M/s. ESSAR STEEL LTD., MUMBAI V. DCIT 5(1), MUMBAI

ITA 4962/MUM/2005

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62432 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 11-07-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Keywords: Business expenditure; Commercial expediency
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI N.V. VASUDEVAN (JUDICIAL MEMBER) AND SHRI N.K. BILLAIYA (ACCOUNTANT MEMBER) ITA NO. 4962/MUM/2005 ASSESSMENT YEAR-2001-02 M/S. ESSAR STEEL LTD., ESSAR HOUSE, 11, KESHAVRAO KHADYE MARG, MAHALAXMI, MUMBAI-400 034 PAN-AAACE 1741P VS. THE DCIT-5(1), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIJAY MEHTA RESPONDENT BY: SHRI A.C. TEJPAL DATE OF HEARING : 13.04.2012 DATE OF PRONOUNCEMENT:16.5.12 O R D E R PER N.K. BILLAIYA (AM): THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)- V DT. 18.4.2005 FOR ASSESSMENT YEAR 2001-02. 2. THE ONLY GRIEVANCE RAISED BY ASSESSEE RELATES T O CONFIRMING THE DISALLOWANCE OF INTEREST TO THE EXTENT OF RS. 9,01, 98,977/- WITH REFERENCE TO THE ADVANCES GIVEN TO M/S. HY-GRADE PELLETS LTD (HG PL). 3. THE ISSUE BEFORE US FINDS PLACE AT PARA-10 AT PA GE 26 OF ASSESSMENT ORDER. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSI NESS OF MANUFACTURING AND SALE OF HOT ROLLED COILS, SHEETS, PLATES, HOT B RIQUETTED IRON ETC. THE RETURN OF INCOME DECLARING LOSS OF RS. 108,61,53,40 0/- WAS FILED ON 30.10.2001. THE RETURN WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICES U/S. 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. ITA NO. 4962/M/05 2 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE COMPANY HAD SIGNIFICANT IN VESTMENT IN EQUITY AND PREFERENCE SHARE OF HGPL IN WHICH MANAGEMENT OF CO MPANY HAS ACTIVE PARTICIPATION . THE ASSESSEE DID NOT CHARGE ANY IN TEREST AGGREGATING TO RS. 46.64 CRORES AS POINTED OUT BY THE AUDITORS OF THE COMPANY ON ADVANCES GIVEN TO HPGL. THE ASSESSING OFFICER ASKED THE ASS ESSEE WHY INTEREST WAS NOT CHARGED ON THE INTEREST FREE LOAN / ADVANCES GI VEN TO M/S. HGPL. THE ASSESSEE EXPLAINED AS UNDER: 3.1 HIGH GRADE PELLETS LIMITED (HGPL) IS A COMPANY IN WHICH OUR COMPANY HAS SIGNIFICANT INVESTMENT IN THE EQUITY AN D PREFERENCE SHARE CAPITAL FURTHER, THEY ARE THE MAIN SOURCE OF ONE OF OUR PRINCIPAL RAW MATERIALS, PELLETS, WHICH ARE REQUIRED FOR THE MANU FACTURE OF STEEL IN OUR PLANT ON A REGULAR BASIS WITHOUT MUCH INTERRUPT ION. THUS, IN THE INTEREST OF THE BUSINESS OF OUR COMPANY, IT IS ESSE NTIAL THAT HGPL SHOULD BE ABLE TO SUSTAIN AND REVIVE WHEN IT IS IN DIFFICULTY. WHEN THIS COMPANY HAS INCURRED HUGE LOSSES AND IS FINDING IT DIFFICULT TO CARRY ON THE NORMAL OPERATIONS, THE CHARGING OF INTEREST WIL L ONLY ADD TO ITS UNPAID LIABILITIES. WHEN THIS COMPANY IS NOT IN A POSITION TO PAY THIS INTEREST, THERE IS NO POINT IN CHARGING THE INTERES T WHEN IT CANNOT BE RECOVERED. FURTHER, WE HAVE TO THINK ABOUT THE SAFE TY OF OUR INVESTMENTS RATHER THAN BURDENING THIS COMPANY WITH MORE LIABILITY WHICH CANNOT BE RECOVERED. THUS, IN THE INTEREST O F THE BUSINESS OF THE ASSESSEE ONLY COMPANY ONLY THIS INTEREST HAS NOT BE EN CHARGED. 3.2 FURTHER, AN ITEM CAN BE ACCOUNTED AS INCOME ON LY WHEN THERE IS A CERTAIN PROBABILITY OF RECEIVING SUCH INCOME A ND AS LONG AS THIS CLAIM IS NOT ACCEPTED BY THE OTHER PARTY, IT CANNOT BE CHARACTERIZED AS A DEBT RECOVERABLE FROM THAT PARTY. THE INCOME IN T HE BOOKS OF OUR COMPANY SHOULD BE CAPABLE OF BEING RECOVERABLE AS D EBT FROM THE OTHER PARTY. IN THE ABSENCE OF THAT, INCOME CANNOT BE RECOGNIZED BY US. 3.3 THERE IS NO QUESTION OF ANY ADDITION TO INCOME JUST BECAUSE INTEREST HAS NOT BEEN CHARGED ON CERTAIN ADVANCES D UE FROM THIS COMPANY. IF AN AMOUNT HAS TO BE ADDED TO THE INCOME , IT SHOULD BE PROVED THAT IT HAS BEEN EARNED. AN AMOUNT WHICH HAS NOT BEEN EARNED CANNOT BE TREATED AS INCOME AS PER THE INCOME -TAX LAW. AN ITEM CANNOT BE TAXED AS INCOME ON PRESUMPTION BASIS EXCE PT WHEN THERE IS A SPECIFIC PROVISION TO THAT EFFECT LIKE INCOME FRO M, PROPERTY. THUS NO AMOUNT CAN BE ADDED AS INCOME DUE TO THE NON-CHARGI NG OF ABOVE INTEREST. 3.4 AT THE SAME TIME, NO PART OF INTEREST PAYMENT C AN BE DISALLOWED SINCE THE INTEREST EXPENDITURE HAS BEEN INCURRED ON AMOUNT BORROWED FOR THE PURPOSE OF THE BUSINESS. ONCE THE MONEY HAS BEEN BORROWED FOR THE PURPOSE OF THE BUSINESS, THE INTEREST ON SU CH BORROWAL IS ITA NO. 4962/M/05 3 ALLOWABLE AS BUSINESS EXPENDITURE AS PER SEC. 36(1) (III) OF THE INCOME TAX ACT, 1961. THERE IS NO SUCH CONDITION THAT INTE REST HAS TO BE CHARGED ON ANY MONEY ADVANCED TO ANYBODY IN THAT SE CTION FOR ALLOWABILITY OF INTEREST PAYMENT. THUS NO PART OF I NTEREST PAYMENT CAN BE DISALLOWED ON ACCOUNT OF ABOVE REASON. IN ANY CA SE, INTEREST HAS NOT BEEN CHARGED BASED ON BUSINESS PRUDENCE AND IN THE INTEREST OF THE BUSINESS OF THE ASSESSEE. FURTHER, THE ADVANCE HAS BECOME DUE FROM HPGL. IN THE COURSE OF BUSINESS OF THE ASSESSE E. THUS, NO INTEREST CAN BE DISALLOWED IN THE COMPUTATION OF IN COME OF THE ASSESSEE. 5. THE AFORESAID CONTENTION OF ASSESSEE DID NOT FIN D FAVOUR WITH THE AO. THE AO WAS OF THE OPINION THAT SINCE THE ASSESSEE I S MAINTAINING BOOKS OF ACCOUNT ON MERCANTILE SYSTEM OF ACCOUNTING, THE ASS ESSEE OUGHT TO HAVE CREDITED THE INTEREST ACCRUED. THE AO FURTHER OBSER VED THAT THE ASSESSEE HAS DIVERTED BUSINESS FUNDS FOR NON BUSINESS PURPOSES A ND THEREFORE THE INTEREST CLAIMED BY ASSESSEE IS NOT ALLOWABLE U/S. 36(1)(III ) OF THE ACT. THE AO ADDED THE INTEREST PORTION RELATING TO BORROWED FUNDS AS UNDER: 1.AVERAGE BORROWED FUNDS DURING THE YEAR (IN CRORES) OPE N ING BALANCE 4,418.84 CLOSING BALANCE 4,462.92 8,881.76 AVERAGE 4,440.88 2. AVERAGE TOTAL FUND S OPENING BALANCE 7,515.36 CLOSING BALANCE 7,524.35 15,039.71 AVERAGE 7,519.85 3. DISALLOWANCE: INTEREST NOT CHARGED X BORROWED FUNDS TOTAL FUNDS = 46,64,53,318X 4,440.88 7,519.85= 27,54,66,028 ITA NO. 4962/M/05 4 6. ACCORDINGLY, THE AO PROPOSED TO ADD RS. 27,54,66 ,028/- ON THIS ACCOUNT. HOWEVER, WHILE COMPUTING ASSESSEES TOTAL INCOME FOR THE YEAR AT CLAUSE (D) AT PAGE 29 OF ASSESSMENT ORDER, THE AO M ADE AN ADDITION OF RS. 46,64,53,318/-. 7. AGGRIEVED, ASSESSEE TOOK THE MATTER BEFORE LD. C IT(A). 8. BEFORE THE LD. CIT(A) ASSESSEE STRONGLY CONTENDE D THAT THE ACTION OF AO WAS AGAINST THE FACTS OF THE CASE. IT WAS POINTE D OUT BY THE ASSESSEE THAT HGPL IS THE SUPPLIER OF ONE OF THE PRINCIPAL RAW MA TERIAL I.E. PELLETS, WHICH ARE REQUIRED FOR THE MANUFACTURE OF STEEL IN THE PLANT OF THE ASSESSEE. THE SAID HGPL WAS GOING THROUGH A VERY LEAN PHASE AND INCURR ING VERY HUGE LOSSES AND IS FINDING IT VERY DIFFICULT TO CARRY ON THE NO RMAL OPERATIONS, IT WAS NOT IN A POSITION TO PAY ANY INTEREST. IT WAS ALSO CONTENDED THAT IT WAS IMPERATIVE FOR THE ASSESSEE WHO HAS CONTROL OVER THIS COMPANY AND WHO NEEDED CONTINUOUS SUPPLY OF RAW MATERIAL AT LOWER COST AND GOOD QUAL ITY. IT WAS ALSO POINTED OUT BEFORE LD. CIT(A) THAT THE PELLET PLANT OF HGP L WAS SET UP BY THE ASSESSEE COMPANY AS ITS OWN PLANT AND LATER ON THE SAID PELLET PLANT WAS TRANSFERRED TO HGPL AS PER THE STIPULATIONS OF THE FINANCIAL INSTITUTIONS. IT WAS FURTHER SUBMITTED BEFORE THE LD. CIT(A) THAT WHEN I NTEREST FREE ADVANCES GIVEN TO SISTER CONCERN, THE ONUS IS ON THE REVENUE TO PROVE THAT THE INTEREST FREE ADVANCES WERE DIVERTED TO NON BUSINESS PURPOS ES. FOR THIS PROPOSITION, RELIANCE WAS PLACED ON THE DECISION OF LUCKNOW BEN CH OF ITAT IN THE CASE OF SHADI RAM AND SONS VS DCIT 92 ITD 22. THE ASSESSEE STRONGLY CONTENDED THAT THE ASSESSEE COMPANY HAD ITS OWN FUNDS OF RS. 3078.97 CRORES AND THEREFORE THERE WAS NO QUESTION OF APPLICATION OF B ORROWED FUNDS IN THE AMOUNTS DUE FROM HGPL. SO FAR AS CREDITING NOTIONA L INTEREST, ASSESSEE RELIED UPON THE STATEMENT MADE BY THE HONBLE SUPREME COUR T IN THE CASE OF STATE BANK OF TRAVANCORE VS CIT (KER) 158 ITR 102 WHEREIN IT HAS BEEN HELD BY THE HONBLE SUPREME COURT THAT WHAT ARE CHARGEABLE TO INCOME-TAX IN RESPECT OF A BUSINESS ARE PROFITS AND GAINS ACTUALLY RESULTING FROM THE TRANSACTIONS OF THE PREVIOUS YEAR, THAT IS TO SAY, THE REAL PROFITS AND GAINS AND NOT HYPOTHETICAL ITA NO. 4962/M/05 5 PROFITS OR GAINS ON A DOCTRINAIRE THEORY OF ACCRUAL , THAT EVEN UNDER THE MERCANTILE SYSTEM OF ACCOUNTING REGULARLY ADOPTED B Y AN ASSESSEE, IT IS ONLY THE ACCRUAL OF REAL INCOME IN THE COMMERCIAL SENSE WHICH IS CHARGEABLE TO TAX AT ACCRUAL IS A MATTER OF SUBSTANCE TO BE DECIDED O N COMMERCIAL PRINCIPLES HAVE REGARD TO BUSINESS CHARACTER OF THE TRANSACTIO NS AND THE REALITIES OF THE SITUATION AND CANNOT BE DETERMINED ON ANY ABSTRACT THEORY OF ACCRUAL OR BY ADOPTING A LEGALISTIC APPROACH. 9. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS OF ASSESSEE, LD. CIT(A) CAME TO THE CONCLUSION AS UNDER: I HAVE GONE THROUGH THE FINDING OF THE AO AND ALSO THE SUBMISSION OF THE APPELLANT. AS REGARDS AOS OBSERV ATION THAT THE INTEREST SHOULD HAVE BEEN ACCOUNTED ON ACCRUAL BASI S AND ACCORDINGLY CHARGEABLE TO TAX IT IS NOW WELL SETTLED THAT AN IN COME CANNOT BE TAXED ON NOTIONAL /PRESUMPTIVE BASIS UNLESS IT IS E ARNED. FURTHER THERE WAS NOTHING IN THE AGREEMENT WITH THE SAID HG PL THAT THE INTEREST WAS CHARGEABLE AS SUCH AND THUS IN ABSENCE OF ANY SUCH UNDERSTANDING THE SAME COULD NOT BE SAID TO HAVE BE EN ACCRUED. FURTHER AS PER THE ACCOUNTING PRINCIPLES AND ACCOUN TING STANDARDS, READ WITH THE JUDICIAL ANALYSIS, AN INCOME CANNOT B E CREDITED TO THE PROFIT AND LOSS ACCOUNT AUTOMATICALLY ON ACCRUAL BA SIS EVEN WHEN THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING UNLESS THERE IS A CERTAINTY OF ITS RECEIPTS AS ALSO IN ACCRUAL RESU LTING IN DEBT DUE. IN THE INSTANT CASE AO HAS NOT BROUGHT ON RECORD ANY M ATERIAL EVIDENCE TO SUBSTANTIATE ITS CLAIM THAT THE APPELLANT COMPAN Y WAS IN FACT ENTITLED TO INTEREST FROM THE SAID HGPL AND THEREFO RE MERELY THERE WAS AN OUTSTANDING IT COULD NOT BE SAID THAT THE IN TEREST INCOME HAD ACCRUED TO THE APPELLANT COMPANY. THUS CONSIDERING THESE FACT AND ALSO CONSIDERING THE REAL INCOME THEORY THE AMOUNT OF RS.46,64,53,318/- CANNOT BE ADDED TO THE TAXABLE IN COME WHEN IT WAS NOT ACTUALLY EARNED, ACCRUED OR RECEIVED BY THE APPELLANT AND THEREFORE ADDITIONS MADE BY THE AO IN THIS REGARD I S DELETED. 10. THE LD. CIT(A) WENT ON TO DISCUSS THE ALTERNATI VE PROPOSITION OF THE AO FOR DISALLOWANCE OF RS. 27,54,66,028/- ON PROPORTIO NATE BASIS IN THE RATIO OF THE BORROWED FUNDS TO THE TOTAL FUNDS STATING THAT INTEREST BEARING FUNDS HAVE BEEN DIVERTED TO ADVANCE TO M/S. HGPL. THE ASSESSE E EXPLAINED THAT THE AMOUNT RECOVERABLE FROM M/S. HGPL CONSISTS OF 3 ITE MS; ITA NO. 4962/M/05 6 (I) THE AMOUNT RECEIVABLE ON ACCOUNT OF COMPULSORY TRAN SFER OF UNIT BELONGING TO THE COMPANY AS PER THE DIRECTI VES OF FINANCIAL INSTITUTIONS. (II) AMOUNT REPRESENTING STOCK OF RAW MATERIALS SUPPLIED FOR CONVERSION OF RAW MATERIALS INTO PELLETS. (III) ADVANCES MADE DURING THE YEAR FOR THE PURPOSE OF MEETING THE OPERATIVE EXPENSES OF THE SAID HGPL SUC H THAT THE SUPPLY OF PELLET COULD BE RECEIVED UNHIND ERED. 11. IT WAS CONTENDED BY THE ASSESSEE THAT ITEM NO. 1 & 2 DO NOT AMOUNT TO TRANSFER OF FUNDS WHICH COULD LEAD TO DISALLOWAN CE OF INTEREST EXPENSES WHEREAS IN THE CASE OF ADVANCES MADE FOR THE PURPOS E OF MEETING THE OPERATIVE EXPENSES OF HGPL, THE SAME WAS REQUIRED T O BE ADVANCED TO RECEIVE THE UNHINDERED SUPPLY OF PELLET WHICH WAS THE BASIC RAW MATERIAL OF THE ASSESSEE COMPANY WITHOUT WHICH THE COMPANYS PR ODUCTION COULD ALSO BE HAMPERED AND THEREFORE IT CANNOT BE SAID THAT THE A MOUNT OUTSTANDING FROM HGPL WAS FOR NON BUSINESS PURPOSE. 12. CONSIDERING THE ARGUMENTS AND SUBMISSIONS OF TH E ASSESSEE, THE LD. CIT(A) HELD THAT HOWEVER I FIND SOME FORCE IN THE ARGUMENT OF THE AP PELLANT THAT IN RESPECT OF AMOUNT RECEIVABLE ON ACCOUNT OF SALE OF UNIT AND ON ACCOUNT OF VALUE STOCK OF IRON ORE GIVEN FOR CONVER SION INTO PELLETS, WHICH IS NOT PRIMARILY ATTRIBUTABLE TO ADVANCING THE FUND BU T IN THE FIRST CASE BUSINESS COMPULSION WHEREAS IN THE SECOND CASE ITS A STOCK OF RAW MATERIALS FOR CONVERSION AND THEREFORE I AM IN AGREEMENT WITH THE APPELLANT THAT INSOFAR AS THE AMOUNT OF INTEREST WHICH IS ATTRIBUTABLE TO BU SINESS DEBT I.E. RECEIVABLE ON ACCOUNT OF RAW MATERIAL SUPPLIED FOR CONVERSION OF RAW MATERIAL INTO PELLET AND IN RESPECT OF AMOUNT RECEIVABLE IN RESPECT OF T RANSFER OF HGPL UNIT WHICH WAS PRIMARILY ATTRIBUTED TO INSISTENCE OF THE FINAN CIAL INSTITUTIONS, NO DISALLOWANCE OF INTEREST SHOULD BE MADE ON AMOUNT S O OUTSTANDING FOR RECOVERIES. ITA NO. 4962/M/05 7 13. AGGRIEVED BY THIS FINDING, ASSESSEE IS IN APPEA L BEFORE US. 14. THE LD. AR APPEARING FOR THE ASSESSEE COMPANY R EITERATED HIS SUBMISSIONS ON THE LINES AS MADE BEFORE THE LOWER A UTHORITIES THAT THE TRANSACTION WAS SOLELY FOR BUSINESS PURPOSE. THERE FORE, IT CANNOT BE SAID THAT THE MONEY HAS BEEN DIVERTED FOR NON BUSINESS PURPOS E. IT WAS FURTHER POINTED OUT BY THE LD. AR THAT HGPL WAS GOING THROU GH HUGE LOSSES AND WAS NOT IN A POSITION TO REPAY THE PRINCIPLE AMOUNT LES T INTEREST. AT THE SAME TIME, THE ASSESSEE COULD NOT HAVE AFFORDED ANY INTE RRUPTION IN THE SUPPLY OF PRINCIPAL RAW MATERIAL I.E. PELLETS FOR ITS OWN MAN UFACTURING ACTIVITY WHICH CLEARLY ESTABLISHES COMMERCIAL NEED OF THE ASSESSEE . IT WAS SUBMITTED THAT APPLYING THE PRINCIPLE LAID DOWN BY THE HONBLE SUP REME COURT IN THE CASE OF SA BUILDERS 288 ITR 1 (SC), THE ADVANCE HAS TO BE C ONSIDERED AS HAVING BEEN MADE OWING TO COMMERCIAL EXPEDIENCY AND THEREFORE N ON CHARGING OF INTEREST ON SUCH ADVANCES CANNOT BE BASIS TO TREATED INTERES T INCOME AS ACCRUED OR TO MAKE DISALLOWANCE OF INTEREST EXPENSES AS ONE INCUR RED FOR NON BUSINESS PURPOSE. APART FROM THE ABOVE, THE LEARNED COUN SEL FOR THE ASSESSEE ALSO POINTED OUT THAT THERE WERE SUFFICIENT INTEREST FRE E FUNDS AVAILABLE AS ACCEPTED BY THE CIT(A) IN THE IMPUGNED ORDER AT PARA 6.11 AN D THEREFORE NO INTEREST EXPENSES CAN BE DISALLOWED APPLYING THE RATIO OF TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES 313 ITR 340 (BOM). THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF LOWER AUTHORITIES. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PER USED THE ORDERS OF LOWER AUTHORITIES. WE FIND THAT THE AO HAS MADE ITS OWN CALCULATION FOR THE DISALLOWANCE OF INTEREST NOT CHARGED ON ADVANCES TO HGPL. THE SAME WAS QUANTIFIED AT A FIGURE OF RS. 27,54,66,028/-. BUT SURPRISINGLY THE AMOUNT WHICH HAS BEEN ADDED WHILE COMPUTING THE INCOME WAS RS. 46,64,53,318/-. THIS FACT WAS POINTED OUT TO THE LD. CIT(A) VIDE GR OUND NO. 6 TAKEN BEFORE LD. CIT(A). HOWEVER, THE LD. CIT(A) WHILE DECIDING THIS ISSUE HAS DELETED THE ADDITIONS OF RS. 46,64,53,318/-. HOWEVER, AT T HE SAME TIME ON THE PROPOSED ADDITION OF RS. 27,54,66,028/-, THE LD. C IT(A) HAS GIVEN PART RELIEF TO THE ASSESSEE AND CONFIRMED THE DISALLOWANCE OF PROPOSED INTEREST ITA NO. 4962/M/05 8 RELATEABLE TO ADVANCES MADE WITHIN THE YEAR ON PROP ORTIONATE BASIS BASED ON THE RATIO OF BORROWED FUNDS TO TOTAL FUNDS. THE A SSESSEE BEFORE US HAS SUO MOTTO CALCULATED SUCH DISALLOWANCE AT RS. 9,01,98,977/-. TO THIS EXTENT, WE FIND THAT BOTH THE ORDERS OF LOWER AUTHORITIES ARE LACKING IN DETAILS REGARDING BREAK UP OF INTEREST ATTRIBUTABLE TO THE VARIOUS CA TEGORIES REFERRED TO ABOVE. HOWEVER, AT THE SAME TIME, SO FAR AS THE ADVANCE TO HGPL IS CONCERNED, WE FIND THAT THE SAID ADVANCE HAS DIRECT BEARING WITH THE COMMERCIAL NEEDS OF THE ASSESSEE. ONCE IT HAS BEEN ESTABLISHED THAT TH E ADVANCES HAVE BEEN MADE FOR COMMERCIAL REASONS, NO PART OF INTEREST CA N BE DISALLOWED. THEREFORE, MODIFYING THE ORDER OF LD. CIT(A), THE A O IS DIRECTED TO ALLOW THE CLAIM OF INTEREST. ACCORDINGLY, THE APPEAL IS ALLO WED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 16 TH DAY OF MAY, 2012 SD/- SD/- (N.V. VASUDEVAN) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 16 TH MAY, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR C BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI