY C IVIL COURT, SECUNDERABAD. FROM THE INFORMATION AVAILABLE WITH H IM, THE AO NOTICED THAT INTEREST CLAIMED BY THE ASSESSEE PERTA INING TO THE ASSESSMENT YEAR 2008-09 IS AS UNDER: DT. OF ADVANCE BANK ADV. AMOUNT NO. OF DAYS UPTO 31/03/08 INTEREST 16.08.2007 KVB, JUBILESS HILLS 78,100,000 229 8,819,951 16.08.2007 ING VYSYA, BANJARA HILLS 77,600,000 229 8,763,485 16.08.2007 AXIS BANK, 77,700,000 229 8,774,778 3 ITA NO. 1879/HYD/2013 M/S MALAPRABHA GREENFIELDS PVT. LTD. HITECH CITY 28.09.2007 AXIX BANK, HITECH CITY 42,500,000 185 3,877,397 26.11.2007 AXIX BANK, HITECH CITY 50,000,000 127 3,131,507 05.12.2007 AXIX BANK, HITECH CITY 34,000,000 117 1,961,753 359,900,000 35,328,871 5. ON THE BASIS OF THE AFORESAID FACTS, THE AO CONCLUDED THAT INTEREST @ 8% ON THE ADVANCES OF RS. 359,900,000/- HAS ACCRUED TO THE ASSESSEE AS THE ASSESSEE IS FOLLOWING MERCANTIL E SYSTEM OF ACCOUNTING. THOUGH, THE ASSESSEE OBJECTED TO SUCH A DDITION ON ACCOUNT OF ACCRUAL OF INTEREST, BUT, THE AO REJECTI NG THE SAME, ADDED AN AMOUNT OF RS. 3,53,28,82/- AS INTEREST ACCRUED TO THE ASSESSEE ON THE AMOUNT ADVANCED TO M/S SCSL AND COMPLETED THE A SSESSMENT ACCORDINGLY. BEING AGGRIEVED OF SUCH ASSESSMENT ORD ER, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 6. BEFORE THE CIT(A), IT WAS CONTENDED BY THE ASSESSEE THAT THOUGH THE AMOUNT WAS GIVEN AS TEMPORARY ADVANCE, B UT, WAS NEVER ACCOUNTED BY M/S SCSL, WHICH IS EVIDENT FROM THE NO TE APPENDED TO THE FINANCIAL STATEMENT OF M/S SCSL FOR THE YEAR EN DED 31/03/2009. IT WAS SUBMITTED THAT M/S SCSL HAS ALSO CONTESTED THE CLAIM IN THE CITY CIVIL COURT. IT WAS SUBMITTED THAT AS-9 ALSO PRESCR IBES INCOME SHOULD BE RECKONED WHEN IT IS NOT UNREASONABLE TO EXPECT C OLLECTION. ONLY BECAUSE MERCANTILE SYSTEM OF ACCOUNTING IS FOLLOWED BY THE ASSESSEE, IT CANNOT BE CONSTRUED THAT INCOME HAS ACCRUED. IT ONLY RECOGNIZES THE INCOME THAT HAS ACCRUED BUT WHEN THERE IS NO SC OPE OF RECOVERY OF PRINCIPAL AMOUNT AND ASSESSEE CHOOSES NOT TO CHA RGE INTEREST, THE AO CANNOT BRING SUCH INTEREST INCOME TO TAX AS CONC EPT OF REAL INCOME IS TO BE APPLIED. IN THIS CONTEXT ASSESSEE R ELIED UPON A NUMBER OF DECISIONS OF HONBLE SUPREME COURT AS WEL L AS VARIOUS HIGH COURTS. FURTHER, IT WAS SUBMITTED THAT THOUGH THE ASSESSEE HAS FILED SUIT IN THE CIVIL COURT BY CLAIMING DAMAGES B Y WAY OF INTEREST @ 18% INTEREST FROM THE DATE OF ADVANCE, HOWEVER, AWA RD OF DAMAGES 4 ITA NO. 1879/HYD/2013 M/S MALAPRABHA GREENFIELDS PVT. LTD. AND THE RATE OF INTEREST FINALLY TO BE GRANTED ARE MATTERS OF DISCRETION OF THE COURT AND NO INTEREST ACCRUES LEGALLY TO THE ASSESSEE TILL THE CITY CIVIL COURT DECIDES THE ISSUE. IT WAS, THUS, S UBMITTED THAT UNDER NO CIRCUMSTANCES INTEREST CAN BE ASSESSED TO TAX IN THE IMPUGNED ASSESSMENT YEAR. 7. THE CIT(A) AFTER CONSIDERING ASSESSEES CON TENTION IN THE LIGHT OF THE RATIO LAID DOWN IN THE JUDICIAL PRECEDENTS, HELD THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES, IT CANNOT BE SAID TH AT INTEREST INCOME HAS ACCRUED TO THE ASSESSEE ON THE AMOUNT ADVANCED BY IT. THE LEARNED CIT(A) HELD THAT WHEN THE MATTER IS PENDING IN THE CITY CIVIL COURT, AND IS YET TO BE DECIDED, THE AO WAS WRONG I N TAXING THE INTEREST INCOME AT THE HANDS OF THE ASSESSEE IN THE IMPUGNED ASSESSMENT ORDER. HE FURTHER HELD WHEN THE COURT FI NALLY DECIDES THE SUIT, INTEREST RATE MENTIONED THEREIN CAN BE RECKON ED AND INCOME CAN BE TAXED IN THE YEAR IN WHICH THE COURT PRONOUNCES ITS ORDER ON THE CIVIL SUIT PENDING BEFORE IT. HE, THEREFORE, DIRECT ED THE AO TO INITIATE PROCEEDING AND TAKE ACTION ACCORDINGLY. 8. BEING AGGRIEVED OF THE SAID ORDER OF THE LEA RNED CIT(A), THE DEPARTMENT IS BEFORE US. 9. THE LEARNED AR, AT THE OUTSET, SUBMITTED BE FORE US THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISIO N OF THE COORDINATE BENCH IN RESPECT OF 15 OTHER COMPANIES IN THE SAME GROUP IN ITA NO. 62 TO 76/HYD/2014 DATED 28/05/2014 IN CASE OF M/S M ANASLU AGRO FARMS PVT. LTD. AND OTHERS WHEREIN THE BENCH CONSID ERING IDENTICAL FACTS AND ISSUES HAS UPHELD THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST INCOME ON ADVA NCE MADE TO M/S SCSL. 5 ITA NO. 1879/HYD/2013 M/S MALAPRABHA GREENFIELDS PVT. LTD. 10. THE LEARNED DR, ON THE OTHER HAND, COULD NO T CONTROVERT THE AFORESAID FACT NOR HE BROUGHT ANY OTHER CONTRARY DE CISION TO OUR NOTICE. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE P ARTIES AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDE RS OF THE REVENUE AUTHORITIES ON THIS ISSUE. ON PERUSAL OF THE ORDER DATED 28/05/2014 IN ITA NOS. 62 TO 76/HYD/2014 (SUPRA), WE FIND THAT TH E TRIBUNAL WHILE CONSIDERING PARI-MATERIA GROUND RAISED BY THE DEP ARTMENT UNDER IDENTICAL FACTS AND CIRCUMSTANCES OF ADVANCES GIVEN BY SOME OTHER GROUP COMPANIES HAS HELD AS UNDER: 13. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, W E FIND THAT THE BASIS FOR BRINGING TO TAX THE NOTIONAL INTEREST INCOME ON ADVANCES ALLEGEDLY MADE BY THE ASSESSEE COMPANY TO M/S. SCSL ARE THE CIVIL SUITS FILED BY THE ASSESSEE COMP ANIES FOR RECOVERY OF THE SUIT AMOUNTS ALONG WITH INTEREST AT THE RATE OF 18% PER ANNUM. THE UNDISPUTED FACTS ARE THAT THE AS SESSEES HAVE ADVANCED THE LOANS/TEMPORARY ADVANCES TO M/S. SCSL AND THIS FACT HAS COME TO LIGHT ONLY BY THE STATEME NT OF SRI RAMALINGA RAJU DATED 7TH/8TH OF JANUARY, 2009. FUR THER, THE ASSESSEES HAVE ADVANCED THE LOANS OR TEMPORARY ADVA NCES THROUGH BANKING CHANNELS AND IMMEDIATELY AFTER THE STATEMENT OF SRI RAMALINGA RAJU, THE ASSESSEES HAVE ALSO ISSUED LEGAL NOTICES FOR THE REPAYMENT OF THE LOANS AND ALSO FILED CIVIL SUITS FOR RECOVERY OF THE LOAN AMOUNTS ALONG WITH INTEREST IN THE CITY CIVIL COURT, SECUNDERABAD. THE REFORE, THE LIABILITY MAY HAVE BEEN DENIED BY M/S. SCSL, BUT AS FAR AS THE ASSESSEES ARE CONCERNED, THERE IS NO DISPUTE OR CON TROVERSY WITH REGARD TO THE LOANS ADVANCED BY THEM TO M/S. S CSL. THE ONLY DISPUTE NOW IS WITH REGARD TO THE LIABILITY OF M/S. SCSL AND THE RIGHT OF THE ASSESSEE TO RECEIVE INTEREST A T THE RATE OF 18% PER ANNUM. ANOTHER UNDISPUTED FACT IS ALSO THAT THERE IS NO CONTRACT BETWEEN THE ASSESSEE AND M/S. SCSL WITH REGARD TO THE ADVANCES AND THE INTEREST THEREON. IN THE A BSENCE OF ANY SUCH CONTRACT TO RECEIVE THE INTEREST ON THE AD VANCES GIVEN BY THE ASSESSEE COMPANIES, IT CANNOT BE SAID THAT THE ASSESSEE COMPANIES HAVE ANY RIGHT TO RECEIVE SUCH A MOUNTS OF 6 ITA NO. 1879/HYD/2013 M/S MALAPRABHA GREENFIELDS PVT. LTD. INTEREST OR THAT THE INTEREST INCOME HAS ACCRUED TO THE ASSESSEES. 14. LET US KNOW EXAMINE THE LEGAL PRINCIPLES GOVERN ING SUCH ISSUES- 1. THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S . WALCHAND & CO. P. LTD. (65 ITR 381), WHILE CONSIDER ING THE PROVISIONS OF S.10(2)(XV) AND S.33(IV) OF THE INDIA N INCOME-TAX ACT, 1922, HAS HELD THAT IN APPLYING THE TEST OF C OMMERCIAL EXPEDIENCY OR DETERMINING WHETHER AN EXPENDITURE WA S WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF BUSINES S, THE REASONABLENESS OF THE EXPENDITURE HAS TO BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT OF THE REV ENUE. 2. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S. RELIANCE UTILITIES AND POWER LTD. (313 ITR 340) HEL D THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST FREE AND O VERDRAFT AND /OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF THE INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE ASSESSEE, IF INTEREST FREE FU NDS WOULD BE SUFFICIENT TO MAKE THE INVESTMENTS. 3. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF HI GHWAYS CONSTRUCTIONS P. LTD. V/S. CIT (199 ITR 702), WAS D EALING WITH A CASE OF AN ASSESSEE COMPANY WHICH HAD ADVANCED INTE REST FREE LOANS TO DIRECTORS FROM AMOUNTS BORROWED ON INTERES T. THE HONBLE HIGH COURT HELD THAT THERE WAS NO FINDING O F FACT TO THE EFFECT THAT ACTUALLY LOAN HAD BEEN GRANTED TO T HE MANAGING DIRECTOR OR ANY OTHER PERSON ON INTEREST O R ANY INTEREST HAD ACTUALLY BEEN COLLECTED, BUT THE COLLE CTION OF THE INTEREST WAS NOT REFLECTED IN THE ACCOUNTS. THE HON BLE HIGH COURT AFTER OBSERVING THAT THE FINDING OF THE ITO W AS THAT THE ASSESSEE SHOULD HAVE COLLECTED INTEREST, HELD THAT IF THE ASSESSEE HAD NOT BARGAINED FOR INTEREST OR HAD NOT COLLECTED THE SAME, THE INCOME TAX OFFICER COULD NOT FIX A NO TIONAL INTEREST AS DUE OR AS COLLECTED BY THE ASSESSEE, AS THERE WAS NO PROVISION IN THE INCOME-TAX ACT, EMPOWERING THE INC OME-TAX AUTHORITY TO INCLUDE IN THE TAXABLE INCOME, ANY INT EREST WHICH WAS NOT DUE OR NOT COLLECTED BY THE ASSESSEE, AND T HE ADDITION OF AN AMOUNT AS NOTIONAL INTEREST WAS NOT JUSTIFIED . 7 ITA NO. 1879/HYD/2013 M/S MALAPRABHA GREENFIELDS PVT. LTD. 4. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V/S. ABHISHEK INDUSTRIES LTD. (286 ITR 1), WAS DEAL ING WITH A CASE OF INTEREST FREE ADVANCES GIVEN TO SISTER CONC ERNS ON THE BASIS OF WHICH THE ASSESSING AUTHORITY HAS DISALLOW ED INTEREST PAID BY THE ASSESSEE ON BORROWED FUNDS. THE HONBLE HIGH COURT HAS HELD THAT THE NEXUS BETWEEN THE INTEREST BEARING FUNDS AND THE ADVANCES MADE TO THE SISTER CONCERNS IS NOT PROVED AND THEREFORE, THERE CANNOT BE ANY DISALLOWA NCE OF INTEREST EXPENDITURE. 15. APPLYING THE ABOVE RATIONALE PROPOUNDED BY THE HONBLE SUPREME COURT AS WELL AS THE HONBLE HIGH C OURTS, IN THE CASES DISCUSSED ABOVE, WE OBSERVE THAT THE FOLL OWING POINTS EMERGE (A) IT IS FOR THE ASSESSEE TO DECIDE HOW IT CONDUCT S ITS BUSINESS; (B) WHERE AN ASSESSEE ADVANCES INTEREST FREE LOANS TO ITS SISTER CONCERNS, UNLESS NEXUS BETWEEN INTEREST BEARING FUN DS AND THE INTEREST FREE ADVANCES IS PROVED, EXPENDITURE ON AC COUNT OF INTEREST ON BORROWED FUNDS CANNOT BE DISALLOWED NOR IT CAN BE PRESUMED THAT THE ASSESSEE HAS COLLECTED INTEREST F ROM ITS SISTER CONCERNS ON THE ADVANCES GIVEN. (C) WHERE THE FUNDS HAVE BEEN ADVANCED OUT OF ANY I NTEREST FREE FUNDS, THEN THE DISALLOWANCE OF INTEREST ON BO RROWED FUNDS CANNOT BE MADE; (D) UNLESS AND UNTIL THERE IS A CONTRACT BETWEEN TH E PARTIES FOR CHARGING OF INTEREST ON THE FUNDS ADVANCED, THE NOT IONAL INTEREST INCOME CANNOT BE BROUGHT TO TAX. 16. APPLYING THESE PRINCIPLES TO THE FACTS OF THE C ASES BEFORE US, WE FIND THAT THE ASSESSEES HAVE STATED BEFORE T HE CIT(A) THAT THE AMOUNTS ADVANCED ARE FROM OUT OF THE SHARE APPLICATION MONIES AND TEMPORARY ADVANCES. IT IS SO STATED ON THE BASIS OF ENTRIES IN THE BALANCE SHEET AND THE PROFIT & LOSS ACCOUNTS OF THE RESPECTIVE ASSESSEES FILED ALONG WI TH THEIR RETURNS OF INCOME. IN THE ABSENCE OF ANY CONTRACT B ETWEEN THE ASSESSEE COMPANIES AND M/S. SCSL FOR CHARGING OF IN TEREST ON THE ADVANCES, THE ASSESSEES ARE NOT ENTITLED TO REC EIVE ANY INTEREST INCOME ON SUCH ADVANCES. THEREFORE, MEREL Y BECAUSE 8 ITA NO. 1879/HYD/2013 M/S MALAPRABHA GREENFIELDS PVT. LTD. THE ASSESSEE IS FOLLOWING MERCANTILE IS SYSTEM OF A CCOUNTING, IT CANNOT BE SAID THAT THE INTEREST HAS ACCRUED TO THE ASSESSEES. FURTHER, MERELY BECAUSE THE ASSESSEES HAVE CLAIMED INTEREST AT THE RATE OF 18% PER ANNUM IN THE SUITS FILED FOR RE COVERY OF ADVANCES, IT CANNOT BE SAID THAT THE SAID RATE OF I NTEREST IS APPLICABLE AS M/S. SCSL HAS NOT ADMITTED THE LIABIL ITY OF EVEN THE AMOUNTS OF ADVANCE. AS SUCH, WE FIND THAT THERE IS NO CERTAINTY WITH REGARD TO THE SAID RATE OF INTEREST. THEREFORE, IT CANNOT BE PRESUMED THAT THE INTEREST ACCRUED TO TH E ASSESSEE AT THE RATE OF 18% P.A. AS CLAIMED BY THE ASSESSEES IN THE SUITS FILED FOR RECOVERY OF ADVANCES. THE CIVIL COURTS WO ULD CONSIDER AND DECIDE THE LIABILITY OF M/S. SCSL TO REPAY THE AMOUNTS OF ADVANCES AND WOULD ALSO CONSIDER THE LIABILITY OF M /S. SCSL TO PAY INTEREST THEREON AND THE RATE OF INTEREST AT WH ICH THE ADVANCES SHOULD BE REPAID. THEREFORE, UNLESS AND UN TIL THE LIABILITY TO PAY THE ADVANCES AND THE RATE OF INTER EST AT WHICH THE TEMPORARY ADVANCES ARE TO BE REPAID IS DETERMIN ED BY THE CIVIL COURT, IT CANNOT BE SAID THAT THE SAME HAS AC CRUED OR ARISEN TO THE ASSESSEES. HOWEVER, IF THE ASSESSEES HAD ADVANCED INTEREST BEARING FUNDS AS INTEREST FREE AD VANCES, THE INTEREST PAID BY THE ASSESSEES TOWARDS SUCH BORROWE D FUNDS WOULD HAVE TO BE DISALLOWED AND TREATED AS THE INCO ME OF THE RESPECTIVE ASSESSEES. THE HONBLE PUNJAB AND HARYAN A HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES (SUPRA) HA S HELD THAT THE NEXUS BETWEEN THE INTEREST BEARING FUNDS AND TH E INTEREST FREE ADVANCES WILL HAVE TO BE PROVED BEFORE MAKING THE DISALLOWANCE OF INTEREST AND BRINGING IT TO TAX. WE FIND THAT NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAS EX AMINED THE ISSUE FROM THIS ANGLE. THEREFORE, THE ORDERS OF THE CIT(A) AND THE ASSESSING OFFICERS ARE SET ASIDE AND THE ISSUE IS REMITTED TO THE FILE OF THE ASSESSING OFFICER OF THE RESPECT IVE ASSESSEES FOR DE NOVO CONSIDERATION IN THE LIGHT OF OUR OBSER VATIONS ABOVE. FURTHER, WE HOLD THAT IF THE AMOUNTS ADVANCE D TO M/S. SCSL BY THE RESPECTIVE ASSESSEES ARE FROM THEIR OWN FUNDS, THEN THE INTEREST EXPENDITURE CANNOT BE DISALLOWED AND BROUGHT TO TAX. NEEDLESS TO MENTION THAT THE ASSESS ING OFFICER SHALL GIVE FAIR OPPORTUNITY OF HEARING TO THE ASSES SEES BEFORE PASSING ANY ORDERS IN THE LIGHT OF OUR ABOVE OBSERV ATIONS AND IN ACCORDANCE WITH LAW. 17. FURTHER, SAME VIEW WAS TAKEN BY THIS TRIBUNAL I N THE CASE OF OTHER ASSESSEES VIZ., M/S. BANGANGA AGRO FARMS P VT. LTD., & 9 ITA NO. 1879/HYD/2013 M/S MALAPRABHA GREENFIELDS PVT. LTD. OTHERS IN ITA NOS. 1852 TO 1855/HYD/2013. ACCORDIN GLY, ON SIMILAR LINES, WE ARE INCLINED TO REMIT THE ISSUE B ACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION. 12. AS FACTS ARE IDENTICAL AND ISSUES RAISED ARE MATERIALLY SAME, RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE C OORDINATE BENCH, WE REMIT THE MATTER BACK TO THE FILE OF THE AO TO DECI DE IT DENOVO IN TERMS WITH THE DIRECTIONS OF THE COORDINATE BENCH IN ITA NOS. 62 TO 76/HYD/14 (SUPRA). 13. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOW ED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28/08/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 28 TH AUGUST, 2014 KV COPY TO:- 1) DCIT, CENTRAL CIRCLE 9,8 TH FLOOR, AAYKAR BHAVAN, BASHEERBAGH, HYDERABAD 500004 2) M/S MALAPRABHA GREENFIELDS PVT. LTD., H-17, FLAT NO. 201, TULSI APT., MADHURA NAGAR, SR NAGAR, HYD 38. HYDERABAD. 3) CIT(A)-VII, HYDERABAD. 4) CIT(CENTRAL), HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD. 10 ITA NO. 1879/HYD/2013 M/S MALAPRABHA GREENFIELDS PVT. LTD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER