DCIT, Ludhiana V. M/s Yoginder Worsted Ltd., Ludhiana

ITA 405/CHANDI/2015

• Counselvise Citation: 40521514 RSA 2015
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 16-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Business expenditure; Question of law; Commercial expediency
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 405/CHD/2015 ASSESSMENT YEAR: 2011-12 THE DCIT, VS M/S YOGINDER WORSTED LTD., CENTRAL CIRCLE III, VILL. KATANI KALAN, LUDHIANA. CHANDIGARH ROAD, LUDHIANA. PAN: AAACY0944L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, DR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 17.08.2015 DATE OF PRONOUNCEMENT : 21.08.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS)-5 LUDHIANA DATED 27.01.2015 FOR ASSESSMENT YEAR 2011-12, CHALLENGING THE DELETION O F ADDITION OF RS. 22,27,000/- BY DISALLOWING INTEREST U/A 36(1)(III) OF THE INCOME TAX ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSIN G OFFICER HAS NOTICED THAT THE ASSESSEE HAD ADVANCED AN AMOUNT OF RS. 1.59 CR FREE OF INTEREST WHEREAS THE INTEREST AMOUNTING TO RS. 8.57 CR HAD BEEN PAID ON VARIOUS L OANS RAISED. THE ASSESSING OFFICER CONFRONTED THIS FACT WITH PROPOSED DISALLOWANCE UNDER SECTION 36(1)(III) OF T HE ACT. THE ASSESSEE EXPLAINED THAT DURING THE YEAR, ASSESS EE 2 COMPANY HAS RECEIVED RS. 10.81 CR ON ACCOUNT OF INT EREST FREE UNSECURED LOANS FROM ITS SISTER CONCERN. OUT OF THE SAID AMOUNT, THE ASSESSEE HAS INVESTED RS. 1.59 CR AS TAX FREE INVESTMENT DURING THE YEAR UNDER CONSIDERATION . IT WAS SUBMITTED THAT NO INTEREST WAS PAID ON UNSECURED LO ANS. COPY OF THE ACCOUNTS WAS FILED. THE ASSESSING OFFIC ER, CONSIDERING EXPLANATION OF THE ASSESSEE, IN THE LIG HT OF THE JUDGEMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. 286 ITR 1 AND HELD THAT THE FUNDS OF THE ENTERPRISES COMPRISED OF BORR OWED INTEREST BEARING FUNDS AS WELL AS INTEREST FREE INT ERNAL ACCRUALS. IN THE CIRCUMSTANCES, IT COULD NOT BE CL AIMED THAT INTEREST FREE ADVANCES HAD BEEN GIVEN OUT OF INTERN AL ACCRUALS AND NOT INTEREST BEARING FUNDS. THE ASSES SING OFFICER, THEREFORE, PROCEEDED TO MAKE DISALLOWANCE ON THE INTEREST FREE ADVANCES LEADING TO ADDITION OF RS. 2 2,27,000/- 3. THE ASSESSEE CHALLENGED ADDITION BEFORE LD. CIT(APPEALS) AND SAME FACTS WERE REITERATED. IT WA S ALSO EXPLAINED THAT THE SAID AMOUNT IS STANDING AS INVES TMENT IN THE BOOKS OF THE ASSESSEE COMPANY RELATES TO THE FI RM M/S HIGH TECH DYEING & FINISHING MILLS P. LTD. REGARDI NG THIS, IT WAS SUBMITTED THAT THE SAID CONCERN IS ENGAGED I N THE BUSINESS OF DYEING AND FINISHING OF CLOTH. THE ASS ESSEE COMPANY WAS DOING REGULAR BUSINESS TRANSACTION WITH THE SAID CONCERN IN REGARD TO DYEING OF THE CLOTH AND F URTHER PROCESSING OF IT AS PER REQUIREMENTS OF THE ASSESSE E COMPANY. IT WAS SUBMITTED THAT DURING THE YEAR 200 9-10, THE SAID CONCERN WAS TAKEN OVER BY THE GROUP CONCER N OF THE 3 ASSESSEE COMPANY AND AT THE BEGINNING OF THE YEAR, ASSESSEE COMPANY HAS A DEBIT BALANCE OF RS. 1,54,15,223/- IN THE BOOKS OF THE COMPANY IN REGARD TO SALE OF THE CLOTH TO THE SAID CONCERN IN ASSESSMENT YEAR 2008-09. AFTER THE TAKEN OVER OF THE SAID CONCERN, SAID CONCERN STOPS ALL TH EIR BUSINESS ACTIVITIES AND THE ASSESSEE COMPANY TOOK T HEIR PREMISES AND THEIR ASSETS, SUCH AS PLANT AND MACHIN ERY ON RENT AND STARTED PAYING RENT TO THE SAID CONCERN. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE INCURRED SOME EXPENDITURE ON BEHALF OF THE SAID CONCERN SUCH AS E LECTRICITY EXPENSES, FEES AND TAXES ETC. WHICH WERE ALSO DEBIT ED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE OVER THE PERIOD OF TIME. FINALLY IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE DEBIT BALANCE OF THE SAID CONCERN HAS BEEN TRANSFER RED IN THE INVESTMENT HEAD. IN FACTS, ASSESSEE COMPANY HA S NOT INVESTED ANY NEW FUNDS DURING THE YEAR UNDER CONSID ERATION AND IT WAS ONLY THE BOOK ENTRY MADE AS A RESULT OF WHICH THERE IS AN INCREASE IN THE AMOUNT OF INVESTMENTS. THERE IS NO APPLICATION OF ANY KIND OF INTEREST BEARING FUND S IN THE SAID INVESTMENT, THEREFORE, DISALLOWANCE IS UNJUSTI FIED. IT WAS FURTHER SUBMITTED THAT DEBIT BALANCE OF THE SAI D CONCERN IN THE BOOKS OF THE ASSESSEE COMPANY PERTAI N TO THE SALE OF CLOTHS MADE BY THE ASSESSEE COMPANY TO THE SAID CONCERN IN ASSESSMENT YEAR 2008-09 WHICH IS STANDIN G IN THE BOOKS OF THE ASSESSEE, THEREFORE, AMOUNT IS TOT ALLY RELATED TO THE BUSINESS AND FALLS UNDER THE BUSINE SS EXPEDIENCY. THE ASSESSEE RELIED UPON DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. 288 4 ITR 1, MARK AUTO INDUSTRIES LTD. 57 DTR 113 (P&H) A ND RELIANCE COMMUNICATIONS INFRASTRUCTURE LTD. 260 CTR 159 (BOM.). 4. THE LD. CIT(APPEALS), CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND MATERIAL ON RECORD NOTED THAT THE ASSESSEE HAS NOW CLAIMED THAT AMOUNT ADVANCED IN FACT REPRES ENTED THE DEBTORS OF THE ASSESSEE COMPANY. IT WAS CLAIME D THAT AMOUNT OF RS. 1.59 CR WAS DUE FROM M/S HIGH TECH DY EING & FINISHING MILLS P. LTD., SINCE ASSESSMENT YEAR 2008 -09 ON ACCOUNT OF SALE OF THE CLOTHS. THEREFORE, THE MATT ER WAS REMANDED TO THE ASSESSING OFFICER FOR EXAMINING THE ISSUE AFRESH AND DIRECTED TO FILE THE REMAND REPORT. THE ASSESSING OFFICER IN HIS REPORT REITERATED THE FACT STATED IN THE ASSESSMENT ORDER AND ALSO STATED THAT ASSESSEE WAS DIRECTED TO FILE THE NATURE OF THE TRANSACTION WITH THE SAID CONCERN FOR LAST THREE YEARS ALONGWITH EVIDENCE OF TRANSACTION OF THE CLOTHES AND COPIES OF THE VOUCHE RS WITH BALANCE SHEET AND CERTIFIED COPY OF THE ACCOUNT OF M/S HIGH TECH DYEING AND FINISHING MILLS P. LTD. FOR THE LAS T THREE YEARS. THE ASSESSEE EXPLAINED THE SAME FACTS BEFOR E THE ASSESSING OFFICER AND SUBMITTED THAT ASSESSEE HAS S OLD CLOTHES TO THE SAID CONCERN IN ASSESSMENT YEAR 2008 -09 WHICH WAS TAKEN OVER BY ASSESSEE LATER ON AND COPIE S OF THE BALANCE SHEET WERE FILED BUT OTHER RECORDS WERE NOT FILED AS SAME WERE NOT TRACEABLE DUE TO LONG PERIOD. THE AS SESSING OFFICER, THEREFORE, SUBMITTED THAT THE ADDITION MAY BE CONFIRMED. THE ASSESSEE IN THE REJOINDER ALSO REIT ERATED THE SAME FACTS AS WERE PLEADED BEFORE THE LD. CIT(APPEA LS). 5 5. THE LD. CIT(APPEALS) CONSIDERING THE EXPLANATION OF THE ASSESSEE, REMAND REPORT OF THE ASSESSING OFFICER AN D MATERIAL ON RECORD DELETED THE ADDITION. THE FINDI NGS OF THE LD. CIT(APPEALS) IN PARA 3.4 TO 3.6 OF THE APPELLAT E ORDER ARE REPRODUCED AS UNDER : 3.4 I HAVE CONSIDERED THE FACTS OF THE CASE, THE BASE OF DISALLOWANCE MADE BY THE A.O., THE ARGUMENTS OF THE AR DURING TH E ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS AND THE COMMENTS OF THE A. O. IN THE REMAND REPORT. IT IS QUITE CLEAR FROM THE PERUSAL OF THE B ALANCE SHEET OF THE APPELLANT COMPANY FOR THE YEAR UNDER CONSIDERATION THAT THE IMPUGNED ADVANCES ACTUALLY REPRESENTS AMOUNT DUE FROM M/S HI GH TECH DYEING & FINISHING MILLS P. LTD. SINCE THE ASSESSMENT YEAR 2 008-09. THE ASSESSEE HAS NOT BEEN ABLE TO CORROBORATE THE COPY OF ACCOUN T OF M/S HIGH TECH DYEING & FINISHING MILLS P. LTD. IN THE ASSESSEE'S BOOKS OF ACCOUNTS WITH COPIES OF SALES BILLS ON THE GROUND THAT THE OLD RE CORD HAS SOMEHOW NOT BEEN ABLE TO BE TRACED. HOWEVER, THE FACT REMAINS THAT T HE AMOUNT REPRESENTS SALE OF CLOTH AS THE AMOUNT DUE STANDS RECORDED UNDER TH E HEAD DEBTORS WHICH IS EVIDENCED BY COPY OF ACCOUNT DETAILING VARIOUS INVO ICES. THIS BEING SO THE SAID AMOUNT DUE CANNOT BE TERMED AS INTEREST FREE ADVANC ES BUT REPRESENTS A BUSINESS DEBT WHICH HAS NOT BEEN REALIZED TILL DATE . THEREFORE, THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT AS RELIED UPON BY THE A.O. IN THE CASE OF M/S ABHISHEK INDUSTRIES LIMITED 288 ITR 1 I S NOT APPLICABLE. 3.5 THE A.R. HAS ALSO BROUGHT ON RECORD THE FACTS THAT THE ASSESSEE COMPANY HAS ACCESS TO INTEREST FREE UNSECURED LOANS FROM DIRECTORY AND INTERCORPORATE DEPOSIT (ICDS) TO THE TUNE OF 21 CR. APPROXIMATELY WHICH IS FAR IN EXCESS OF THE AMOUNT OUTSTANDING FROM ONE PA RTICULAR CONCERN, I.E., M/S HIGH TECH DYEING & FINISHING MILLS P. LTD. IT I S ALSO TO BE APPRECIATED THAT THE AMOUNT OUTSTANDING TO THE TUNE OF RS. 1.59 CR. IS IN RESPECT OF ASSESSMENT YEAR 2008-09 AND THE SAME CANNOT FORM TH E BASIS FOR ANY INTEREST BEARING FUNDS RAISED IN THE CURRENT YEAR TO BE USED FOR NON-BUSINESS PURPOSES. 3.6 IN VIEW OF THE ABOVE DETAILED ANALYSIS AND FAC TS & CIRCUMSTANCES OF THE CASE, THERE IS NO CASE TO TREAT THE AMOUNT OF A DVANCE AMOUNT 1.59 CR. DUE FROM M/S HIGH TECH DYEING & FINISHING MILLS P. LTD. AS INTEREST FREE ADVANCES TO BE CONSIDERED AS NON-BUSINESS USE OF IN TEREST BEARING FUNDS. AS SUCH DISALLOWANCE IS DIRECTED TO BE DELETED. 6 6. THE LD. DR RELIED UPON ORDERS OF THE ASSESSING O FFICER AND SUBMITTED THAT ASSESSEE HAS CHANGED THE STAND B EFORE LD. CIT(APPEALS) AND THAT IT WAS COMMON FUNDS EMPLO YED BY THE ASSESSEE, THEREFORE, ASSESSING OFFICER WAS JUST IFIED IN MAKING THE ADDITION BY FOLLOWING THE JUDGEMENT OF T HE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. (SUPRA). ON THE OTHER HAN D, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT THE ASS ESSEE SOLD CLOTHES TO M/S HIGH TECH DYEING AND FINISHING MILLS P. LTD. IN ASSESSMENT YEAR 2008-09 AND AMOUNT OF RS. 1 .54 CR WAS STANDING IN THE NAME OF THIS CONCERN AS DEBIT B ALANCE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE HAS RE FERRED TO PB-26 AND PB-36 WHICH IS COPY OF THE BALANCE SHEET AS ON 31.03.2008 AND LIST OF SUNDRY DEBTORS IN SUPPORT OF THIS CONTENTION AND FURTHER SUBMITTED THAT IN ASSESSMENT YEAR UNDER APPEAL, THE SAID FIRM WAS TAKEN OVER AND THE TOTAL INVESTMENTS WERE SHOWN IN A SUM OF RS. 4.86 CR WHIC H INCLUDES THE INVESTMENT OF RS. 1.65 CR IN M/S HIGH TECH DYEING AND FINISHING MILLS P. LTD. PB-52 AND PB-60 OF THE PAPER BOOK ARE REFERRED TO IN SUPPORT OF THE CONTEN TION. HE HAS ALSO REFERRED TO DETAILS OF INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE COMPANY IN A SUM OF RS. 21 CRORES I N ASSESSMENT YEAR UNDER APPEAL SUPPORTED BY SCHEDULE TO THE BALANCE SHEET. HE HAS SUBMITTED THAT ASSESSEE HAS INCURRED THE AMOUNT IN QUESTION FOR COMMERCIAL EXPEDIENCY. THEREFORE, THE LD. CIT(APPEALS) WAS JUSTIFIED IN DE LETING THE ADDITION. HE HAS FURTHER SUBMITTED THAT SINCE AMOU NT WAS 7 SPENT IN EARLIER YEAR FOR COMMERCIAL EXPEDIENCY, TH EREFORE, ADDITION IS UNJUSTIFIED. HE HAS RELIED UPON RECENT DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. VS CIT IN ITA 224 OF 2 013 DATED 24.07.2013, COPY OF THE JUDGEMENT IS PLACED ON RECO RD. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE ASSES SEE HAS PLACED ON RECORD COPY OF THE BALANCE SHEET FOR ASSESSMENT YEAR 2008-09 AND 2011-12. IT WOULD SHOW THAT THE AMOUNT IN QUESTION ACTUALLY REPRESENTS AMOUNT D UE FROM M/S HIGH TECH DYEING AND FINISHING MILLS P. LT D. SINCE THE ASSESSMENT YEAR 2008-09. THE DETAILS OF SUNDRY DEBTORS AND BIFURCATION IS FILED WHICH SUPPORT THE CONTENTI ON OF THE ASSESSEE THAT ASSESSEE COMPANY HAS A DEBT BALANCE O F RS. 1,54,15,223/- IN THE BOOKS. THE ASSESSEE, THEREFOR E, RIGHTLY CONTENDED THAT NO NEW INVESTMENTS HAVE BEEN MADE IN THE YEAR UNDER CONSIDERATION. MAY BE THE ASSESSEE HAS NOT FILED THE DETAILS OF SALES MADE TO THIS CONCERN, BUT IT R EMAINED A FACTS THAT THE AFORESAID CONCERN WAS A DEBTOR TO TH E ASSESSEE COMPANY FOR AN AMOUNT IN QUESTION. THEREF ORE, THE AMOUNT ADVANCED TO THAT PARTY COULD NOT BE TREA TED AS INTEREST FREE ADVANCES BUT THE SAME REPRESENTS A BU SINESS DEBT WHICH HAS NOT BEEN REALIZED AND ULTIMATELY THE SAID CONCERN WAS TAKEN OVER BY GROUP OF ASSESSEE'S COMPA NY. THE ASSESSEE ALSO FILED THE BALANCE SHEET AS ON 31. 3.2011 TO EXPLAIN THE INVESTMENTS IN A SUM OF RS. 4.86 CR WHI CH INCLUDES THE INVESTMENT MADE IN THE AFORESAID CONCE RN WHICH IS COMING UP FROM THE PRECEDING ASSESSMENT YE AR 2008-09. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO BROUGHT 8 ON RECORD THE DETAILS OF INTEREST FREE FUNDS AVAILA BLE TO THE ASSESSEE WHICH COMES TO RS. 21 CR APPROXIMATELY. T HIS SUM IS SUPPORTED BY THE SCHEDULE TO THE BALANCE SHEET A S ON 31.3.2011 AND THE SAID AMOUNT ITSELF IS FAR IN EXCE SS OF THE AMOUNT OUTSTANDING FROM THE SAID CONCERN. THEREFOR E, ITS STAND ESTABLISHED ON RECORD THAT THE AMOUNT OF RS. 1.59 CR PERTAIN TO THE FIRM WHICH IS A DEBTOR TO THE ASSESS EE IN ASSESSMENT YEAR 2008-09 AND OTHERS AND AS SUCH, NO SUBSTANTIAL INVESTMENTS HAVE BEEN MADE IN THE ASSES SMENT YEAR UNDER APPEAL. THE FUNDS AVAILABLE TO THE ASSE SSEE ON INTEREST FREE BASIS WERE ALSO SUFFICIENT TO MEET OU T THE REQUIREMENTS. THE HON'BLE PUNJAB & HARYANA HIGH CO URT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. (SUPRA) IN PARA 10 TO 18 HELD AS UNDER : 10. THE CIT (APPEALS) WAS, THEREFORE, ENTIRELY JUS TIFIED IN COMING TO THE CONCLUSION THAT THE AMOUNT WAS ADVANC ED 'BY THE APPELLANT TO ITS SISTER CONCERN ON ACCOUNT OF CO MMERCIAL EXPEDIENCY AND THAT THE ADVANCE WAS USED BY ITS SIS TER CONCERN FOR THE PURPOSES OF ITS BUSINESS. THE ADDITIONAL FACTS FURTHER ESTABLISH THE FINDINGS, 11. THE TRIBUNAL'S OBSERVATION THAT THERE IS NOTHIN G ON RECORD THAT THE MONEY ADVANCED BY THE APPELLANT TO ITS SISTER COMPANY HAD BEEN USED AS A MEASURE OF COMMERCIAL EX PEDIENCY, WAS NOT JUSTIFIED, THE APPELLANT FURNISHED ALL THE DOCU MENTS IN THIS REGARD, THE APPELLANT EXPRESSLY STATED THAT THE AMO UNTS HAD BEEN UTILIZED FOR COMMERCIAL ACTIVITY. THIS ASSERTION WA S NEVER DENIED. THE APPELLANT WAS NOT REQUIRED TO DO ANYTHING FURTH ER TO ESTABLISH ITS ASSERTION THAT ITS SISTER COMPANY HAD UTILIZED THE AMOUNTS FOR THE PURPOSES OF ITS BUSINESS. THE FINDING OF THE TRIBUN AL IS NOT BASED ON ANY MATERIAL. IT IS IMPORTANT TO NOTE THAT THE TRIBUNAL HAD NOT EVEN SUGGESTED 9 THAT SUCH A CASE WAS PUT TO THE APPELLANT OR ITS AU THORIZED REPRESENTATIVE AND THAT DESPITE THE SAME THE APPEI 1 ANT FA IIED T O ESTABII SH THE SAME. 12, THE VIEW OF THE TRIBUNAL THAT THE CIT (APPEALS) HAD NOT CONSIDERED THE DECISION OF THE SUPREME COURT IN S.A . BUILDERS LTD. VS. COMMISSIONER OF INCOME-LAX (APPEALS) AND ANOTHER (SUPRA) IN 'RIGHT SPIRITS' AND THAT THE CIT HAD WRONGLY INTERP RETED THE JUDGMENT IS NOT WELL-FOUNDED. IN S.A BUILDER VS. CI T (SUPRA), THE SUPREME COURT OBSERVED:- 'IT IS TRUE THAT THE BORROWED AMOUNT IN QUESTION WA S NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS, B UT HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SIST ER CONCERN. HOWEVER, IN OUR OPINION, THAT FACT I S NOT REA 1 I Y RE I EVANT. WHAT IS RELEVANT IS WHETHER THE ASSESSEE ADVANCED SUCH AMOUNT TO ITS SISTER CONCERN AS A MEASURE OF COMMERCIAL EXPEDIENCY, ' (EMPHASIS SUPPLIED) IT IS PRECISELY THIS TEST THAT WAS APPLIE D BY THE CIT (APPEALS). 13. THE COMMERCIAL EXPEDIENCY IN ADVANCING THE AMOUNT IS ESTABLISHED BEYOND DOUBT, THE APPELLANT OWNS ABOUT 89% OF THE EQUITY CAPITAL. A DIVISION BENCH OF THIS COURT IN CIT VS. MARUDHAR CHEMICALS & PHARMACEUTICALS (P) L TD., (2009) 319 ITR 75 (P&H) HELD:- '15. SECTION 36(1)(III) OF THE ACT PROVIDES THAT 'T HE AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR TH E PURPOSES OF THE BUSINESS OR PROFESSION' HAS TO BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME UNDER SECTION ON 28 OF THE ACT , THE EXPRESSION 'FOR THE PURPOSE OF BUSINESS' HAS BEEN H ELD TO BE WIDER IN SCOPE THAN THE EXPRESSION 'FOR THE PURPOSE OF EARNING INCOME, PROFITS OR GAINS'. IT HAS BEEN HELD IN S.A. BUILDERS LTD. 'S CASE (SUPRA) THAT WHEN THE ASSESSEE BORROWED THE FU ND FROM THE BANK AND LENT SOME OF IT TO ITS SISTER CONCERN AS A N INTEREST FREE LOAN, THEN THE REAL TEST TO ALLOW THE INTERE ST AS DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT IS WHETHER THIS WAS DONE AS A MEASURE OF COMMERCIAL EXPEDIENCY. IT HAS BEEN HELD THAT IN ORDER TO CLAIM A DEDUCTION, IT IS ENOUGH TO SHOW THAT THE MONEY IS EXPENDED, NOT ON NECESSITY AND WITH A VIEW TO DIRECT AND IMMEDIATE BENEFIT, BUT VOLUNTARILY AND O N ACCOUNT 10 OF COMMERCIAL EXPEDIENCY AND IN ORDER TO INDIRECTLY TO FACILITATE THE CARRYING ON THE BUSINESS. THE EXPRESSION 'COMME RCIAL EXPEDIENCY' IS AN EXPRESSION OF WIDE IMPORT AND INC LUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRE D UNDER ANY LEGAL OBLIGATION, BUT YET IT IS ALLOWABLE AS A BUSINESS EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMER CIAL EXPEDIENCY. IN S.A. BUILDERS LTD. 'S CASE (SUPRA), IT WAS HELD THAT IN ORDER TO DECIDE WHETHER IT WAS FOR COMMERCI AL EXPEDIENCY, THE AUTHORITIES AND THE COURTS SHOULD HAVE EXAMINED THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED MONEY TO IT S SISTER CONCERN AND WHAT THE SISTER CONCERN DID WITH THE MO NEY. IT WAS FURTHER HELD THAT IT IS NOT RELEVANT WHETHER TH E ASSESSEE HAS UTILIZED THE BORROWED AMOUNT IN ITS OW N BUSINESS OR HAS ADVANCED THE SAME AS INTEREST FREE LOAN TO ITS SISTER CONCERN. WHAT IS RELEVANT IS WHETHER THE AMOUNT, SO ADVANCED WAS AS A MEASURE OF COMMERCIAL EXPEDIEN CY OR NOT. IT IS NOT NECESSARY THAT THE AMOUNT SO ADVANCE D IS EARNING PROFIT OR NOT BUT THERE MUST BE SOME NEXUS BETWEEN EXPENSES AND THE PURPOSE OF BUSINESS,' IT IS IMPORTANT TO NOTE THAT THE DIVISION BENCH IN ARRIVING AT ITS CONCLUSION FOLLOWED THE JUDGMENT OF THE SUPREME COU RT IN S.A. BUILDERS LTD. VS. COMMISSIONER OF INCOME-TAX (APPEA LS) AND ANOTHER (SUPRA). THE DIVISION BENCH, IN FACT, AFTER REMANDING THE MATTER, EXPRESSLY DIRECTED THE TRIBUNAL TO CONS IDER THE MATTER IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN S.A. BUILDERS LTD. VS. COMMISSIONER OF INC OME-TAX (APPEALS) AND ANOTHER (SUPRA). 14. THE APPELLANT'S CASE MEETS EACH OF THE TESTS .STIPULATED BY THE DIVISION BENCH. IN FACT, IT MEET S A HIGHER TEST. WHEN A HOLDING COMPANY INVESTS AMOUNTS FOR THE PURP OSE OF THE BUSINESS OF ITS SUBSIDIARY, IT MUST OF NECESSITY BE HELD TO BE AN EXPENSE ON ACCOUNT OF COMMERCIAL EXPEDIENCY. A FINA NCIAL BENEFIT OF ANY NATURE DERIVED BY THE SUBSIDIARY ON ACCOUNT OF THE 11 AMOUNTS ADVANCED TO IT BY THE HOLDING COMPANY WOULD NOT MERELY INDIRECTLY BUT DIRECTLY BENEFIT ITS HOLDING COMPANY. IN THE CASE BEFORE US, THE SUBSIDIARY HAD TO BE FUNDED TO A LARGE EXTENT FOR OTHERWISE IT WOULD NOT HAVE SURVIVED. IF IT HAD NOT SURVIVED AND HAD GONE INTO LIQUIDATION, THE APPELLANT WOULD HAVE SUFFERED DIRECTLY ON ACCOUNT OF AN EROSION OF ITS ENTIRE INV ESTMENT IN THE SUBSIDIARY. IN THIS CASE, THE FINANCIAL ASSISTANCE WAS NOT ONLY PRUDENT BUT OF UTMOST NECESSITY FOR WITHOUT IT THE SUBSIDIARY WOULD HAVE SUFFERED GRAVE FINANCIAL PREJUDICE, 15. THE TRIBUNAL, THEREFORE, ERRED IN COMING TO THE CONCLUSION THAT THE CIT (APPEALS) HAD NOT CONSIDERE D THE JUDGMENT OF THE SUPREME. COURT IN THE CORRECT PERSP ECTIVE. WITH RESPECT, WE FIND THAT THE TRIBUNAL HAS NOT EVEN ANA LYZED THE JUDGMENT OF THE SUPREME COURT IN 5.A, BUILDERS LTD. VS. COMMISSIONER OF INCOME-TAX (APPEALS) AND ANOTHER (S UPRA). 16. AS WE NOTED EARLIER, THE FUNDS/RESERVES OF T HE APPELLANT WERE SUFFICIENT TO COVER THE INTEREST FRE E ADVANCES MADE BY IT OF RS.10.29 CRORES TO ITS SISTER COMPANY . WE ARE ENTIRELY IN AGREEMENT WITH THE JUDGMENT OF THE BOMB AY HIGH COURT IN COMMISSIONER OF INCOME TAX VS. RELIANCE UT ILITIES & POWER LTD., (2009) 313 ITR 340, PARA-10, THAT IF TH ERE ARE INTEREST FREE FUNDS AVAILABLE A PRESUMPTION WOULD A RISE THAT INVESTMENT WOULD BE OUT OF THE INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY IF THE INTEREST FREE FUN DS WERE SUFFICIENT TO MEET THE INVESTMENT. 17. THE ASSESSING OFFICER'S VIEW THAT THE ADVANCE WAS N OT FOR BUSINESS PURPOSES AS THE APPELLANT HAD NO BUSIN ESS 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 O F BUSINESS. IT WOULD MAKE NO DIFFERENCE. IT WOULD STILL BE COMMERC IALLY EXPEDIENT FOR ONE GROUP COMPANY TO ADVANCE AMOUNTS TO ANOTHER 12 GROUP COMPANY, IF, FOR INSTANCE, AS A RESULT THEREO F THE FORMER BENEFITS. IN THE PRESENT CASE, AS WE HAVE ALREADY D EMONSTRATED, THERE WOULD BE A DIRECT BENEFIT ON ACCOUNT OF THE A DVANCE MADE BY THE APPELLANT TO ITS SISTER COMPANY IF THE SAME IMPROVES THE FINANCIAL HEALTH OF THE SISTER COMPANY AND MAKES IT A VIABLE ENTERPRISE. WE HASTEN TO ADD THAT IT IS NOT NECESSA RY THAT THE ADVANCE RESULTS IN A POSITIVE TANGIBLE BENEFIT- SO LONG AS THE AMOUNT IS ADVANCED WITH THAT VIEW IN MIND OR WITH A NY OTHER COMMERCIALLY EXPEDIENT VIEW IN MIND THAT IS SUFFICI ENT. 18. IN THE CIRCUMSTANCES, THE QUESTION OF LAW IS AN SWERED IN FAVOUR OF THE APPELLANT AND AGAINST THE DEPARTMENT. THE ORDER OF THE TRIBUNAL IS SET ASIDE. THE APPELLANT SHALL BE E NTITLED TO THE DEDUCTION UNDER SECTION 36(1)(III), THERE SHALL, HOWEVER, BE NO ORDER AS TO COSTS. 8. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE MATERIAL ON RECORD, IT IS CLEAR THAT THE AMOUNT IN QUESTION REPRESENTS THE BUSINESS DEBT AND AFTER TAKING OVER THE CONCERN M/S HIGH TECH DYEING AND FINISHING MILLS P. LTD. AND SPENDING SAME PART AMOUNT ALSO, THE AMOUNT IN QUESTION WAS SHOWN AS INVESTMENT IN THE BOOKS OF TH E ASSESSEE COMPANY. THE AMOUNT WAS, THEREFORE, SPENT FOR BUSINESS EXPEDIENCY AND COULD NOT BE TREATED TO HAV E BEEN GIVEN OUT OF THE BORROWED INTEREST BEARING FUNDS. FURTHER, THE SUFFICIENT FUNDS WERE AVAILABLE TO THE ASSESSEE COMPANY AND AS SUCH LD. CIT(APPEALS), ON PROPER APPRECIATIO N OF THE FACTS AND MATERIAL ON RECORD CORRECTLY DELETED THE ADDITION. THE FINDINGS RECORDED BY THE LD. CIT(APPEALS) ARE S UPPORTED BY THE JUDGEMENT OF HON'BLE PUNJAB & HARYANA HIGH C OURT IN THE CASE OF M/S BRIGHT ENTERPRISES PVT. LTD. TH EREFORE, 13 WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL O F THE REVENUE. THE SAME IS, ACCORDINGLY, DISMISSED. 9. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST,2015. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 ST AUGUST,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH