The Dy. Commissioner of Income Tax, Jalandhar Cantt V. M/s Modern Publishers, Jalandhar

ITA 579/ASR/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8722 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 04-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Proportionate interest; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JALANDH AR ) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO. 579(ASR)/2015 ASSESSMENT YEAR: 2010-11 DY. CIT, CIRCLE-IV, JALANDHAR. VS. M/S. MODERN PUBLISHERS, MBD HOUSE, OLD RAILWAY ROAD, JALANDHAR. PAN:AARFM-5313R (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. BALWINDER KAUR (D R.) RESPONDENT BY: SH. SUDHIR SEHGAL DATE OF HEARING: 24.01.2017 DATE OF PRONOUNCEMENT: 15.03.201 7 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORDE R OF LD. CIT(A)-2, JALANDHAR, DATED 10.08.2015 FOR ASST. YEA R:2010-11. 2. THE REVENUE HAS TAKEN VARIOUS GROUNDS OF APPEAL, WHEREIN IT IS AGGRIEVED WITH THE ACTION OF LD. CIT(A), BY WHICH H E HAS ALLOWED RELIEF TO THE ASSESSEE AGAINST THE DISALLOWANCE WHICH THE ASS ESSING OFFICER HAD MADE U/S 36(1)(III) OF THE I.T. ACT. THE REVENUE IS AGGRIEVED WITH THE VARIOUS OBSERVATIONS MADE BY LD. CIT(A) WHILE DELET ING THE DISALLOWANCE. ITA NO. 5 79(ASR)/2015 ASST. YEAR: 2010-11 2 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER OBSERVED THAT ASSESSEE HAD RAISED LOANS FROM BANK TO THE TUN E OF RS.29.67 CRORES AND HAD PAID INTEREST ON SUCH LOANS AND ON THE OTHE R HAND IT HAD MADE INVESTMENTS OF RS.72.38 CRORES, THEREFORE, THE ASSE SSEE SHOW CAUSED TO EXPLAIN THE FOLLOWING: (I) IS THERE ANY INCOME FROM INVESTMENTS IN THE FIR MS ? (II) IF NO INCOME, THEN WHY INTEREST PAID ON BANK L OANS SHOULD NOT BE DISALLOWED. (III) PLEASE JUSTIFY THESE INVESTMENTS. 4. IN RESPONSE TO THIS, THE ASSESSEE REPLIED VIDE L ETTER DATED 30.11.2012 AND IN VIEW OF THE REPLY SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION ONLY A SUM OF RS.10 LACS WAS DEBITED TO INVESTMENT ACCOUNT AND OTHER OUTSTANDING BALANCE INVESTMENT WA S OPENING BALANCE AS ON 29.12.2009. IT WAS FURTHER SUBMITTED THAT THE RE WAS A CREDIT BALANCE OF RS.1,01,65,896/- IN THE CAPITAL ACCOUNT AS ON 31 ST MARCH, 2010 AND THEREFORE, THE INVESTMENT TO THE TUNE OF R S.10 LACS WAS MADE DURING THE YEAR FROM THE OWN SURPLUS FUNDS AVAILABL E WITH THE FIRM. AFTER THAT THE ASSESSING OFFICER RAISED CERTAIN QUERIES A ND ASSESSEE SUBMITTED REPLY STATING THEREIN THAT ASSESSEE HAD SUFFICIENT INTEREST FREE CREDIT BALANCES AND THEREFORE, NO DISALLOWANCE WAS WARRANT ED. HOWEVER, THE ASSESSING OFFICER MADE THE DISALLOWANCE OF RS.72,41 ,192/- AS DISALLOWANCE U/S 36(1)(III) AFTER RELYING ON THE DE CISION OF HONBLE PUNJAB ITA NO. 5 79(ASR)/2015 ASST. YEAR: 2010-11 3 & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. 286 ITR 01 (P&H). 5. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LD. C IT(A) AND LD. CIT(A) AFTER GOING THROUGH THE VARIOUS SUBMISSIONS ALLOWED RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 6.4 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSE SSING OFFICER AS MADE BY HIM IN THE ASSESSMENT ORDER AS WELL AS IN THE RE MAND REPORT. I HAVE ALSO CONSIDERED WRITTEN SUBMISSIONS OF THE ASSESSEE FILED VIDE LETTER DATED 01.08.2014 AS WELL AS THE COUNTER COMMENTS OF THE A SSESSEE FILED VIDE LETTER DATED 20.03.2015 ON THE ISSUE UNDER REFERENC E. I HAVE FURTHER CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS RELIED U PON BY THE ASSESSEE AS WELL AS BY THE ASSESSING OFFICER IN CONNECTION W ITH THE ISSUE UNDER REFERENCE. ON CAREFUL CONSIDERATION OF THE RIVAL CO NTENTIONS ON THE ISSUE UNDER REFERENCE AS WELL AS THE OTHER MATERIAL BROUG HT ON RECORD, IT HAS BEEN NOTICED THAT THE ASSESSING OFFICER HAS MADE TH E IMPUGNED ADDITION BY OBSERVING THAT THE ASSESSEE HAS DIVERTED INTERES T BEARING FUNDS FOR NON BUSINESS PURPOSES AS THE ASSESSEE HAS MADE INVESTME NT IN THE GROUP CONCERNS FROM WHICH ASSESSEE IS NOT EARNING ANY INC OME WHEREAS THE ASSESSEE HAS PAID HUGE AMOUNT OF INTEREST TO THE EX TENT OF RS.75,26,289/- ON BORROWED FUNDS. ON THE OTHER HAND, THE ASSESSEE HAS SUBMITTED THAT INVESTMENT ON WHICH THE ASSESSEE IS NOT EARNING ANY INCOME HAS BEEN MADE OUT OF NON INTEREST BEARING FUNDS AVAILABLE WI TH THE ASSESSEE IN THE FORM OF SHARE CAPITAL AND SUNDRY CREDITORS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS ALSO MADE INVESTMENT IN FDRS WITH CENT RAL BANK OF INDIA APPROXIMATELY OF AN AMOUNT OF RS.37.40 CRORES ON WH ICH INTEREST INCOME HAS BEEN SHOWN AT RS.86,03,021/-. IT HAS FURTHER BE EN SUBMITTED THAT AFTER PLEDGING THE FDRS, THE ASSESSEE HAS RAISED LO AN OF RS.28.67 CRORES FOR BUSINESS PURPOSES ON WHICH THE ASSESSEE HAS PAI D INTEREST OF RS.75,26,289/- TO THE BANK. IT WAS AGAIN SUBMITTED THAT THE INVESTMENTS MADE BY THE ASSESSEE ARE OLD AND ONLY AN INVESTMENT OF RS. 10,00,000/- HAS BEEN MADE DURING THE PERIOD UNDER ASSESSMENT. I T WAS AGAIN SUBMITTED THAT HAD THE ASSESSEE ENCASHED THE FDRS A ND UTILIZED THESE FUNDS FOR ITS BUSINESS PURPOSES WITHOUT RAISING ANY LOAN FROM THE BANK, IT WOULD NEITHER HAVE SHOWN INTEREST INCOME OF RS.86,0 3,021/-NOR CLAIMED ANY EXPENSES ON ACCOUNT OF INTEREST ON LOAN AND IN THESE CIRCUMSTANCES, THE ASSESSEE WOULD HAVE PAID LESSER AMOUNT OF TAX. IT WAS AGAIN SUBMITTED THAT THE INVESTMENT HAS BEEN MADE IN SIST ER CONCERNS OUT OF COMMERCIAL EXPEDIENCY. IT WAS, THEREFORE, SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE EXAMINED THE CASE OF THE ASSESS EE FROM THIS ANGLE ALSO BEFORE MAKING THE IMPUGNED ADDITION. ITA NO. 5 79(ASR)/2015 ASST. YEAR: 2010-11 4 6.5 ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIO NS, I AM ALSO OF THE OPINION THAT IT IS LOGICAL TO PRESUME WHERE BORROWE D FUNDS AND OTHER INTEREST FREE FUNDS INCLUDING OWN FUNDS ARE MIXED T HAT THE NON INCOME GENERATING INVESTMENTS IN THE GROUP CONCERNS HAVE B EEN MADE OUT OF NON INTEREST BEARING FUNDS AVAILABLE WITH THE ASSESSEE. IN MY OPINION, THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS IN THE SHAPE OF BALANCE IN THE CAPITAL ACCOUNT OF THE PARTNERS AND OUTSTAND ING SUNDRY CREDITORS TOTALING TO RS.88 CRORES APPROXIMATELY TO MAKE INVE STMENT IN NON INCOME GENERATING ASSETS AND CONSEQUENTLY NO DISALLOWANCE OUT OF INTEREST WAS CALLED FOR KEEPING IN VIEW THE DECISION OF THE HONO RABLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & P OWER LTD. REPORTED AT 313 ITR 340. IT IS ALSO PERTINENT TO MENTION HERE THAT THE HONORABLE SUPREME COURT HAD IN A SUBSEQUENT DECISION IN THE CASE OF M /S MUNJAL SALES VS. CIT REPORTED AT 298 ITR 298 AFTER CONSIDERING THE D ECISION IN THE CASE OF M/S S.A. BUILDERS HELD THAT THE BENEFIT OF OPENING BALANCE OF OWN FUNDS AND THE PROFIT EARNED DURING THE YEAR HAS TO BE ALL OWED WHILE CONSIDERING THE ISSUE OF DISALLOWANCE OUT OF INTEREST. THE HONO RABLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & P OWER REPORTED AT 313 ITR 340 HAD CLEARLY HELD AFTER RELYING ON THE DECISION OF THE SUPREME COURT IN THE CASE OF M/S S.A. BUILDERS REPORTED AT 288 ITR 1 THAT WHERE THE ASSESSEE HAS INTEREST FREE FUNDS, THE PRESUMPTION W OULD BE THAT THE INTEREST FREE ADVANCES WOULD BE OUT OF SUCH FUNDS. THE DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF M/S MUNJAL S ALES (SUPRA) HAS ALSO BEEN APPRECIATED BY THE HONORABLE CHHATTISGARH HIGH COURT IN THE CASE OF CIT VS. M/S BEEKAY ENGINEERING CORPORATION REPORTED AT 325 ITR 384 AND IT WAS HELD THAT WHERE SUFFICIENT FUNDS WERE AVAILA BLE WITH THE HUF AND SUBSTANTIAL PROFIT HAD ACCRUED TO THE ASSESSEE, THE RE COULD BE NO DISALLOWANCE FOR THE INTEREST FREE ADVANCES TO THE MEMBER OF THE HUF. THE HONORABLE ITAT, DELHI HAS RECENTLY IN THE CASE OF M /S METRO INSTITUTE OF MEDICAL SCIENCES P. LTD. VS. ACIT HELD THAT WHERE A DEQUATE INTEREST FREE FUNDS WERE AVAILABLE TO THE ASSESSEE, DISALLOWANCE OUT OF INTEREST FOR INTEREST FREE ADVANCES WAS NOT CALLED FOR. THE HON BLE ITAT, MUMBAI BENCH HAS IN THE CASE OF ITO VS. M/S GSB CAPITAL MA RKETS HELD THAT WHERE THE ASSESSEE HAD SUFFICIENT NON-INTEREST BEARING FU NDS FAR IN EXCESS OF MONIES RECOVERABLE FROM SISTER CONCERNS, NO DISALLO WANCE OUT OF INTEREST COULD BE MADE. SIMILARLY THE HONORABLE ITAT MUMBAI BENCH IN THE CASE OF M/S PRANIK SHIPPING & SERVICES LTD. VS. ACIT REPORT ED AT 135 ITD 233 HELD THAT WHERE THE ASSESSEE HAD INTEREST FREE FUNDS AS WELL AS INTEREST BEARING FUNDS AT ITS DISPOSAL, THE PRESUMPTION WOULD BE THA T INVESTMENTS WERE MADE FROM INTEREST FREE FUNDS AVAILABLE WITH THE AS SESSEE AND ACCORDINGLY THE DISALLOWANCE OUT OF INTEREST WAS DELETED. THE H ONORABLE ITAT JAIPUR BENCH HAS IN THE CASE OF ACIT VS. SH. RAM KISHAN VE RMA REPORTED AT 143 TTJ 1 HELD THAT WHERE THE INTEREST FREE ADVANCES WE RE LESS THAN THE CAPITAL, NO DISALLOWANCE OUT OF INTEREST WAS CALLED FOR. SIMILARLY THE HONORABLE ITAT RAJKOT BENCH HAS IN THE CASE OF M/S MAHESHWARI HANDLING AGENCY PVT. LTD. VS. ACIT REPORTED AT 18 T AXDMANN.COM 195 HELD THAT WHERE, SUFFICIENT INTEREST FREE FUNDS ARE AVAI LABLE IN THE FORM OF CAPITAL, RESERVES AND OTHER FUNDS WITHOUT INTEREST FROM FRIENDS ETC. WHICH COVER THE INTEREST FREE ADVANCES, NO DISALLOWANCE O UT OF INTEREST IS CALLED FOR. SIMILARLY THE HONORABLE ITAT, KOLKATA BENCH, ( THIRD MEMBER) IN THE ITA NO. 5 79(ASR)/2015 ASST. YEAR: 2010-11 5 CASE OF M/S S.P. JAISWAL ESTATES (P) LTD. VS. CIT R EPORTED AT 147 TTJ 649 HELD THAT WHERE THE INTEREST FREE FUNDS AVAILABLE W ITH THE ASSESSEE ARE FOR MORE THAN THE INTEREST FREE ADVANCES, THE PRESUMPTI ON HAS TO BE THAT THE INTEREST FREE ADVANCES WERE GIVEN OUT OF THE INTERE ST FREE FUNDS AVAILABLE TO THE ASSESSEE. IN MY OPINION, THE THIRD MEMBER DECIS ION HAS THE SAME EFFECTIVENESS AS OF A SPECIAL BENCH DECISION IN VIE W OF THE DECISION OF THE ITAT MUMBAI SPECIAL BENCH IN THE CASE OF DCIT VS. M /S OMAN INTERNATIONAL BANK SAOG REPORTED AT 100 ITD 285. WH AT IS PERTINENT TO MENTION HERE THAT THE INVESTMENT IN NON INCOME GENE RATING ASSETS IS RS.72.38 CRORES WHEREAS INTEREST FREE FUNDS AVAILAB LE WITH THE ASSESSEE IN THE FORM OF CAPITAL BALANCE OF PARTNERS AND SUNDRY CREDITORS ARE AT RS.88 CRORES APPROXIMATELY ON WHICH NO INTEREST IS BEING PAID/CHARGED. IT MAY ALSO BE NOTED THAT THE ASSESSING OFFICER HAS HIMSE LF OBSERVED THAT PART OF THE INVESTMENT IN GROUP CONCERNS HAS BEEN MADE OUT OF BALANCE AMOUNTS OUTSTANDING IN THE CASE OF VARIOUS CREDITORS. I AM, THEREFORE, OF THE OPINION THAT THE ASSESSEE IS HAVING SUFFICIENT INTEREST FRE E FUNDS TO THE EXTENT OF RS.88 CRORES APPROXIMATELY IN THE FORM OF BALANCES OF SUNDRY CREDITORS AND PARTNERS CAPITAL OUT OF WHICH AN INVESTMENT OF RS.7 2.38 CRORE IN NON INCOME GENERATING ASSETS CAN EASILY BE MADE. I AM A LSO OF THE OPINION THAT THE ASSESSING OFFICER HAS NO AUTHORITY TO DICTATE T ERMS TO THE ASSESSEE THAT AS TO HOW THE ASSESSEE SHOULD RUN ITS BUSINESS AND TO WHAT EXTENT THE ASSESSEE SHOULD RAISE AND UTILIZE ITS OWN AND BORRO WED FUNDS. LAST BUT NOT THE LEAST, THE ASSESSEE HAS ALSO SHOWN INTEREST INCOME OF RS.86,03,021/- WHICH OTHERWISE WOULD NOT HAVE BEEN SHOWN HAD THE ASSESSEE DECIDED TO UTILIZE THESE FUNDS AFTER ENCAS HING THE FDRS WITHOUT RAISING ANY LOAN FROM THE BANK. THE JUDICIAL PRONOU NCEMENTS RELIED UPON BY THE ASSESSEE ALSO SUPPORT ITS CASE TO A LARGE EX TENT. 6.6 IN VIEW OF THE ABOVE STATED FACTS AND IN THE C IRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OFFICER IS N OT JUSTIFIED IN MAKING ADDITION A OF RS.72,41,192/- TO THE RETURNED INCOME OF THE ASSESSEE ON ACCOUNT OF DISALLOWANCE OF PROPORTIONATE INTEREST. THE ADDITION OF RS.72,41,192/- MADE ON ACCOUNT OF DISALLOWANCE OF P ROPORTIONATE INTEREST EXPENSES IS, THEREFORE, DIRECTED TO BE DELETED. IN THE RESULT, GROUNDS NO.2 & 3 OF APPEAL TAKEN BY THE ASSESSEE ARE ALLOWED. 6. AGGRIEVED WITH THE ORDER, THE REVENUE IS IN APPE AL BEFORE US. 7. AT THE OUTSET, THE LD. DR SUBMITTED THAT ASSESSI NG OFFICER HAD RIGHTLY MADE DISALLOWANCE AND LD. CIT(A) HAS ALLOWE D RELIED TO THE ASSESSEE HOLDING THAT SUNDRY CREDITORS OUTSTANDING IN THE BALANCE SHEET AS OWN FUNDS OF THE ASSESSEE. THE LD. DR FURTHER SU BMITTED THAT LD. CIT(A) HAS WRONGLY RELIED ON THE CASE LAW OF CIT VS. RELIANCE UTILITIES & ITA NO. 5 79(ASR)/2015 ASST. YEAR: 2010-11 6 POWER REPORTED AT 313 ITR 340, AS THE NET WORTH OF THE ASSESSEE IN THAT CASE WAS MORE THAN INTEREST FREE INVESTMENTS WHEREAS IN THE PRESENT CASE, THE NET WORTH OF THE ASSESSEE WAS LESS THAN THE INTERES T FREE INVESTMENTS. THE LD. DR FURTHER ARGUED THAT ASSESSEES CAPITAL W AS ONLY RS.1.01. CRORE AS AGAINST INTEREST FREE INVESTMENT OF RS.72. 83 CRORES. THE LD. DR HEAVILY PLACED HER RELIANCE ON THE ORDER OF ASSESSI NG OFFICER. 8. THE LD. AR, ON THE OTHER HAND, SUBMITTED THAT LD . CIT(A) HAS GIVEN A FINDING OF FACT STATING THAT SUFFICIENT BALANCE O F SUNDRY CREDITORS AND CAPITAL WERE AVAILABLE WITH THE ASSESSEE ON WHICH A SSESSEE WAS NOT PAYING ANY INTEREST. IT WAS SUBMITTED THAT LD. CIT( A) HAS HELD THAT ASSESSEE HAD FDRS WITH CENTRAL BANK OF INDIA TO TH E AMOUNT OF 37.40 CRORES ON WHICH THE INTEREST INCOME HAS BEEN DECLAR ED TO THE TUNE OF RS.86,03,021/-. IT WAS SUBMITTED THAT IF ASSESSEE H AD UTILIZED FUNDS AFTER ENCHASING FDRS, INTEREST INCOME DECLARED WOULD HAV E BEEN NIL AND IN FACT THE ASSESSEE HAD DECLARED MORE INTEREST INCOME THEN INTEREST PAID ON LOANS. IT WAS SUBMITTED THAT LD. CIT(A) HAS RIGH TLY TREATED THE INTEREST FREE SUNDRY CREDITORS AS PART OF OWN FUNDS FOR THE PURPOSES OF DETERMINATION INTEREST FREE FUNDS. IT WAS FURTHER S UBMITTED THAT ONLY A SUM OF RS.10 LACS WAS INVESTED DURING THE YEAR AND ALL OTHER INVESTMENTS WERE OPENING BALANCES. IT WAS FURTHER S UBMITTED THAT ASSESSEE WAS A MAJORITY SHARE HOLDER IN ALL CONCERN S/COMPANIES IN WHICH INVESTMENT WERE MADE AND INVESTMENTS WERE MADE KEEP ING IN VIEW ITA NO. 5 79(ASR)/2015 ASST. YEAR: 2010-11 7 COMMERCIAL EXPEDIENCY ALSO. THE LD. AR SUBMITTED TH AT ASSESSING OFFICER HAD RELIED ON THE JUDGMENTS OF ABHISHEK INDUSTRIES LTD. (SUPRA) WHICH HAS BEEN REVERSED BY HONBLE SUPREME COURT IN THE C ASE OF M/S HERO CYCLE LTD. REPORTED 379 ITR 247. THE LD. AR RELIED ON A NUMBER OF CASE LAWS PLACED AT (PB 1 TO 113) WHEREIN VARIOUS BENCHE S OF THE TRIBUNAL INCLUDING AMRITSAR BENCH AND HIGH COURTS OF MADRAS, PUNAJAB & HARYANA, AND GUJRAT HAD HELD THAT IF THERE WERE SU FFICIENT FUNDS AVAILABLE WITH THE ASSESSEE AS NON INTEREST BEARING FUNDS THEN THE DISALLOWANCE CANNOT BE MADE. THE LD. AR PARTICULARL Y INVITED OUR ATTENTION TO THE DECISIONS OF AMRITSAR BENCH IN THE CASE OF GROUP COMPANIES OF THE ASSESSEE IN THE CASE OF MBD PRINTO GRAPHICS PVT. LTD. VS. DCIT PLACED AT (PB 1 TO 24). FURTHER RELIANCE W AS PLACED ON THE ORDER OF AMRITSAR BENCH IN THE CASE OF ANOTHER GROUP COMP ANY HOLY FAITH INTERNATIONAL PVT. LTD. VS. ACIT AND IN THE CASE OF MALHOTRA BOOK DEPOT AND ASHOK MALHOTRA MALHOTRA AT (PB 24 TO 50). IN VI EW OF THE ABOVE FACTS AND CIRCUMSTANCES AND JUDICIAL PRECEDENTS, IT WAS S UBMITTED THAT LD. CIT(A) HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESS EE. 9. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GO NE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE INTEREST FREE FU NDS AVAILABLE WITH THE ASSESSEE IN THE FORM OF CAPITAL AND SUNDRY CREDITOR S WAS TO THE EXTENT OF RS.88.35 CRORES WHICH FACT IS VERIFIABLE FROM (PB-1 ) AND FROM COPY OF BALANCE SHEET PLACED AT (PB-3). THESE FACTS HAS ALS O BEEN NOTED BY LD. ITA NO. 5 79(ASR)/2015 ASST. YEAR: 2010-11 8 CIT(A) IN HIS ORDER. IT IS ALSO AN UNDISPUTED FACT THAT ASSESSEE HAD MADE INVESTMENTS IN THE GROUP COMPANIES TO THE EXTENT OF RS.72.38 CRORES. THEREFORE, CONSIDERING THE SUNDRY CREDITORS WHICH F ORMED PART OF AVAILABLE FUNDS WITH ASSESSEE, THE ASSESSEE HAD DEF INITELY SUFFICIENT NON INTEREST BEARING FUNDS. WE FURTHER FIND THAT ASSESS EE HAD DECLARED INTEREST INCOME OF RS.86.03 LACS AS INCOME FROM FIX ED DEPOSITS WHICH FACT IS VERIFIABLE FROM (PB-6) WHICH IS A COPY OF P &L ACCOUNT OF THE ASSESSEE. AGAINST THE FIXED DEPOSITS, THE ASSESSEE HAD AVAILED LOANS FROM CENTRAL BANK OF INDIA AND HAD PAID INTEREST ON SUCH LOANS. HOWEVER, THE FACT REMAINS THAT HAD THE ASSESSEE ENCASHED FDRS A ND HAD NOT TAKEN OVER DRAFT FACILITIES AGAINST FIXED DEPOSITS, THE A SSESSEE WOULD NOT HAVE BEEN REQUIRED TO PAY INTEREST TO THE BANK AND AT TH E SAME TIME WOULD NOT HAVE DECLARED INTEREST INCOME TO THE TUNE OF RS .86.03 LACS. THE ACT OF OBTAINING FUNDS AGAINST FDRS IN FACT RESULTED INTO A NET INTEREST INCOME OF RS.10.77 LACS WHICH HAS BEEN OFFERED TO TAX AND IF WE EXAMINE THE FACTS OF THE CASE FROM THIS ANGLE ALSO THE REVENUE IS AT AN ADVANTAGEOUS POSITION AS ASSESSEE HAD DECLARED NET INTEREST INCO ME TO THE TUNE OF RS.10.77 LACS. THESE FINDINGS HAS BEEN MADE BY LD. CIT(A) AT PARA 6.4 OF THE ORDER. FURTHER WE FIND THAT ASSESSEE HAD SUFFIC IENT NON INTEREST BEARING FUNDS WHICH WERE IN THE FORM OF OWN CAPITAL AND SUNDRY CREDITORS AVAILABLE WITH THE ASSESSEE. THE GRIEVANC E OF THE REVENUE IS THAT LD. CIT(A) SHOULD NOT HAVE CONSIDERED SUNDRY C REDITORS AS PART OF AVAILABLE NON INTEREST BEARING FUNDS. HOWEVER, WE H OLD THAT AVAILABILITY OF ITA NO. 5 79(ASR)/2015 ASST. YEAR: 2010-11 9 NON INTEREST BEARING FUNDS IN THE FORM OF OWN CAPIT AL, UNSECURED LOANS OR SUNDRY CREDITORS DO NOT MAKE ANY DIFFERENCE AS ALL THE COMPONENTS OF CREDIT BALANCES DO NOT BEAR ANY COST IN THE FORM OF INTEREST. THEREFORE, NON INTEREST BEARING FUNDS HAS TO BE COMPARED WITH THE NON INTEREST BEARING INVESTMENTS FOR THE PURPOSES OF CALCULATION OF AVAILABILITY OF NET NON INTEREST HEARING FUNDS. THE LD. CIT(A) HAS RELI ED ON A NUMBER OF CASE LAWS, FOR THE PROPOSITION THAT WHERE THE AVAIL ABILITY OF NON INTEREST BEARING FUNDS IS MORE THAN NON INTEREST BEARING INV ESTMENTS THE DISALLOWANCE U/S 36(1)(III) CANNOT BE MADE. THE REV ENUE IS AGGRIEVED THAT LD. CIT(A) HAD IGNORED THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES LTD. (SUPRA). HOWEVER, WE FIND THAT THE DECISION OF ABHISHEK INDUSTRIES LTD. (SUPRA) HAS BEEN OVERRULED BY THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. VS. CIT (CENTRAL), LUDHIANA REPORT ED IN 379 ITR 247, WHEREIN THE HONBLE SUPREME COURT HAS HELD AS UNDER : INSOFAR AS THE LOANS TO DIRECTORS ARE CONCERNED, I T COULD NOT BE DISPUTED BY THE REVENUE THAT THE ASSESSEE HAD A CREDIT BALAN CE IN THE BANK ACCOUNT WHEN THE SAID ADVANCE OF RS.34 LAKHS WAS GI VEN. REMARKABLY, AS OBSERVED BY THE CIT(APPEAL) IN HIS ORDER, THE CO MPANY HAD RESERVE/SURPLUS TO THE TUNE OF ALMOST 15 CRORES AND THEREFORE, THE ASSESSEE COMPANY COULD IN ANY CASE, UTILIZE THOSE F UNDS FOR GIVING ADVANCE TO ITS DIRECTORS. ITA NO. 5 79(ASR)/2015 ASST. YEAR: 2010-11 10 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE JUDICIAL PRECEDENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF LD. CIT(A) AND THEREFORE, THE APPEAL FILED BY REVENUE IS DISMISSED . 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 .03. 2017. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15.03.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER