ACIT, New Delhi V. M/s. Religare Finvest Ltd, New Delhi

ITA 2968/DEL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52743 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 17-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SYALI
• Keywords: Fair market value; Commercial expediency
• Section: 143(3)

Judgement Text

ITA NO. 2968/DEL/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2968/DEL/2009 A.Y. : 2006-07 A DD L . C.I.T., RANGE - 15, NEW DELHI VS. M/S RELIGARE FINVEST LTD., 3 RD FLOOR, 6, DEVIKA TOWER, RIGHT WING, NEHRU PLACE, NEW DELHI (PAN/GIR NO. : AAFCS6801H) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. M.S. SYALI, SR. ADV., AND SH. TARANDEEP SINGH, CA DEPARTMENT BY : SH. SUDESH GARG, C.I.T. (D.R.) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 27.4.2 009 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (APPEALS) ERRED IN DELETING THE DISALLOWANCE OF ` 6 ,85,64,364/- MADE BY THE ASSESSING OFFICER U/S 40A(2)(B) OF THE IT ACT. 3. IN THIS CASE ASSESSING OFFICER OBSERVED THAT ASS ESSEE HAS TAKEN UNSECURED LOANS FROM THE FOLLOWING CONCERNS:- NAME OF THE CONCERN INTEREST AMOUNT (IN RUPEES) RATE OF INTEREST RANBAXY HOLDING CO. 26,84,89,950/- 11% ITA NO. 2968/DEL/2009 2 RELIGARE COMMODITIES LTD. 74,816/- 11% RELIGARE SECURITIES LTD. 8,43,350/- 11% LUMINOUS HOLDING (P) LTD. 4,29,877/- 10% SHRI RAM GLOBAL ENT. 29,80,849/- 9% TO 9.10% JAGUAR ESTATES (P) LTD. 1,92,864/- 9% TOTAL = 27,30,11,706/- 3.1 ASSESSING OFFICER FURTHER OBSERVED THAT OUT OF THE AFOREMENTIONED CONCERNS, MIS RANBAXY HOLDING CO., REL IGARE COMMODITIES LTD & RELIGARE SECURITIES LTD. ARE COVER ED U/S 40A(2)(B) AS PER THE AUDITORS REPORT. IT IS ALSO CLEAR FROM TH E ABOVE CHART THAT INTEREST HAS BEEN PAID TO THESE THREE CONCERNS @ 11 % WHEREAS THE INTEREST PAID TO OTHER CONCERNS WHO ARE NOT COVERED U/S 40A(2)(B) @ 9% TO 10%. 3.2 BESIDES THESE, IT WAS ALSO NOTICED THAT THE ASS ESSEE HAS PAID INTEREST TO DIFFERENT BANKS ON THE WORKING CAPITAL LOANS SUCH AS DBS BANK LTD. @ 8.2%, HDFC BANK @ 8.5% AND YES BANK @ 9. 2%. OUT OF THESE WORKING CAPITAL LOANS, THE LOANS FROM HDFC BAN K AND YES BANK WERE REPAID BY THE ASSESSEE DURING THE RELEVANT PRE VIOUS YEAR. ONLY THE BANK LOAN FROM DBS BANK CONTINUED AND THE CLOSIN G BALANCE AS ON 31.03.2006 WAS RS.15 CRORES. 3.3 BESIDES THESE, THE ASSESSEE WAS ALSO FOUND TO H AVE PAID INTEREST TO THE CORPORATE BODIES ON SHORTS TERM LOAN AT THE RATES VARYING FROM 8.5% TO 10% AND ON DEBENTURES AT THE RATES VARYING FROM 6.5% TO 8.7%. ITA NO. 2968/DEL/2009 3 3.4 THE ASSESSEE WAS REQUESTED TO EXPLAIN AS TO WHY THE EXCESSIVE INTEREST PAID TO THE CONCERNS COVERED U/S 40A(2)(B) I.E. AT THE HIGHER RATE OF 11 % SHOULD NOT BE DISALLOWED U/S 40A(2)(B) . 3.5 IN ITS REPLY, THE ASSESSEE STATED THAT: - UNLIKE OTHER LOANS, LOANS FROM THE SPECIFIED PERSONS ARE UNSECURED LOANS AND WERE AVAILABLE TO THE ASSESSEE COMPANY WITHIN A SHORT TIME WITHOUT ANY SIGNIFICANT PAPER WORK, IN CONTRAST TO THE LOANS TAKEN FROM THE HDFC BANK, WHIC H WAS SECURED LOAN AND WAS GIVEN AFTER SIGNIFICANT PAPER WORK. - THE LOANS FROM RELATED PARTIES WERE EASILY AVAILABLE AT ,ANY DESIRED POINT OF TIME AS COMPARED TO LOANS FROM BANKS . FURTHER, THE COMPANY WAS AT THE INCEPTION STAGE OF OPERATION AND THE LOANS FROM BANK WERE NOT READILY AVAILABLE AS PER TH E REQUIREMENTS OF THE COMPANY. - THE BANK PRIME LENDING RATE DURING THE PREVIOUS YEAR 2005-06 WAS IN THE RANGE OF 10.25 TO 10.75% (FOR SECURED LO ANS) AS PER ECONOMIC SURVEY REPORT FOR 2005-06. - THE RATE AT WHICH THE LOANS WERE TAKEN FROM SPECIFIE D PERSONS WAS FOR BUSINESS EXPEDIENCY. 3.6 ASSESSING OFFICER DID NOT FIND ASSESSEES EXPL ANATION SATISFACTORY AND GAVE FOLLOWING OBSERVATION:- (I) THE ECONOMIC SURVEY REPORT FOR THE F.Y.2005-06 IS GENERAL IN NATURE. THE ECONOMIC SURVEY REPORT IS BASED ON THE T RANSACTIONS OF TOP FIVE BANKS ONLY FROM WHOM THE ASSESSEE HAS NOT TAKEN ANY LOAN. IT IS WORTHWHILE TO MENTION HERE THAT THE LOA N TRANSACTIONS ARE OF DIFFERENT TYPES SUCH AS SHORT TERM LOAN, LON G TERM LOAN, ITA NO. 2968/DEL/2009 4 WORKING CAPITAL LOAN ETC. AND THE RATE OF INTEREST CHARGED BY THE BANKS MAY VARY DEPENDING ON THE NATURE OF LOAN TRANS ACTION. THE NON-BANKING FINANCE COMPANIES HAVE A DIFFERENT STRUCT URE AND WORKING. IF WE CONSIDER THIS REPORT IN THE PRESENT CASE THEN THE RATE OF INTEREST CHARGED BY THE ASSESSEE FROM ITS CU STOMERS SHOULD BE AT THE RATE OF PRIME-LENDING RATE WHICH WA S, ACCORDING TO THE REPORT, AROUND 10.25% TO 10.75 %. BUT IT WAS FOUND FROM THE RECORD THAT THE ASSESSEE HAS CHARGED INTEREST F ROM ITS CUSTOMERS MUCH ABOVE THESE RATES. SO THIS REPORT CA NNOT BE CONSIDERED FOR AS A BENCHMARK FOR COMPARING THE RATE OF INTEREST WITH THE PRIME LENDING RATES IN THE CASE OF BANKS. EVEN FOR ARGUMENT SAKE, IF WE CONSIDER, THIS ECONOMIC SURVEY REPORT, THE REPORT SUGGESTS THAT THE RATE OF INTEREST WAS IN TH E RANGE OF 10.25% TO 10.75% I.E. THE PRIME LENDING RATE IN THE CASE OF FIVE BANKS, THE RATE OF INTEREST PAID TO THE AFOREMENTIO NED SPECIFIED PERSONS @ 11 % IS ON THE HIGHER SIDE. DURING THE CO URSE OF ASSESSMENT, THE LOAN AGREEMENT WITH YES BANK WAS EXA MINED AND IT WAS FOUND THAT THE BANK HAS CLEARLY MENTIONE D THAT THE PLR OF 11.75% ON THE DATE OF D.P. NOTE IS ONLY CUSTOM ARY AND IS A PART OF THEIR STANDARD DOCUMENTATION. THIS SHOWS TH AT IT WAS NOT COMPULSORY FOR THE BANKS TO CHARGE THE PLR AT THE RAT E OF 11.75%, AS CLAIMED BY THE ASSESSEE. SUBSEQUENTLY, TH E ASSESSEE HAS OBTAINED LOAN AT THE RATE OF 9.2% (AVERAGE) FRO M YES BANK. (II) THE LOAN FROM HDFC BANK HAS BEEN TAKEN BY THE AS SESSEE THROUGH SYNDICATION VIA RANBAXY HOLDING CO. THE RAT E OF INTEREST CHARGED BY HDFC BANK WAS FOUND TO BE @ 8.5% AND THE ASSESSEE HAS PAID 1% AS SYNDICATION FEE TO M/S RANBAXY HOLDIN G CO. FOR ARRANGING THIS LOAN. SO THE ASSESSEE CONTENTION THA T THE SECURED ITA NO. 2968/DEL/2009 5 LOANS WERE AVAILABLE FROM THIS BANK@ 10.25% TO 10.7 5% IS CONTRADICTORY TO THE FACTS OF THIS CASE. (III) NO EVIDENCE HAS BEEN PRODUCED BY THE ASSESSE E TO SHOW THAT LOANS FROM BANKS WERE NOT AVAILABLE AT THE DESIRED P OINT OF TIME. EVEN THE REPORT FROM ECONOMIC SURVEY FOR THE YEAR 200 5-06 DOES NOT SUGGESTS THAT THERE WAS ANY LIQUIDITY PROBLEM. (IV) THE ASSESSEE CONTENTION THAT THE PAYMENT OF IN TEREST AT THE HIGHER RATE TO THE SPECIFIED PERSONS WAS FOR BUSINE SS EXPEDIENCY, HAS ALSO NO MERIT. THE ASSESSEE IS A NON BANKING FIN ANCIAL COMPANY AND ITS PRIME OBJECTIVE IS TO EARN INCOME. PAY MENT OF HIGHER RATE OF INTEREST CANNOT BE CONSIDERED AS BUS INESS EXPEDIENCY. DURING THE YEAR THE ASSESSEE HAS OBTAIN ED LOAN FROM VARIOUS SOURCES SUCH AS BANKS, INTER CORPORATE LOAN , DEBENTURES ETC. AT A MUCH LOWER RATE THEN THE LOANS TAKEN FROM T HE AFOREMENTIONED SPECIFIED PERSONS. EVEN IF WE CONSIDE R THE COMMERCIAL EXPEDIENCY, IT WOULD HAVE BEEN WISER TO RETURN THE LOANS TAKEN AT THE HIGHER RATE OF INTEREST THEN THE LOAN TAKEN ON THE LOWER RATE OF INTEREST. IN THE PRESENT CASE OF THE ASSESSEE, IT WAS NOTICED THAT THE ASSESSEE RETURNED THE LOANS TA KEN AT THE LOWER RATES FROM HDFC BANK AND YES BANK WHEREAS IT H AS CONTINUED THE LOANS TAKEN AT HIGHER RATES FROM THE SPECIFIED PERSONS. THIS ACT OF THE ASSESSEE CANNOT BE CONSTRU ED AS COMMERCIAL EXPEDIENCY. IN FACT, THE TRANSACTIONS WI TH THE SPECIFIED PERSONS SHOW THAT IN ORDER TO SUPPRESS IT S INCOME, THE ASSESSEE HAS CONTINUED THESE LOANS AND INCURRED EXP ENDITURE AS INTEREST ON THESE LOANS. OUT OF THE TOTAL EXPENDITU RE ON ACCOUNT OF INTEREST PAYMENT OF RS.37,18,88,771/- (TOTAL INT EREST PAID ON ITA NO. 2968/DEL/2009 6 SHORT TERM LOAN FROM CORPORATE BODIES, DEBENTURES, W ORKING CAPITAL LOAN AND UNSECURED LOAN) THE ASSESSEE HAS P AID RS.27,30,11,705/- AS INTEREST ON UNSECURED LOAN I.E . 73.41%. OUT OF THE TOTAL INTEREST EXPENDITURE OF RS.27,30,11,70 6/- ON UNSECURED LOAN DURING THE RELEVANT PREVIOUS YEAR, T HE ASSESSEE HAS PAID RS.26,84,89,950/- TO M/S RANBAXY HOLDING C O. WHICH IS COVERED U/S 40A(2)(B). THIS SHOWS THAT 98.34% OF TH E TOTAL EXPENDITURE ON ACCOUNT OF INTEREST PAID ON UNSECURE D LOAN, HAS BEEN PAID TO M/S RANBAXY CO. LTD. WHO HOLDS SUBSTANT IAL INTEREST IN THE ASSESSEE COMPANY. THE RETURN OF INCOME FILED BY M/S RANBAXY HOLDING CO. REVEALED THAT IT IS A LOSS MAKIN G COMPANY AND NO TAX HAS BEEN PAID BY THIS COMPANY EVEN UNDER MAT. THE RETURN OF INCOME OF M/S RANBAXY CO. LTD. HAS BEEN ILL USTRATED BELOW FOR REFERENCE. NAME A.Y. RETURNED INCOME TAX PAID RANBAXY HOLDING CO. 2006-07 (-) 30400439/- NIL -DO- 2005-06 NIL NIL -DO- 2004-05 (-)9276572/- NIL -DO- 2003-04 (-)157613570/- NIL 3.7 SIMILARLY, IT WAS FOUND THAT THE ASSESSEE HAS RE CEIVED INTEREST FROM M/S RELIGARE COMMODITIES LTD AT THE RATE OF 11 % AND HAVE PAID INTEREST AT THE SAME RATE I.E. AT THE RATE OF 11 %. IN THE CASE OF RELIGARE SECURITIES LTD. THE ASSESSEE HAVE PAID INT EREST AT THE RATE OF 11 % AND HAVE RECEIVED INTEREST FROM IT AT THE RATE OF 11 % TO 12%. IT WAS NOTICED THAT DURING THE PREVIOUS YEAR 2005-06 T HE ASSESSEE HAD ADVANCED LOAN TO THE TUNE OF RS.38,93,05,730/- TO R ELIGARE ITA NO. 2968/DEL/2009 7 COMMODITIES LTD. AND HAVE RECEIVED INTEREST OF RS.10 ,40,966/- @ 11 % INTEREST. IF WE COMPARE THE RATE OF INTEREST ON WHI CH THE LOAN WAS GIVEN TO OTHER CUSTOMERS RANGING BETWEEN 12% TO 18% DURIN G THE SAME PREVIOUS YEAR WITH THE LOAN GIVEN TO SPECIFIED PERS ON NAMELY RELIGARE COMMODITIES LTD. WHICH IS @11 %, IT IS EVIDENT THAT ON THIS ACCOUNT ALSO THE ASSESSEE HAS CHARGED LESS INTEREST IN COMP ARISON TO OTHER CUSTOMERS. ALL THESE TRANSACTIONS INDICATE THAT THE ASSESSEE HAS, IN FACT, INCURRED LOSSES ON THESE TRANSACTIONS, IF WE CONSIDER, THE ADMINISTRATIVE COST ATTRIBUTABLE TO THESE TRANSACTIO NS. AGAIN, ALL THESE TRANSACTIONS WITH THE SPECIFIED PERSONS CANNOT BE C ONSIDERED AS COMMERCIAL EXPEDIENCY ON THE PART OF THE ASSESSEE A ND FROM THE POINT OF VIEW THAT PROFIT. THESE TRANSACTIONS HAVE NOT BE EN MADE BY THE ASSESSEE WITH THE INTENTION TO MAKE PROFIT. 3.8 THE ABOVE ILLUSTRATION SUGGESTS THAT THE ASSESS EE HAS ADOPTED A METHOD THROUGH THE CORPORATE VEIL TO REDUCE ITS INCO ME AND EVADED TAX TO THAT EXTENT. THE CONTINUANCE OF LOAN FROM THE SPECIFIED PERSONS AT THE HIGHER RATE OF INTEREST AND THE REPAYMENT OF LOAN FROM OTHER SOURCES WHICH WAS AT THE LOWER RATE OF INTEREST, CA NNOT BE CONSIDERED AS BUSINESS/COMMERCIAL EXPEDIENCY. 3.9 ASSESSING OFFICER FURTHER EXAMINED THE PROVISION S OF SECTION 40A(2)(B) AND HELD AS UNDER:- THE FUNDS AVAILABLE TO THE ASSESSEE DURING THE YEA R WERE AS LOW AS @ 6.5% TO 8.7% (DEBENTURES) AND WORKING CAPITAL LOANS FROM DBS BANK LIMITED @8.20% AND YES BANK @9.2%. THE FUNDS FROM HDFC BANK WERE AVAILABLE @8.5%. EVEN FROM THE MARKET ASSESSEE HAS TAKEN LOANS @ 9 TO 10% OF INTEREST. BU T ONLY TO ASSOCIATE CONCERNS NAMELY RANBAXY HOLDING CO., RELI GARE ITA NO. 2968/DEL/2009 8 COMMODITIES LIMITED AND RELIGARE SECURITIES LIMITED, THE PAYMENT OF INTEREST HAS BEEN MADE @11%, WHICH WAS NOT THE RATE PREVAILING AND EXCESSIVE, PREJUDICIAL TO THE I NCOME OF THE ASSESSEE COMPANY. THEREFORE, THE DISALLOWANCE U/S 40 A(2)(B) IS CALCULATED BELOW:- 3.10 INTEREST PAID @ 11 % TO THE ASSOCIATED CONCERN S DURING THE YEAR: I) RANBAXY HOLDING CO. 26,84,89,950/- II) RELIGARE COMMODITES LIMITED 74,816/- III) RELIGARE SECURITIES LIMITED 8,43,350/- TOTAL 26,94,08,116/- 3.11 AMONG THE BANKS FROM WHICH THE ASSESSEE HAS TAK EN WORKING CAPITAL, THE LOAN WITH M/S DBS BANK LIMITED WAS EXIS TING DURING EARLIER PREVIOUS YEAR I.E. 2004-05 AND THE LOAN HAS CONTINU ED INTO THE NEXT YEAR I.E. THE RELEVANT PREVIOUS YEAR I.E. 2005-06. HENCE, TAKING THE TRANSACTIONS WITH THIS BANK AS THE FAIR MARKET VALUE FOR THE INTEREST PAYMENTS FOR THE RELEVANT PREVIOUS YEAR 2005-06, THE REASONABLE INTEREST RATE IS TAKEN @ 8%. SINCE THE ASSESSEE HA S PAID EXCESSIVE INTEREST @ 11 % AS AGAINST INTEREST PAYMENT OF ONLY 8.2% TO DBS BANK LIMITED, THE EXCESSIVE INTEREST PAYMENT TO THE ASSOCI ATE CONCERNS IS DETERMINED AT 2.8% (11% - 8.20%. HENCE, 25.45% OF TH E INTEREST PAYMENT ( 2.8/11X100) IS TO BE HELD AS EXCESSIVE AND UNREASONABLE INTEREST PAYMENT HAVING REGARD TO THE FAIR MARKET VA LUE AND LEGITIMATE NEEDS OF THE BUSINESS, WHICH ARE ILLUSTRATED BELOW: - RANBAXY HOLDING CO. - 26,84,89,950 X 25.45% = ` 6,83,30,692/- ITA NO. 2968/DEL/2009 9 RELIGARE COMMODITES LIMITED - 74,816 X 25.45% = ` 19,040/- RELIGARE SECURITIES LIMITED - 8,43,350 X 25.45% - ` 2,14,632/- TOTAL ` 6,85,64,364/- 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE AND HELD AS UNDER:- (I) IT IS BEYOND DOUBT THAT THE APPELLANT HAS PAI D INTEREST @ 11 % TO ITS ASSOCIATE CONCERNS VIZ. M/S.RANBAXY HOLDING CO., M/S. RELIGARE COMMODITIES LTD. AND M/S.RELIGARE SECURITIES ON UNSECURED LOANS TAKEN BY IT. IT IS ALSO NOT DOUBTED THAT THE TRANSACTIONS WITH THE AFORESAID THREE ASSOCIATE CO NCERNS WERE GENUINE AND THE INTEREST COST WAS ACTUALLY BORNE BY THE APPELLANT. II) THE LD. ASSESSING OFFICER IN HIS ORDER HAS CO MPARED THE RATE OF INTEREST (11%) ON UNSECURED LOANS TAKEN FROM THE ABOVE THREE ASSOCIATE CONCERNS WITH SECURED LOANS TAKEN F ROM M/S.DBS BANK LTD. @ 8.2% BY HOLDING THAT THE APPELLA NT CONTINUED THE LOAN WITH M/S.DBS BANK LTD. THROUGH OUT THE YEAR. III) THE APPELLANT HAS SUBMITTED THAT THE RATE OF INTEREST ON SECURED LOANS BORNE BY IT DURING THE YEAR UNDER RE FERENCE RANGED FROM 8.2% TO 10%, THE DETAILS OF WHICH WERE D ULLY FURNISHED WITH AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. A COPY OF THE SAME HAS ALSO BEEN FILED BEFORE ME. ITA NO. 2968/DEL/2009 10 (IV) THE YEAR UNDER REFERENCE IS THE SECOND ASSESS MENT YEAR OF THE BUSINESS OPERATION OF HE APPELLANT. THE APPELLANT S UBMITTED THAT DURING THE YEAR UNDER REFERENCE, ITS BUSINESS ACTIV ITIES AS WELL AS INCOME THEREFROM HAS INCREASED SUBSTANTIALLY AND IT HAS ACCORDINGLY RETURNED INCOME AT RS. 10.71 CRS. ON WHI CH IT HAS PAID TAX TO THE TUNE OF RS.3.61 CRS. AS AGAINST RET URNED INCOME OF RS.3.L0 CRS. AND TAX PAID THEREON TO THE TUNE OF RS .1.13 CRS. IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. IT THUS SU BMITTED THAT THERE IS AN INCREASE OF OVER 200% IN THE RETUR NED INCOME AS WELL AS TAXES PAID IN THE CURRENT YEAR. V) DURING THE YEAR UNDER REFERENCE, THE APPELLANT HA S PAID INTEREST COST OFRS.26.85 CRS. (OUT OF TOTAL RS.37.19 CRS.) T O M/S.RANBAXY HOLDING CO. @ 11% AND HAS EARNED INTEREST INCOME @ 12% TO 16% AMOUNTING TO RS.49.23 CRS. (OUT OF TOTAL RS.51. 50 CRS.) MAINLY OUT OF BORROWINGS MADE FROM MLS.RANBAXY HOLDING CO. IT THUS CLAIMED THAT WITHOUT SUCH LOANS FROM MLS.RANBAXY HOLDING CO., IT WOULD NOT HAVE BEEN POSSIBLE TO EARN ADDITI ONAL INTEREST INCOME @ 12% TO 16% FROM ITS CLIENTS AND THEREFORE T HE BORROWINGS MADE FROM M/S. RANBAXY HOLDING CO. WERE AB SOLUTELY NECESSARY AND LEGITIMATE NEED OF THE APPELLANT FOR EXPANSION OF ITS BUSINESS. VI) THE AR HAD ALSO DRAWN MY ATTENTION TO THE FAC T THAT THE SECURED LOANS WERE NEITHER AVAILABLE EASILY NOR THEY WERE E NOUGH TO CATER TO THE BUSINESS NEEDS OF THE APPELLANT AS IT DID NO T HAVE ENOUGH SECURITY AND/OR PROVISION OF GUARANTEE FOR OBTAININ G SUCH LOANS. MOREOVER, THE SECURED LOANS REQUIRED SUBSTANTIAL TIME , HUGE AMOUNT OF PAPER WORK AND FORMALITIES INCLUDING ARRANG EMENT OF ITA NO. 2968/DEL/2009 11 SECURITY AND/OR GUARANTEE, WHICH IT WAS NOT ABLE TO MANAGE. THE AR HAS ALSO FURNISHED BEFORE ME SANCTION LETTER FRO M MLS.DBS BANK LTD., WHEREIN IT HAS SANCTIONED A LOAN FACILIT Y OF RS.30 CRS. ONLY AS AGAINST RS. 100 CRS. REQUISITIONED BY THE A PPELLANT. IN THE SAID LETTER THE BANK HAS ALSO STATED THAT THERE WOU LD BE AN UPFRONT LEVY OF FEE OF 1% OF LOAN AMOUNT AS ALSO IT WOULD LEVY PENALTY FOR PREPAYMENT OF LOANS. THE AR HAD ALSO DRA WN MY ATTENTION TO THE FACT THAT THE LOAN WAS FINALLY DIS BURSED BY MLS.DBS BANK LTD. ON 09.12.2005 I.E. AFTER A PERIOD O F MORE THAN TWO MONTHS FROM THE DATE OF APPLICATION. THE AR HAS A LSO PRODUCED BEFORE ME SANCTION LETTERS FROM OTHER BANKS, WHICH ALSO REQUIRE SIMILAR FORMALITIES IN THE CASE OF SECURED LO ANS SANCTIONED BY THEM. WHEREAS, THE UNSECURED LOANS FROM M/S.RANBA XY HOLDING CO. WERE AVAILABLE, THOUGH AT A SLIGHTLY HI GHER RATE OF INTEREST, AT ANY POINT OF TIME AND FOR ANY NUMBER OF DAYS WITHOUT MUCH OF PAPER WORK AND/OR OTHER FORMALITIES. THE AR THEREFORE PLEADED THAT THE LOAN TAKEN FROM M/S.RANBAXY HOLDING CO. WAS ABSOLUTELY NECESSARY FOR THE PURPOSE OF CARRYING ON ITS BUSINESS AS WELL AS FOR EXPANSION OF THE BUSINESS OF GRANTIN G LOANS & ADVANCES TO EARN THE ADDITIONAL INTEREST INCOME @ 12 % TO 16%, WITHOUT WHICH, IT WOULD NOT HAVE EARNED SUCH ADDITI ONAL INTEREST INCOME AND HAD PAID TAXES ACCORDINGLY. THE AR HAS A LSO FURNISHED MEMORANDUM OF UNDERSTANDING WITH M/S.RANBAX Y HOLDING CO. WITH REGARD TO UNSECURED LOANS OBTAINED BY IT. VII) THE AR ALSO SUBMITTED THAT THE INTEREST COST B ORNE BY M/S.RANBAXY HOLDING CO. WAS ALSO 10% - OR MORE. IT ALSO SUBMITTED BEFORE ME THE SANCTION LETTERS FROM VARIOUS INSTITUTIONS WHICH STATED THAT THE INTEREST RATE ON SECURED LOANS TAKEN BY M/S.RANB AXY HOLDING ITA NO. 2968/DEL/2009 12 CO. WAS 10% (PAYABLE MONTHLY OR QUARTERLY). THEREFOR E, KEEPING IN VIEW THE FORMALITIES AND PAPER WORK INCLUDING PR OVISION OF SECURITY/GUARANTEE FOR OBTAINING SECURED LOANS AT T HE REQUEST OF THE APPELLANT, IT WAS JUSTIFIED N THE PART OF M/S.RA NBAXY HOLDING CO. TO CHARGE INTEREST @ 11 % ON THE UNSECURED LOAN S GIVEN TO THE APPELLANT ON WHICH THE APPELLANT HAS EARNED INT EREST INCOME FROM 12% TO 16%. (VIII) THE LD. ASSESSING OFFICER WHILE COMPUTING TH E DISALLOWANCE U/S 40A(2)(B) HAS CONSIDERED/COMPARED THE RATE OF INTERE ST ON SECURED LOANS FROM M/S.DBS BANK LTD. @ 8.2%, WHILE NO T MENTIONING THE HIGHER RATE OF INTEREST ON SECURED LO ANS AVAILED BY THE APPELLANT, THE DETAIL OF WHICH WAS AVAILABLE WITH THE LD.AO. EVEN OTHERWISE, IT IS COMMON PRACTICE THAT INTEREST ON UNSECURED LOANS IS GENERALLY MORE THAN INTEREST ON SECURED LOA NS, KEEPING IN VIEW THE RISK INVOLVED IN THE CASE OF UNSECURED LOA NS AS HAS ALSO BEEN HELD BY THE HON'BLE HIGH COURT OF GUWAHATI IN THE CASE OF DEVELOPMENT INVESTORS V. C.I.T.- 223 ITR 432. (IX) IT IS ALSO NOTED THAT THE LOAN FROM M/S.RANB AXY HOLDING CO. IS CONTINUING FROM THE PREVIOUS YEAR AND THE RATE OF I NTEREST ALSO REMAINED THE SAME I.E. 11%. THE SAID RATE OF INTEREST HAS NOT BEEN ADVERSELY COMMENTED UPON AND THEREFORE ACCEPTED BY THE DEPARTMENT IN THE IMMEDIATELY PRECEDING ASSESSMENT Y EAR IN THE ASSESSMENT FRAMED U/S 143(3) OF THE ACT. (X) I HAVE ALSO GONE THROUGH THE PRIME LENDING RA TES IN RESPECT OF SECURED LOANS AS PER THE ECONOMIC SURVEY REPORT FOR THE FINANCIAL YEAR 2005-06 DULY FURNISHED BEFORE ME AS W ELL AS THE ITA NO. 2968/DEL/2009 13 LD.AO AS PER WHICH THE RATE OF INTEREST ON SECURED LOANS RANGED FROM 10.25% TO 10.75%, WHICH WAS NOT CONSIDERED BY T HE LD.AO. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, CONTENTIONS OF THE APPELLANT INCLUDING CASE LAWS RE LIED UPON BY IT AND ORDER OF THE LD.AO, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAD EARNED SUBSTANTIAL INTEREST INCOME AN D HAD PAID SUBSTANTIALLY HIGHER TAXES IN THE YEAR UNDER REFERE NCE AS COMPARED TO THE EARLIER YEARS MAINLY OUT OF LOANS RA ISED FROM M/S.RANBAXY HOLDING CO. @ 11 %, WHICH WERE LENT BY T HE APPELLANT TO EARN THE INTEREST INCOME AMOUNTING TO R S.49.23 CRS. @ 12% TO 16% WHICH IS SUBSTANTIALLY HIGHER THAN THE PREVIOUS YEAR. I FULLY AGREE WITH THE CONTENTION OF THE APPE LLANT THAT IT HAD BORROWED THE MONEY FROM M/S.RANBAXY HOLDING CO. @ 1 1 % FOR IT BUSINESS NEEDS & REQUIREMENTS, AND WITHOUT SUCH BORR OWING, IT WOULD NOT HAVE BEEN ABLE TO RUN/EXPAND ITS BUSINESS IN AN EFFICIENT MANNER AS ADEQUATE SECURED LOANS WERE NOT AVAILABLE TO THE APPELLANT FROM BANKS KEEPING IN VIEW THE RESOURC ES IN THE FORM OF SECURITY ETC. AVAILABLE WITH THE APPELLANT. ACCORDINGLY, WITHOUT SUCH UNSECURED LOANS, IT WOULD NOT HAVE BEE N ABLE TO EARN SUBSTANTIALLY HIGHER INTEREST INCOME ON WHICH IT HAS PAID SUBSTANTIALLY HIGHER TAXES. I THUS HOLD THAT THE UNSECURED LOANS TAKEN BY THE A PPELLANT FROM M/S RANBAXY HOLDING CO. WERE FOR THE BUSINESS N EEDS OF THE APPELLANT AND WITHOUT THE SAME IT WOULD NOT HAVE BE EN POSSIBLE FOR IT TO EARN THE INTEREST INCOME OFFERED BY IT FOR TAXATION. SIMILARLY, THE SMALL LOANS TAKEN FROM M/S RELIGARE COMMODITIES LTD. AND M/S RELIGARE SECURITIES LTD WERE ALSO FOR ITA NO. 2968/DEL/2009 14 THE PURPOSE OF BUSINESS OF THE APPELLANT ON WHICH I T HAS EARNED INTEREST INCOME. I THEREFORE DIRECT THE LD.AO TO DELETE THE DISALLOW ANCE OF INTEREST AMOUNTING TO ` 6,85,64,364 MADE IN THE ASSES SMENT ORDER U/S 40A(2)(B) OF THE ACT. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. 7. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ASS ESSEE HAS RAISED LOANS @ 8.2% FROM BANKS WHEREAS INTEREST PAI D TO THE SISTER CONCERN WAS @11%. HE FURTHER CLAIMED THAT THE ARGU MENTS OF SECURED LOAN BEING LESS COSTLY IS NOT RELEVANT BEC AUSE AS FAR AS THE ASSESSEE AND THE LENDING SISTER CONCERN OF THE ASSE SSEE IS CONCERNED, THERE WAS INBUILT SECURITY AS THERE WAS NO FEAR OF LOSS OF PRINCIPLE OR INTEREST TO THE LENDER. HE FURTHER SUBMITTED THAT T HE ASSESSEE COMPANY HAD ENOUGH ASSETS ON ITS BALANCE SHEET TO O FFER AS SECURITY AND ARRANGE SECURED LOANS AT THE INTEREST RATE OF AROUND 8%. HE FURTHER SUBMITTED THAT THERE WAS A CLEAR TAX SAVING TO THE ASSESSEE AS A GROUP ON ACCOUNT OF PAYMENT OF INTEREST @ 11% TO SISTER CONCERN. HE FURTHER CLAIMED THAT ASSESSEE HAS CLAIMED BUSIN ESS EXIGENCY BUT HAS NOT BEEN ABLE TO DEMONSTRATE ANY EVIDENCE FOR TH E SAME. HE FURTHER SUBMITTED THAT THE ASSESSEES ARGUMENTS AND R ELIANCE ON ECONOMY SURVEY IS ALSO ABSOLUTELY UNCALLED FOR, ESPE CIALLY IN VIEW OF THE FACT THAT THE ASSESSEE HAS ITSELF RAISED MONEY @ 8%. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT INTERPRETAT ION OF SECTION 40A(2)(B) AS DONE BY THE ASSESSEE IS ERRONEOUS. IN THIS REGARD, HE ITA NO. 2968/DEL/2009 15 PLACED RELIANCE UPON HONBLE GUJRAT HIGH COURT DECIS ION IN THE CASE OF [2010] 188 257 CORONATION FLOUR MILLS VS. ACIT. RE GARDING THE CASE LAW RELIED UPON BY THE ASSESSEE, HE ARGUED THAT THE Y WERE DISTINGUISHABLE ON FACTS. 7.1 LD. COUNSEL OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). HE MENTIONED TH AT ASSESSEE HAS BORROWED UNSECURED LOAN FROM M/S RANBAXY HOLDINGS CO. IN ASSESSMENT YEAR 2005-06. NO DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER, IN THIS CONNECTION, IN ASSESSM ENT YEAR 2005-06. HE ARGUED THE RATE OF INTEREST ON UNSECURED LOAN BORRO WED FROM RANBAXY HOLDINGS CO. HAS BEEN ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS AND THE SAME RATE OF INTEREST IS CONTINUING IN THE CURRENT YEAR AS WELL. WITH THE LOANS TAKEN FROM THE RANBAXY HOLDINGS CO., THE ASSESSEE WAS ABLE TO INCREASE BUSINESS ACTIVITY MANIFOLD. H E FURTHER SUBMITTED THAT THE ASSESSEE HAD NO ASSETS AVAILABLE WITH IT T O OFFER AS A SECURITY FOR THE PURPOSE OF AVAILING A SECURED LOAN. HE FUR THER SUBMITTED THAT DIFFERENCE BETWEEN SECURED AND UNSECURED LOANS HAVE NOT BEEN PROPERLY APPRECIATED BY THE ASSESSING OFFICER. 7.2 WE HAVE CAREFULLY CONSIDER THE SUBMISSIONS AND PERUSED THE RECORDS. WE CAN GAINFULLY REFER HERE THE PROVISION S OF SECTION 40A:- EXPENSES OR PAYMENTS NOT DEDUCTIBLE IN CERTAIN CIRC UMSTANCES. 40A. (1) THE PROVISIONS OF THIS SECTION SHALL HAVE EFFEC T NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISION OF THIS A CT RELATING TO THE COMPUTATION OF INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINES S OR PROFESSION. (2)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB-SECTION, AND THE [ASSESSING] OFFICER IS OF OPINION THAT SUCH EXPENDI TURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVI CES OR FACILITIES FOR WHICH THE PAYMENT IS ITA NO. 2968/DEL/2009 16 MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PRO FESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. (B) THE PERSONS REFERRED TO IN CLAUSE (A) ARE THE FOLLOWING, NAMELY : (I) WHERE THE ASSESSEE IS AN INDIVIDUAL ANY RELATIVE OF THE ASSESSEE; (II) WHERE THE ASSESSEE IS A COMPANY, FIRM, ASSOCIATION OF PERSONS OR HINDU UN- DIVIDED FAMILY ANY DIRECTOR OF THE COMPANY, PARTNER OF THE FIRM, OR MEMBER OF THE ASSOCIATION OR FAMILY, OR ANY RELATIVE OF SUCH DIRECTOR, PARTNER OR MEMBER; (III) ANY INDIVIDUAL WHO HAS A SUBSTANTIAL INTERES T IN THE BUSINESS OR PROFESSION OF THE ASSESSEE, OR ANY RELATIVE OF SUCH INDIVIDUAL; (IV) A COMPANY, FIRM, ASSOCIATION OF PERSONS OR HI NDU UNDIVIDED FAMILY HAVING A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSESSEE OR ANY DIRECTOR, PARTNER OR MEMBER OF SUCH COMPANY, FIRM, ASSOCIATION OR FAM ILY, OR ANY RELATIVE OF SUCH DIRECTOR, PARTNER OR MEMBER; (V) A COMPANY, FIRM, ASSOCIATION OF PERSONS OR HIN DU UNDIVIDED FAMILY OF WHICH A DIRECTOR, PARTNER OR MEMBER, AS THE CASE MAY BE, HAS A SUBSTA NTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSESSEE; OR ANY DIRECTOR, PARTNE R OR MEMBER OF SUCH COMPANY, FIRM, ASSOCIATION OR FAMILY OR ANY RELATIVE OF SUCH DIREC TOR, PARTNER OR MEMBER; (VI) ANY PERSON WHO CARRIES ON A BUSINESS OR PROFE SSION, (A)WHERE THE ASSESSEE BEING AN INDIVIDUAL, OR ANY RELATIVE OF SUCH ASSESSEE, HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THAT PERSON; OR (B)WHERE THE ASSESSEE BEING A COMPANY, FIRM, ASSOC IATION OF PERSONS OR HINDU UNDIVIDED FAMILY, OR ANY DIRECTOR OF SUCH COMPANY, PARTNER OF SUCH FIRM OR MEMBER OF THE ASSOCIATION OR FAMILY, OR ANY RELATIVE OF SUCH DIRE CTOR, PARTNER OR MEMBER, HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THAT PERSON. EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION, A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A BUSINESS OR PROFESSION, I F, (A) IN A CASE WHERE THE BUSINESS OR PROFESSION IS CARRIED ON BY A COMPANY, SUCH PERSON IS, AT ANY TIME DURING THE PREVIOUS YEAR, THE BENEFICIA L OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH O R WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER; AND ITA NO. 2968/DEL/2009 17 (B) IN ANY OTHER CASE, SUCH PERSON IS, AT ANY TIME DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE PR OFITS OF SUCH BUSINESS OR PROFESSION. 8. WE FIND THAT ASSESSING OFFICER HAS COMPARED THE R ATE OF INTEREST OF 8.2% ON WHICH SECURED LOAN WAS OBTAINED FROM DBS B ANK WITH THAT OF LOAN FROM ASSOCIATED CONCERN FROM WHOM THE UNSE CURED LOAN WAS OBTAINED @ 11% AND ASSESSING OFFICER HAS MADE PROP ORTIONATE DISALLOWANCE U/S 40A(2)(B). WE FIND THAT LOAN FROM RANBAXY HOLDING CO. IS CONTINUING FROM THE PREVIOUS YEAR AND THE RA TE OF INTEREST ALSO REMAINED THE SAME I.E. 11%. THE SAID RATE OF INTER EST HAS NOT BEEN ADVERSELY COMMENTED UPON AND THEREFORE, ACCEPTED BY THE REVENUE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR IN THE ASS ESSMENT FRAMED U/S 143(3). WE FIND THAT HONBLE JURISDICTIONAL HIG H COURT IN THE CASE CIT VS. DALMIA PROMOTERS DEVELOPERS (P) LTD. 281 ITR 34 6 HAS HELD THAT FOR REJECTING THE VIEW TAKEN IN EARLIER ASSESSMENT YEARS, THERE MUST BE MATERIAL CHANGE IN THE FACT, SITUATION OR IN LA W. IN THIS CASE, CLEARLY THERE IS NEITHER ANY CHANGE IN THE FACT, SITUATION OR IN LAW. HENCE, ASSESSING OFFICERS ACTION IS NOT JUSTIFIED FROM TH IS ANGLE. 8.1 IT IS FURTHER NOTED THAT ASSESSEE HAS EARNED SU BSTANTIAL INTEREST INCOME AND PAID SUBSTANTIALLY HIGHER TAXES IN THE Y EAR UNDER REVIEW AS COMPARED TO EARLIER YEARS MAINLY OUT OF LOANS RAISED FROM M/S RANBAXY HOLDING CO. @ 11% WHICH WERE LENT BY THE ASSESSEE T O EARN INTEREST INCOME AMOUNTING TO ` 49.23 CRORES @ 13% TO 16% WHIC H IS SUBSTANTIALLY HIGHER THAN THE PREVIOUS YEAR. THUS , OBTAINING THE UNSECURED LOAN @ 11% FROM ASSOCIATED CONCERN WAS CO MMERCIALLY EXPEDIENT. 8.2 IT IS FURTHER NOTED THAT SECURED LOAN WERE NEIT HER AVAILABLE EASILY NOR THEY WERE ENOUGH TO CATER THE BUSINESS NEEDS OF THE ASSESSEE AS IT ITA NO. 2968/DEL/2009 18 DID NOT HAVE ENOUGH SECURITY AND / OR PROVISION O F GUARANTEE FOR OBTAINING SUCH LOAN. MOREOVER, THE SECURED LOANS RE QUIRED SUBSTANTIAL TIME, HUGE AMOUNT OF PAPER WORK INCLUDING FORMALITIES INCLUDING ARRANGEMENT OF SECURITY / OR GUARANTEE, WHICH THE ASSESSEE WAS NOT ABLE TO MANAGE. THE ABOVE FINDS ITS COGENCY FROM THE FACT THAT ASS ESSEE WAS ABLE TO SECURE LOAN FACILITY OF RS. 30 CRORES FROM M/S DBS BENCH AS AGAINST THE REQUISITIONED LOAN AMOUNT OF ` 100 CRORES. FURTHE R THE LOAN WAS SANCTIONED AFTER A PERIOD OF 2 MONTHS FROM THE DATE OF APPLICATION. 8.3 AS AGAINST THE DIFFICULTIES FACED BY THE ASSES SEE WITH RESPECT TO SECURED LOAN FROM BANKS, THE UNSECURED LOAN FROM M/S RANBAXY HOLDING CO. WERE AVAILABLE, THOUGH AT A SLIGHTLY HI GHER RATE OF INTEREST, AT ANY POINT OF TIME AND FOR ANY NUMBER OF DAYS WITH OUT MUCH PAPER WORK AND / OR FORMALITIES. 8.4 WITH REGARD TO PROVISIONS OF SECTION 40A CIRCUL AR NO. 6P DATED 6 TH JULY, 1968 ISSUED BY CBDT INTER-ALIA MENTIONS THAT INCOME TAX OFFICER IS EXPECTED TO EXERCISE HIS JUDGEMENT IN A REASONABL E AND FAIR MANNER. IT SHOULD BE BORNE IN MIND THAT THE PROVISION IS MEA NT TO CHECK EVASION OF TAX THROUGH EXCESSIVE OR UNREASONABLE PAYMENTS TO RELATIVES AND ASSOCIATE CONCERNS AND SHOULD NOT BE APPLIED IN A MANNER WHICH WILL CAUSE HARDSHIP IN BONAFIDE CASES. 8.5 CLEARLY ON THE FACTS AND CIRCUMSTANCES OF THIS CASE STRICT APPLICATION OF THE PROVISION WOULD CAUSE UNDUE HAR DSHIP UPON THE ASSESSEE, WHOSE CASE IS BONAFIDE. WE FURTHER FIN D THAT IN THE CASE OF SOM DUTT GOYAL & SONS VS. ITO 27 DTR 263, IT WAS HEL D THAT IN VIEW OF THE DIFFICULTIES IN OBTAINING THE LOAN FROM BANKS OR THE FINANCIAL ITA NO. 2968/DEL/2009 19 INSTITUTIONS, IF ASSESSEE HAS PAID A LITTLE HIGHER RATE OF INTEREST THEN IT WOULD NOT BE CONSIDERED THAT IT WAS PAID IN VIOLATI ON OF S. 40A(2) OF THE ACT. 8.6 FURTHER, FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT UNLIKE OTHER LOANS, LOANS FROM SPECIFIED PERSONS WERE AVAILABLE TO THE ASSESSEE COMPANY WITHIN A SHORT TIME WITHOUT SIGNIFICANT PAPE R WOK IN CONTRAST TO LOAN TAKEN FROM BANKS WHICH WERE SECURED LOAN AND WERE GIVEN AFTER SIGNIFICANT PAPER WORK. 8.7 FROM THE ABOVE DISCUSSION, WE FIND THAT LD. COMMI SSIONER OF INCOME TAX (APPEALS) IS CORRECT IN HOLDING THAT ASS ESSEE HAS EARNED SUBSTANTIAL INTEREST INCOME AND HAS PAID SUBSTANTIA LLY HIGHER TAXES IN THE YEAR UNDER REFERENCE, AS COMPARED TO EARLIER YEA RS MAINLY OUT OF LOAN RAISED FROM M/S RANBAXY HOLDING CO. @ 11%. FUR THER, LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CORRECT IN H OLDING THAT ASSESSEE HAS BORROWED THE MONEY FROM M/S RANBAXY HOLDI NG CO. @ 11% FOR ITS BUSINESS NEEDS AND REQUIREMENT AND WITH OUT SUCH BORROWING, IT WOULD NOT HAVE BEEN ABLE TO RUN/EXPA ND ITS BUSINESS IN AN EFFICIENT MANNER AS ADEQUATE SECURED LOANS WERE NOT AVAILABLE TO THE ASSESSEE FROM BANKS KEEPING IN VIEW THE RESOU RCES IN THE FORM OF SECURITY ETC. AVAILABLE WITH THE ASSESSEE. ACCORD INGLY, WITHOUT SUCH UNSECURED LOANS, IT WOULD NOT HAVE BEEN ABLE TO EAR N SUBSTANTIALLY HIGHER INTEREST INCOME ON WHICH IT HAS PAID SUBSTANT IALLY HIGHER TAXES. ITA NO. 2968/DEL/2009 20 IN THE BACKGROUND OF THE AFORESAID DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) AND HENCE, WE UPHOLD THE SAME. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/9/2011. SD/- SD/- [ [[ [C.L. SETHI C.L. SETHI C.L. SETHI C.L. SETHI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 16/9/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES