M/s Holy Faith International Pvt. Ltd, Jalandhar V. The Asstt. Commissioner of Income-tax, Jalandhar

ITA 32/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0685 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 12-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A N MISHRA
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.32(ASR)/2015 ASSESSMENT YEAR:2012-13 PAN: AAACH6111J M/S. HOLY FAITH INTERNATIONAL VS. ASSTT. COMMR. O F INCOME TAX, PVT. LTD., MBD HOUSE, CIRCLE-II, RAILWAY ROAD, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH.SUDHIR SEHGAL, RESPONDENT BY: SH. A.N. MISHRA, DR DATE OF HEARING: 23/05/2016 DATE OF PRONOUNCEMENT: 13/06/2016 ORDER PER A.D. JAIN, JM: THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2012-13, AGAINST THE ORDER, DATED 12.11.2014, PASSED BY TH E LD. CIT(A)-1, LUDHIANA. THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN DISAL LOWING PROPORTIONATE INTEREST AMOUNTING TO RS.3,71,68,025/ - U/S 36(1)(III) OF THE INCOME TAX ACT IN RESPECT OF INVE STMENT STANDING AS SHARE APPLICATION MONEY IN VARIOUS REL ATED CONCERNS AMOUNTING TO RS.1,49,36,11,300/- AS ON 31.03.2011, BY TREATING THE SAME AS AMOUNT USED FOR NON- BUSINESS PURPOSE. 2. THAT THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT THE INVESTMENT IN SHARE APPLICATION MONEY WAS MADE FROM INTEREST FREE FUNDS IN THE SHAPE OF CAPITAL RESERVE AND SURPLUS AND NO BORROWED FUNDS HAVE BEEN UTILIZED. ITA NO. 32(ASR)/2015 A.Y. 2012-13 2 3. THAT THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT THE ORDER OF THE HONBLE PUNJAB & HARYANA HIGH COURT I N THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. (2006) 286 ITR 1 IS NOT APPLICABLE IN THIS CASE. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS ACTIVITY OF PUBLICATION OF CHILDREN BO OKS AND AS PRINTERS AT ITS PLANTS SITUATED AT SAHIBABAD IN UTTAR PRADESH AND JALANDHAR. AS PER AUDITED PROFIT AND LOSS ACCOUNT FILED AND COMPUTAT ION OF TOTAL INCOME, THE ASSESSEE HAD DECLARED GROSS PROFIT @ 28.17% ON THE GROSS TURNOVER OF RS.124,07,17,249/- AGAINST THE G.P. RATE OF 26.70% ON THE TURNOVER OF RS.107,75,07,747/-. THEREFORE, BOTH THE SALES AND G ROSS PROFIT RATE WERE PROGRESSIVE. THE AO OBSERVED THAT PERUSAL OF THE BALANCE SHEET AND PROFIT LOSS ACCOUNT OF THE ASSESSEE, SHOED THAT TH E ASSESSEE HAD AN AMOUNT OF RS.149,36,11,300/- DURING THE YEAR STANDI NG AS INVESTMENTS AS SHARE APPLICATION MONEY IN VARIOUS RELATED CON CERNS. IT WAS ALSO NOTICED THAT THE ASSESSEE HAD NOT RECEIVED ANY INTE REST ON ACCOUNT OF SUCH INVESTMENTS. FURTHER, THE AO OBSERVED THAT DUR ING THE YEAR ASSESSEE HAD CLAIMED AN EXPENDITURE OF BANK INTERES T, AMOUNTING TO RS.3,72,31,075/-. THIS INCLUDED INTEREST ON VEHICL E LOANS AT RS.63,049 AND THAT ON CASH CREDIT LIMIT AT RS.3,71,68,025/-. THE AO DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF B ANK INTEREST TO THE TUNE OF RS.3,71,68,025/- AND ADDED BACK TO THE INCO ME OF THE ASSESSEE U/S 36(1)(III) OF THE ACT. 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOW ANCE MADE BY THE AO BY HOLDING AS UNDER: ITA NO. 32(ASR)/2015 A.Y. 2012-13 3 7. I HAVE CONSIDERED THE FACTS OF THE CASE, THE BA SIS OF ADDITION MADE BY THE ASSESSING OFFICER AND THE ARGU MENTS OF THE AR ON THE ISSUE DURING ASSESSMENT AS WE' AS APPELLA TE PROCEEDINGS. IT IS SEEN THAT THE APPELLANT HAD NOT EVEN ATTEMPTED TO SHOW THAT THE INVESTMENTS IN SISTER CONCERNS SER VE ANY BUSINESS PURPOSE. THE ENTIRE EMPHASIS HAS BEEN TO SUPPORT TH E CLAIM THAT THE IMPUGNED INVESTMENT HAD BEEN MADE FROM SELF OWN ED FUNDS AND NOT FROM INTEREST BEARING SOURCES. THE APPELLAN T IN ORDER TO PROVE ITS POINT HIGHLIGHTED THAT TWO SEPARATE ACCOU NTS HAVE BEEN MAINTAINED FOR BORROWED FUNDS I.E. SBI TERM LOAN AC COUNT AND SBI CASH CREDIT ACCOUNT. THE FUNDS SO RECEIVED UNDER BO TH THE SOURCES HAVE BEEN USED SPECIFICALLY FOR THE SAID PARTIES. H OWEVER THE INVESTMENTS HAVE BEEN MADE FROM SEPARATE CURRENT AC COUNT IN WHICH THE DEPOSITS REPRESENT THE ACCRUALS FROM THE BUSINESS OF THE ASSESSEE COMPANY I.E. ITS SALES THIS TO SAY THAT IF SUCH ACCRUE HAD BEEN- CREDITED/DEPOSITED IN THE CASH CREDIT ACCOUNT , THE NEED TO CONTINUE WITH OR EVEN RAISING SUCH INTEREST BEARING FUNDS FOR WORKING CAPITAL REQUIREMENTS WOULD NOT HAVE BEEN TH ERE. THIS PROVE THE POINT OF THE ASSESSING OFFICER THAT FUNDS RAISED ON INTEREST FOR WORKING CAPITAL REQUIREMENTS HAD TO BE RAISED IN ORDER TO MAKE UP FOR THE SHORT FALL CAUSED BY INTEREST FR EE INVESTMENTS IN THE SISTER CONCERNS WHICH DID NOT SERVE ANY BUSINES S PURPOSE FOR THE APPELLANT COMPANY. THE JUDICIAL PRONOUNCEMENT R ELIED UPON BY THE AR DURING THE APPELLATE PROCEEDINGS DO NOT ADDR ESS THIS BASIC SALIENT FEATURE OF FUNDS POSITION AND USAGE THEREOF . THE DIRECT LINK BETWEEN THE NON BUSINESS INTEREST FREE INVESTMENT A ND RAISING OF INTEREST BEARING FUNDS HAS BEEN CLEARLY ESTABLISHE D BY THE ANALYSIS OF TWO SEPARATE ACCOUNT MAINTAINED BV THE APPELLANT. IN THE CIRCUMSTANCES THE JUDGMENT OF HON'BLE JURISDICT ION 'HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES IS SQUAREL Y APPLICABLE. THE ASSESSING OFFICER HAS FURTHER HIGHLIGHTED THAT DISALLOWANCE < INTEREST ON SIMILAR FACTS IN THE CASE OF ASSESSEE'S SISTER CONCERN M BRIGHT ENTERPRISES PVT. LTD. FOR THE ASSESSMENT YEA R 2005-06 HAD BE< UPHELD BY THE HON'BLE ITAT, AMRITSAR BENCH VIDE THEIR ORDER DATED 07/08/2012. IN THE CIRCUMSTANCES, THE DISALLO WANCE MADE BY THE AO IS THEREFORE, CONFIRMED. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS AN APPEAL FILED BY THE ASSESSEE AND THE ONLY GROUND IN THE AS SESSEES APPEAL IS AGAINST THE DISALLOWANCE OF INTEREST U/S 36(1)(III) MADE BY THE ASSESSING OFFICER AND WHICH HAS BEEN CONFIRMED BY THE LD. CIT (A), FOLLOWING THE ITA NO. 32(ASR)/2015 A.Y. 2012-13 4 JUDGMENT IN THE CASE OF ABHISHEK INDUSTRIES REPORTE D IN 286 ITR 1. HE FURTHER STATED THAT BOTH THE ASSESSING OFFICER AND CIT (A) HAVE HELD THAT SINCE THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 3,7 1,68,025/- AS INTEREST PAID ON CC/OD ACCOUNT WHICH IS EVIDENT FRO M PAGE 21 R.W. PAGE 14 OF THE PAPER BOOK AND THE CASE OF THE ASSESSING OFFICER IS THAT THE ASSESSEE HAD ADVANCED THE AMOUNT TO THE SISTER CONC ERNS WITHOUT ANY BUSINESS EXPEDIENCY AND NO INTEREST HAS BEEN CHARGE D FROM SUCH ADVANCES IGNORING THE FACT THAT THE ASSESSEE HAD DI SCLOSED THE INTEREST INCOME OF RS. 2,72,42,083/- ON FDRS AS IS EVIDENT F ROM PAGE 13 OF THE PAPER BOOK AND THE TOTAL AMOUNT OF FDRS REFLECTED I N THE BALANCE SHEET AS ON 31.03.2012 ARE TO THE TUNE OF RS. 32,05,65,25 5/- AS PER PAGE-9 OF THE PAPER BOOK AND ALSO THAT THE ASSESSEE HAD BUSIN ESS DEALINGS WITH THE SISTER CONCERNS AS WELL. 4.1. THE LD. COUNSEL SUBMITTED THAT BOTH THE AUTHOR ITIES BELOW ARE OF THE VIEW THAT THE ENTIRE AMOUNT IN BUSINESS ENTITY COMES IN A COMMON KITTY AND THE ONLY THING SUFFICIENT TO DISALLOW THE INTEREST PAID ON THE BORROWINGS TO THE EXTENT OF AMOUNT IS LENT TO THE S ISTER CONCERN WITHOUT CARRYING ANY INTEREST WOULD BE FOR NON-BUSINESS PUR POSE AND HAS HELD THAT THE FUNDS TO THE EXTEND DIVERTED TO THE SISTER CONCERN ARE FOR NON- BUSINESS PURPOSES AND THE CIT (A) AND ASSESSING OFF ICER HAS TOTALLY RELIED UPON ON THE JUDGMENT OF ABHISHEK INDUSTRIES AS REPORTED IN 286 ITR 1 AND ON THE JUDGMENT OF THE ITAT, AMRITSAR BEN CH IN THE CASE OF ITA NO. 32(ASR)/2015 A.Y. 2012-13 5 M/S BRIGHT ENTERPRISES IN ITA NO. 414/ASR/2010 FOR ASSTT. YEAR 2005-06 AND WHICH STANDS OVER RULED NOW BY THE PUNJAB & HAR YANA HIGH COURT. 4.2. THE LD. COUNSEL STATED THAT THE ASSESSEE HAD M ADE THE FOLLOWING CONTENTIONS BEFORE THE ASSESSING OFFICER AND CIT ( A):- I. THE TOTAL INVESTMENTS DURING THE YEAR UNDER CONSIDE RATION AS ON 31.03.2012 WERE AS UNDER:- SR.NO. NAME OF RELATED PARTIES BALANCE AS ON 31.03.2012 BALANCE AS ON 31.03.2011 PAGE NUMBER OF THE PAPER BOOK 1. MBD PRINTOGRAPHICS PVT. LTD. 1492601300 847565000 12 2. HOLYFAITH PUBLICATIONS PVT. LTD. 10,000/- 10,000/- 12 3. MBD ALCHEMIE (P) LTD. 10,00,000/- 10,00,000/- 12 TOTAL 1493611300 848575000 12 II). OUR FOLLOWING CONTENTIONS IN THIS REGARD MAY B E CONSIDERED:- A) FIRSTLY, THE ASSESSEE HAD BUSINESS DEALINGS WITH TH E SISTER CONCERNS TO WHOM THE ADVANCES HAVE BEEN MADE, WHICH IS EVIDENT FROM ANNEXURE D OF TAX AUDIT REPORT, WHER E THE AMOUNT OF BUSINESS TRANSACTIONS HAVE BEEN REFLECTED WITH THE CONCERNS AND IN THE CASE OF MBD ALCHEMIE (P) LTD., PARTICULARLY, THE BUSINESS TRANSACTIONS ARE TO THE TUNE OF RS. 3, 97,98,492/- AND THE AMOUNT, WHICH IS OUTSTANDING TOWARDS THE MB D ALCHEMIE (P) LTD. JUST RS. 10 LACS. B) SIMILARLY, WITH MBD PRINTOGRAPHICS PVT. LTD., THE T RANSACTIONS RUN MORE THAN RS. 14 CRORES. THUS, THE AMOUNT IS OU T OF BUSINESS EXPEDIENCY AND NO PART OF THE INTEREST IS DISALLOWABLE. C) ALL THE ADVANCES, WHICH HAVE BEEN GIVEN ARE TO THE SAME GROUP OF COMPANIES HAVING COMMON DIRECTORS/SHAREHOLDERS A ND IN ORDER TO STRENGTHEN THE FINANCIAL HEALTH OF THE OTH ER COMPANIES AND THE FACT THAT THERE ARE COMMON SHAREHOLDERS/DIR ECTORS, IS EVIDENT FROM PAGE 17 TO 18 OF THE PAPER BOOK AND AL SO THE NATURE OF THE BUSINESS OF THE SISTER CONCERNS IS AL SO SAME. ITA NO. 32(ASR)/2015 A.Y. 2012-13 6 D) THE INVESTMENTS AS MADE TO THE SISTER CONCERNS ARE OUT OF THE ASSESSEES OWN SOURCES AND IT CANNOT BE PRESUMED TH AT THE INVESTMENTS WERE OUT OF THE BORROWED FUNDS OF THE APPELLANT. E) THE ASSESSEE WAS HAVING MORE THAN SUFFICIENT INTERE ST FREE FUNDS AVAILABLE AS ON 31.03.2012, WHICH IS EVIDENT FROM THE BALANCE AS UNDER:- A. SHARE CAPITAL RS. 60,00,200 (PAGE-2 OF P.B.) B. RESERVE & SURPLUS RS. 27,96,61,215 (PAGE-2 OF P. B.) C. SHARE APPLICATION RECEIVED RS. 1,26,04,55,744 AS PER BALANCE SHEET TOTAL RS. 1,54,61,17,159/- THUS, THE TOTAL INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE RS. 1,54,61,17,159/ AGAINST THE ADVANCES OF RS. 1,49,36,11,300/- AND THUS, THE DISALLOWANCE OF INTE REST WAS NOT CALLED FOR, SPECIALLY, WHEN THE ASSESSEE HAD BUSINE SS DEALINGS WITH THOSE CONCERNS AND THE AMOUNT HAD BEEN GIVEN T O THE SISTER CONCERNS, WHICH SHOULD BE TERMED FOR BUSINES S EXPEDIENCY. F) BESIDES, THE ASSESSEE HAVING HUGE SURPLUS FUNDS AS STATED ABOVE. YOUR GOODSELF ATTENTION IS INVITED TO THE FA CT THAT THE ASSESSEE HAS FIXED DEPOSITS ON THE ASSETS SIDE OF THE BALANCE SHEET REFLECTED AS UNDER AND WHICH IS EVIDENT FROM PAGE 9 OF THE PAPER BOOK :- A. FIXED DEPOSITS RECEIPT RS. 57,022.00 B. FDR WITH CBI RS. 3,92,63,272.00 C. FDR WITH CORPORATION BANK RS.6,42,46,469.00 D. FDR WITH OBC RS.21,69,98,492.00 G) ON THESE FDRS, THE ASSESSEE HAS DISCLOSED INTEREST INCOME TO THE TUNE OFRS.2,72,42,083/- AS PER PAGE 13 OF THE P APER BOOK AND THIS ASPECT HAS BEEN IGNORED BY THE ASSESSING O FFICER AND CIT (A) WHILE MAKING THE DISALLOWANCE. 4.3. IN CONFIRMING THE DISALLOWANCE OF INTEREST, TH E CIT(A) HAS REFERRED TO THE JUDGMENT OF ABHISHEK INDUSTRIES AND OF ITAT, AMRITSAR BENCH IN THE CASE OF M/S BRIGHT ENTERPRISES PVT. LTD. FOR AS STT. YEAR 2005-06 AND THAT JUDGMENT OF M/S BRIGHT ENTERPRISES PVT. LTD. H AS BEEN OVER RULED BY ITA NO. 32(ASR)/2015 A.Y. 2012-13 7 THE PUNJAB ET HARYANA HIGH COURT AS REPORTED IN 381 ITR 107 AND THESE OBSERVATIONS OF THE CIT (A) ARE NOT PROPER, BECAUSE OF THE FOLLOWING FACTS:- A. WE HAD MUCH MORE INTEREST FREE FUNDS AVAILABLE WITH US AS STATED ABOVE IN PARA-4(II)(E) ABOVE. B. THE ADVANCES ARE TO THE GROUP CONCERNS AS PER PAGE 12 OF THE PAPER BOOK AND THERE ARE COMMON DIRECTORS/SHAREHOLD ERS AND, AS SUCH, THE ADVANCES WERE GIVEN FOR STRENGTHENING THE CAPITAL BALANCE OF SISTER CONCERN, WHICH CAN BE TERMED AS C OMMERCIAL EXPEDIENCY. C. THE HUGE INTEREST INCOME ON FDRS HAS BEEN DISCLOSED AS PER PAGE 13 OF THE PAPER BOOK AS STATED IN PARA 5(II)(G ) ABOVE AND, AS SUCH, DISALLOWANCE WAS NOT CALLED FOR. 4.4. THE LD. COUNSEL CONTENDED THAT THE RELIANCE BY THE CIT (A) ON THE JUDGMENT OF BRIGHT ENTERPRISES (P) LTD. OF THE AMRI TSAR BENCH OF ITAT IS AGAIN NOT PROPER, SINCE THAT JUDGMENT HAS BEEN REVE RSED BY THE HONBLE JURISDICTIONAL. PUNJAB & HARYANA HIGH COURT, COPY O F THE JUDGMENT IS PLACED AT PAGES 35 TO 41 OF THE JUDGMENT SET AND WH ICH HAS BEEN REPORTED IN 381 ITR 107. AFTER CONSIDERING THE VARI OUS JUDGMENTS, THE HONBLE PUNJAB & HARYANA HIGH COURT HAS REVERED THE JUDGMENT OF HONBLE ITAT AND HAS HELD AS UNDER:- 17. THE ASSESSING OFFICERS VIEW THAT THE ADVANCE WAS NOT FOR BUSINESS PURPOSES AS THE APPELLANT HAD NO BUSINESS DEALINGS WITH THE SISTER COMPANY IS ERRONEOUS. COMMERCIAL EX PEDIENCY IN ADVANCING LOANS DOES NOT ARISE ONLY ON ACCOUNT OF T HERE BEING TRANSACTIONS DIRECTLY BETWEEN THE HOLDING COMPANY A ND THE SUBSIDIARY COMPANY OR BETWEEN THE GROUP COMPANIES I NTER SE. THE TWO COMPANIES MAY EVEN BE IN A DIFFERENT LINE OF BU SINESS. IT WOULD MAKE NO DIFFERENCE. IT WOULD STILL BE COMMERCIALLY EXPEDIENT FOR ONE GROUP COMPANY TO ADVANCE AMOUNTS TO ANOTHER GROUP C OMPANY, IF, FOR INSTANCE, AS A RESULT THEREOF THE FORMER BENEFI TS. IN THE PRESENT CASE, AS WE HAVE ALREADY DEMONSTRATED, THERE WOULD BE A DIRECT BENEFIT ON ACCOUNT OF THE ADVANCE MADE BY THE APPEL LANT TO ITS SISTER COMPANY IF THE SAME IMPROVES THE FINANCIAL HEALTH O F THE SISTER COMPANY AND MAKES IT A VIABLE ENTERPRISE. WE HASTEN TO ADD THAT IT ITA NO. 32(ASR)/2015 A.Y. 2012-13 8 IS NOT NECESSARY THAT THE ADVANCE RESULTS IN A POSI TIVE TANGIBLE BENEFIT. SO LONG, AS THE AMOUNT IS ADVANCED WITH TH AT VIEW IN MIND OR WITH ANY OTHER COMMERCIALLY EXPEDIENT VIEW IN MI ND THAT IS SUFFICIENT. 4.5. HE FURTHER SUBMITTED THAT THE JUDGMENT OF ABHI SHEK INDUSTRIES HAVE ALSO BEEN OVERRULED BY THE HONBLE SUPREME COU RT IN THE CASE OF HERO CYCLES, FOR WHICH, THE COPY IS PLACED AT PAGES 42 TO 47, REPORTED IN 379 ITR 347. 4.6. THE LD. COUNSEL ALSO PLEADED THAT EVEN ON THE JUDGMENT OF ITAT, CHANDIGARH BENCH IN THE CASE OF DEEPAK BUILDERS, FOLLOWING THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CA SE OF M/S BRIGHT ENTERPRISES AND M/S HERO CYCLES, THE HONBLE BENCH HAS DELETED THE DISALLOWANCE OF INTEREST U/S 36(1 )(III)AND JUDGMEN T IS PLACED AT PAGES 48 TO 59 OF THE JUDGMENT SET BOOK AND THE RELEVANT PAG ES ARE 51 TO 53 OF THE JUDGMENT SET, WHEREIN THE JUDGMENT OF BRIGHT EN TERPRISES (P) LTD. AND HERO CYCLES HAS BEEN REFERRED AND FOLLOWED. 4.7. SIMILARLY, RELIANCE IS BEING PLACED ON THE JUD GMENT OF PUNJAB & HARYANA HIGH COURT, COPY PLACED AT PAGES 71 TO 73 O F THE JUDGMENT SET IN THE CASE OF CIT VS RAKESH GUPTA AND, THUS, THE W HOLE BASIS OF DISALLOWANCE U/S 36(1 )(III) IS UNCALLED FOR. 4.8. THE ASSESSEES COUNSEL HAS PLACED RELIANCE ON THE JUDGMENT OF OMAX BIKES LTD OF CHANDIGARH ITAT, WHEREIN FOLLOW ING THE JUDGMENT OF BRIGHT ENTERPRISES, THE DISALLOWANCE U/S 36 (1)(III ) STANDS DELETED. SIMILARLY, THE CHANDIGARH BENCH OF THE ITAT IN THE CASE OF SH. DEEP MALHOTRA IN ITA NO. 661 /CHD/2015 AND C.O.NO. 28/CH D/2015 IN PARA ITA NO. 32(ASR)/2015 A.Y. 2012-13 9 18 OF THE JUDGMENT HAS DELETED THE DISALLOWANCE U/S 36(1 )(III) BY FOLLOWING THE JUDGMENT OF BRIGHT ENTERPRISES AND RE LIANCE UTILITIES. 4.9. SIMILARLY, THE RELIANCE IS ALSO BEING PLACED O N THE JUDGMENT OF MADRAS HIGH COURT, IN WHICH, NO DISALLOWANCE U/S 36 (1)(III) IS CALLED FOR. COPY OF THE JUDGMENT IS PLACED AT PAGES 74 TO 77 OF THE JUDGMENT SET. 4.10. IN VIEW OF THE ABOVE SUBMISSIONS, THE LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE U/S 36(1)(III) IN A NY MANNER IS CALLED FOR. 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PER USED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE RELIANCE P LACED BY THE LD. CIT(A) ON THE JUDGMENT OF BRIGHT ENTERPRISES (P) LTD. OF THE ITAT, AMRITSAR BENCH, IS NOT PROPER, SINCE THAT JUDGMENT HAS BEEN REVERSED BY THE HONBLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 26.07.2015, REPORTED IN 381ITR107 (COPY PLACED AT APB 100 TO 106), HOLDI NG AS UNDER: 17. THE ASSESSING OFFICERS VIEW THAT THE ADVANCE WAS NOT FOR BUSINESS PURPOSES AS THE APPELLANT HAD NO BUSINESS DEALINGS WITH THE SISTER COMPANY IS ERRONEOUS. COMMERCIAL EXPEDIE NCY IN ADVANCING LOANS DOES NOT ARISE ONLY ON ACCOUNT OF T HERE BEING TRANSACTIONS DIRECTLY BETWEEN THE HOLDING COMPANY A ND THE SUBSIDIARY COMPANY OR BETWEEN THE GROUP COMPANIES I NTER SE. THE TWO COMPANIES MAY EVEN BE IN A DIFFERENT LINE OF BU SINESS. IT WOULD MAKE NO DIFFERENCE. IT WOULD STILL BE COMMERCIALLY EXPEDIENT FOR ONE GROUP COMPANY TO ADVANCE AMOUNTS TO ANOTHER GROUP C OMPANY, IF, FOR INSTANCE, AS A RESULT THEREOF THE FORMER BENEFI TS. IN THE PRESENT CASE, AS WE HAVE ALREADY DEMONSTRATED, THERE WOULD BE A DIRECT BENEFIT ON ACCOUNT OF THE ADVANCE MADE BY THE APPEL LANT TO ITS SISTER ITA NO. 32(ASR)/2015 A.Y. 2012-13 10 COMPANY IF THE SAME IMPROVES THE FINANCIAL HEALTH O F THE SISTER COMPANY AND MAKES IT A VIABLE ENTERPRISE. WE HASTEN TO ADD THAT IT IS NOT NECESSARY THAT THE ADVANCE RESULTS IN A POSI TIVE TANGIBLE BENEFIT. SO LONG, AS THE AMOUNT IS ADVANCED WITH TH AT VIEW IN MIND OR WITH ANY OTHER COMMERCIALLY EXPEDIENT VIEW IN MI ND THAT IS SUFFICIENT. 7. FURTHER, THE JUDGMENT IN THE CASE OF ABHISHEKH INDUSTRIES (SUPRA) RELIED UPON BY BOTH THE AUTHORITIES BELOW HAS ALSO BEEN OVERRULED BY THE HONBLE SUPREME COURT IN THE CASE OF HERO CYCLES V S. CIT, 379 ITR 347 (SC) (COPY PLACED AT APB 112 TO 116), IN FAVOUR O F THE ASSESSEE BY HOLDING AS FOLLOWS: COMPANY HAD RESERVE/SURPLUS TO THE TUNE OF ALMOST 15 CRORES AD, THEREFORE, ASSESSEE COMPANY COULD IN ANY CASE, UTI LIZE THOSE FUNDS FOR GIVING ADVANCE TO ITS DIRECTORS ORDER OF THE HIGH COURT SET ASIDE AND ORDER OF THE ITAT WAS RESTORED APPEAL AL LOWED. ASSESSEE HAD A CREDIT BALANCE IN THE BANK ACCOUNT WHEN THE SAID ADVANCE OF RS.34 LAKHS WAS GIVEN. COMPANY HAD RESERVE/SURPLUS TO THE TUNE OF RS.15 CRORES AND, TH EREFORE, THE ASSESSEE COMPANY COULD IN ANY CASE, UTILIZE THOSE F UNDS FOR GIVING ADVANCE TO ITS DIRECTORS. 8. FURTHER, THE RELIANCE ON THE FOLLOWING JUDGMEN TS ALSO SUPPORTS THE CASE OF THE ASSESSEE OVERRULING THE JUDGMENT OF ABHISHEKH INDUSTRIES, WHEREIN IT HAS BEEN HELD THAT THE DISA LLOWANCE U/S 36(1)(III) IS UNCALLED FOR: I) CIT-1, LUDHIANA VS. RAKESH GUPTA, ITA NO.37-20 14, DATED 02.07.2015. II) ACIT VS. OMAX BIKES LTD. ITA NO.1085/CHD/2013 , DATED 06.08.2015 ITA NO. 32(ASR)/2015 A.Y. 2012-13 11 9. WE ARE OF THE VIEW THAT THE LD. COUNSEL FOR THE ASSESSEE IS CORRECT IN CONTENDING THAT SINCE THE DECISIONS IN THE CASE OF ABHISHEK INDUSTRIES LTD. (SUPRA) AND BRIGHT ENTERPRISES (P) LTD. (SUP RA) FOLLOWED BY THE AUTHORITIES BELOW WHILE MAKING AND CONFIRMING ADDIT ION HAVE BEEN OVERRULED BY THE HONBLE COURTS, THE ADDITION DOES NOT SURVIVE. 10. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT T HE IMPUGNED ADVANCE HAS BEEN MADE OUT OF INTEREST FREE FUNDS AV AILABLE WITH THE ASSESSEE AND THERE WAS NO QUESTION OF WHATSOEVER F OR DISALLOWING INTEREST 36(1)(III) OF THE ACT. ACCORDINGLY, WE HO LD THAT THE DISALLOWANCE OF INTEREST U/S 36(1)(III) PERTAINING TO THE SISTER C ONCERNS UPHELD BY THE LD. CIT(A) IS NOT JUSTIFIED, HENCE, THE SAME IS DELETE D. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/06/ 2016. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER /SKR/ DATED: 13/06/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. HOLY FAITH INTERNATIONAL PVT. LIM ITED, JALANDHAR 2. THE ACIT, CIRCLE-II, JALANDHAR. 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.