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

ITA 62/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7763 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-08-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 19-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Proportionate interest; Question of law; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A NO. 62/(ASR)/2016 ASSESSMENT YEAR: 2012-13 PAN: AARFM5313R M/S MODERN PUBLISHERS, MBD HOUSE, RAILWAY ROAD, JALANDHAR. VS. DY. C. I. T., CENTRAL CIRCLE-IV, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL RESPONDENT BY: SH. RAHUL DHAWAN (D. R.) DATE OF HEARING: 14.09.2017 DATE OF PRONOUNCEMENT: 24.10.201 7 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LD. CIT(A), JALANDHAR DATED 11.12.2015 FOR ASST. YEAR: 2012-13. 2. THE GROUNDS OF APPEAL TAKEN BY ASSESSEE ARE REPR ODUCED BELOW: 1. THAT THE WORTH COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3,18,60,761/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES BY INVOKING THE PROVISIONS OF SECTION36(1)(III) OF THE ACT BY APPLYING THE JUDGME NT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES AS REPORTED IN 268 ITR 1 AS PER PARA 6.5 OF THE ORDER. 2. THAT THE ADDITION OF RS.3,18,60,761/- HAS BEEN U PHELD AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETAILED SUBMISSI ON FILED DURING THE COURSE OF HEARING ALONGWITH VARIOUS CASE LAWS HAS N OT BEE CONSIDERED PROPERLY. 3. THAT THE CIT(A) HAS FAILED TO CONSIDER THAT THE AMOUNT WAS ADVANCED FOR ACQUIRING SHARES OF THE SISTER CONCERNS AS SHARE AP PLICATION MONEY AND, LATER ON, SUBSTANTIAL SHARES WERE ALLOTTED TO THE A PPELLANT AND THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE JUDGMENT OF HON'BLE SUPREME COURT ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 2 IN THE CASE OF HERO CYCLES LTD. V/S CIT IN CA NO. 5 14/2008 AND JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF ONE O F THE GROUP CONCERN OF THE APPELLANT NAMELY M/S BRIGHT ENTERPRISES PVT. LT D. IN ITA NO. 224/2013 AS QUOTED BEFORE THE CIT(A). 4. THAT THE WORTHY CIT(A) HAS ERRED IN RESTRICTING THE ADHOC ADDITION OF RS.1,00,000/- WITHOUT PIN POINTING ANY SPECIFIC DIS CREPANCY AS PER PARA 8.3 OF THE ORDER, OUT OF ADDITION OF RS.4,00,000/- MADE BY THE ASSESSING OFFICER OUT OF FOLLOWING EXPENSES. (I) VEHICLE RUNNING & MAINTENANCE RS.8,40,520/ - (II) TRAVELLING EXPENSES RS.52,72,622/- (III) TELEPHONE EXPENSES RS.1,65,033/- 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 3. AT THE OUTSET, THE LD. AR SUBMITTED THAT GROUNDS NO. 1 TO 3 RELATES TO SINGLE GRIEVANCE OF THE ASSESSEE BY WHICH LD. CIT(A ) HAS UPHELD THE DISALLOWANCE MADE BY ASSESSING OFFICER U/S 36(1)(III) OF THE ACT . AS REGARDS GROUND NO. 4, THE LD. AR SUBMITTED THAT HE WILL NOT BE PRESSING THE S AME AND THEREFORE THE SAME MAY BE DISMISSED AS WITHDRAWN. REGARDING THE GRIEVANCE OF ASSESSEE AS COVERED IN GROUNDS NO. 1 TO 3 THE LD. AR SUBMITTED THAT ASSESSEE HAD INVESTED AN AMOU NT OF RS.42,34,12,328/- IN THE SHARE APPLICATION MONEY IN THE GROUP COMPANIES ON WHICH NO INTEREST OR DIVIDEND WAS RECEIVED. HE FURTHER SUBMITTED THAT TH E SAID INVESTMENT WAS NOT MADE DURING THE YEAR UNDER CONSIDERATION BUT IT WAS MADE IN THE EARLIER YEARS AND WAS CONTINUING IN THE YEAR UNDER CONSIDERATION AND THEREFORE NO NEW INVESTMENT WAS MADE DURING THE YEAR. 4. THE LD. AR IN THIS RESPECT INVITED OUR ATTENTION TO P.B. PAGE 6 WHERE THE DETAILS OF SHARE APPLICATION MONEY INVESTED BY THE ASSESSEE IN ITS GROUP ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 3 COMPANIES FOR THE FINANCIAL YEAR 31.03.2011 AND 31. 03.2012 WAS PLACED. THE LD. AR SUBMITTED THAT AS ON 31.03.2011, THE TOTAL INVES TMENT IN THESE COMPANIES WAS TO THE TUNE OF RS.574558998/- AND WHICH HAD RED UCED TO RS.423412328/- DURING THE YEAR AND THEREFORE IT WAS SUBMITTED THAT NO NEW INVESTMENT WAS MADE DURING THE YEAR. THE LD. AR SUBMITTED THAT IS AN UNDISPUTED FACT THA T NO NEW INVESTMENT WAS MADE DURING THE YEAR AND THE AMOUNT OF INVESTME NT WAS MADE IN EARLIER YEARS AND IN EARLIER YEARS, IT HAS BEEN HELD THAT A SSESSEE HAD SUFFICIENT NON INTEREST FREE FUNDS AND THEREFORE DURING THIS YEAR EVEN IF THE ASSESSEE DID NOT HAVE SUFFICIENT INTEREST FREE FUNDS, NO DISALLOWANC E CAN BE MADE AS DISALLOWANCE OF INTEREST U/S 36(1)(III) CANNOT BE MADE ON THE OP ENING BALANCE OF ADVANCES. RELIANCE IN THIS RESPECT WAS PLACED ON THE DECISION OF AMRITSAR BENCH IN THE CASE OF EURO INFRASTRUCTURE LTD. IN ITA NO.571(ASR)/2013 AND IN THE CASE OF AJAY ELECTRONICS, REPORTED IN 52 ITR (TRIBUNAL) 332. THE LD. AR FURTHER SUBMITTED THAT FACTS IN THE PRES ENT CASE ARE IDENTICAL TO THE FACTS IN ASSESSMENT YEAR 2010-11 WHEREIN LD. CI T(A) HAD ALLOWED RELIEF TO THE ASSESSEE VIDE HIS ORDER DATED 10.08.2015 AND AGAINS T WHICH THE APPEAL OF THE REVENUE BY HON'BLE ITAT IN 579/ASR/2015 HAS ALSO BE EN DISMISSED. THE LD. AR SUBMITTED THAT LD. CIT(A) IN APPEAL FOR ASSESSMENT YEAR 2010-11 HAS HELD THAT INVESTMENT IN THE GROUP COMPANIES WAS MADE PARTLY O UT OF AMOUNTS OUTSTANDING TO VARIOUS SUNDRY CREDITORS AND THEREFORE HE HAD CO NSIDERED THE SUNDRY CREDITORS AS PART OF INTEREST FREE FUNDS. HE SUBMITTED THAT D URING THE YEAR UNDER CONSIDERATION, THE TOTAL OF CAPITAL AND SUNDRY CRED ITORS ARE TO THE TUNE OF ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 4 RS.108.26 CRORES AND WHILE INVESTMENT IN THE SHARE APPLICATION MONEY IS ONLY TO THE TUNE OF RS.42.34 CRORES AND THEREFORE SUFFICIEN T INTEREST FREE FUNDS WERE AVAILABLE WITH THE ASSESSEE. THE LD. AR SUBMITTED T HAT DURING THE YEAR UNDER CONSIDERATION, THE LD. CIT(A) HAS NOT ALLOWED THE A PPEAL OF THE ASSESSEE ONLY DUE TO THE FACT THAT FIXED DEPOSITS WHICH WERE ASSETS O F THE CONCERN DURING LAST YEAR HAD BEEN TRANSFERRED TO SMT. SATISH BALA MALHOTRA A ND INCOME FROM THESE FDRS HAS BEEN DECLARED IN HER HANDS AND THEREFORE HE HAS HELD THAT FACTS ARE DIFFERENT AND THEREFORE HE HAS CONFIRMED THE ACTION OF ASSESS ING OFFICER. IN THIS RESPECT, THE LD. AR SUBMITTED THAT FACTS IN THE PRESENT CASE ARE EXACTLY SIMILAR EXCEPT THE FACT THAT MR. ASHOK MALHOTRA HAD DIED AND THE FIXED DEPOSITS WERE TRANSFERRED IN THE NAME OF HIS WIFE. WITHOUT PREJUDICE THE LD. AR SUBMITTED THAT THE INV ESTMENT HAS BEEN MADE IN GROUP COMPANIES WITH A VIEW TO CONTROL MANA GEMENT AND SUCH INVESTMENT WAS MADE FOR GROWTH OF THE BUSINESS AND BRAND NAME AND THUS SUCH INVESTMENT WAS FOR BUSINESS EXPEDIENCY AND HE FURTH ER STATED THAT SHARES HAVE ALREADY BEEN ALLOTTED AGAINST THE ABOVE SAID SHARE APPLICATION MONEY. TO PROVE THAT THE SAID COMPANIES WERE UNDER THE COM MON MANAGEMENT AND CONTROL OF THE ASSESSEE COMPANY, THE LD. AR INV ITED OUR ATTENTION TO P.B. PAGE 9 AND 10 WHERE THE BREAK UP OF SHARE HOLDING O F VARIOUS INVESTEE COMPANIES WAS PLACED. THE LD. AR SUBMITTED THAT EAR LIER MR. ASHOK KUMAR MALHOTRA THE HUSBAND OF SMT. SATISH BALA MALHOTRA W AS SOLE PROPRIETOR OF THE ASSESSEE FIRM AND ON HIS DEATH THE PROPRIETORSHIP F IRM WAS CHANGED TO THE PARTNERSHIP FIRM WITH WIFE HOLDING 44% SHARE AND RE ST OF THE 66% WAS ALLOTTED TO ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 5 THE TWO DAUGHTERS WHICH IS APPARENT FROM LIST OF PA RTNERS OF ASSESSEE FIRM PLACED IN P.B. PAGE 9. THE LD. AR SUBMITTED THAT THESE THR EE PERSONS HELD THE ENTIRE 100% CAPITAL OF THE INVESTEE COMPANIES AND THEREFOR E THERE IS NO DOUBT THAT THE ASSESSEE HAD 100% CONTROL OVER THE INVESTEE COMPANI ES. IT WAS ALSO SUBMITTED THAT THE THREE PERSONS OF THE ASSESSEE FIRM WERE AL SO THE THREE DIRECTORS ON THE BOARD OF THESE COMPANIES AND IN THIS RESPECT OUR AT TENTION WAS INVITED TO P.B. PAGE 7 AND 8 WHERE THE LIST OF DIRECTORS OF THE INV ESTEE COMPANIES WAS PLACED. THE LD. AR SUBMITTED THAT THE AUTHORITIES BELOW HAS NOT MADE ANY ADVERSE COMMENTS ON THE ABOVE. THE LD. AR SUBMITTED THAT FR OM THE ABOVE FACTS IT BECOMES APPARENT THAT THE INVESTMENT IN EARLIER YEA RS WERE MADE FOR PURCHASE OF EQUITY SHARES OF THE COMPANIES WHICH WERE CONTROLLE D BY ASSESSEE AND THEREFORE, THE INVESTMENT WAS MADE OUT OF BUSINESS EXPEDIENCY. THE LD. AR SUBMITTED THAT OUT OF INVESTMENT OF RS.42,34,12,328/- SHARES WERE ALLOTTED TO THE ASSESSEE COMPANY TO THE TUNE OF RS.19,07,25,320/- DURING FIN ANCIAL YEAR 2014-15 AND REST OF THE MONEY WAS RECEIVED BACK. THE LD. AR SUB MITTED THAT EVEN IF THE AMOUNT INVESTED IN THE FORM OF SHARE APPLICATION MO NEY WAS RECEIVED BACK EVEN THEN IT HAS BEEN HELD BY THE AHMEDABAD HIGH COURT I N THE CASE OF PRAMUKH OXYGEN PVT. LTD. VS. DCIT THAT THE ASSESSEE WAS ENT ITLED TO DEDUCTION U/S 36(1)(III) OF THE ACT. THE LD. AR INVITED OUR ATTENTION TO AN ORDER OF PUN JAB & HARYANA HIGH COURT IN THE CASE OF ITS GROUP COMPANY BRIGHT ENTER PRISES (P) LTD. WHEREIN THE HON'BLEBE PUNJAB & HARYANA HIGH COURT VIDE ITS ORD ER JULY 24, 2015 HAS HELD THAT ADVANCING MONEY TO SISTER CONCERNS WITHOUT INT EREST AND ASSESSEE HAVING ABOUT 89% OF EQUITY CAPITAL IN THAT CONCERN AMOUNTS TO EXPENSE ON ACCOUNT OF ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 6 COMMERCIAL EXPEDIENCY AND THEREFORE, ASSESSEE WAS N OT LIABLE TO DISALLOWANCE U/S 36(1)(III) OF THE ACT. THE LD. AR SUBMITTED THA T INSTEAD OF 89%, THE PARTNERS OF THE ASSESSEE FIRM ARE HAVING 100% OF THE CAPITAL OF THE INVESTEE COMPANIES. IN VIEW OF THESE FACTS AND CIRCUMSTANCES IT WAS ARGUED THAT THE APPEAL OF THE ASSESSEE BE ALLOWED. THE LD. AR SUBMITTED THAT IN PAYING INTEREST TO BA NK THERE WAS BUSINESS EXPENDITURE FROM ANOTHER ANGEL ALSO AND STATED THAT MR. ASHOK KUMAR MALHOTRA WHO WAS THE PROPRIETOR OF THE ABOVE SAID CONCERN HA D EXPIRED ON 29.12.2009 AND THEREFORE SMT. SATISH BALA MALHOTRA WIFE OF MR. ASH OK KUMAR MALHOTRA THEN BECAME PARTNER IN THE ABOVE SAID CONCERN ALONGWITH HER TWO DAUGHTERS NAMELY SMT. MONICA AND SMT. SONICA AND THESE FDRS AFTER TH E DEATH OF SH. ASHOK KUMAR MALHOTRA WERE TRANSFERRED IN THE NAME OF SMT. SATISH BALA MALHOTRA. HE SUBMITTED THAT FDRS CONTINUED TO BE PLEDGED WITH TH E BANK AGAINST WHICH LIMIT WAS BEING ENJOYED BY THE PARTNERSHIP CONCERN AND, T HUS, THESE FDRS WERE UTILIZED BY THE PARTNERSHIP FIRM FOR OBTAINING THE OVERDRAFT LIMIT AND, THUS, THE OVERDRAFT LIMITS WERE MEANT FOR GROWTH OF THE BUSIN ESS AND FOR BUSINESS EXPEDIENCY AND TO SAVE THE BUSINESS THE ASSESSEE CO NTINUED TO ENJOY BANK OVERDRAFT AGAINST PLEDGE OF FIXED DEPOSITS. THE LD. AR FURTHER SUBMITTED THAT THE INTEREST ON SUCH FDRS HAS BEEN DISCLOSED IN THE HAN DS OF SATISH BALA MALHOTRA WHICH WAS QUITE SUBSTANTIAL AND HAS BEEN TAXED IN H IGHEST BRACKET AND THEREFORE THERE IS NO LOSS TO REVENUE. WHETHER THE INTEREST I S DECLARED IN THE PARTNERSHIP FIRM OR IN THE HANDS OF INDIVIDUAL DOES NOT MAKE AN Y DIFFERENCE IN VIEW OF THESE FACTS AND CIRCUMSTANCE, THE LD. AR SUBMITTED THAT F ACTS IN THE PRESENT CASE ARE NO DIFFERENT THAN IN ASSESSMENT YEAR 2010-11 OTHER THAN THE FACT THAT IN EARLIER ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 7 YEAR THE CONCERN WAS HEADED BY A SOLE PROPRIETOR WH O HAD DIED AND DURING THIS YEAR AND NOW THE FIRM IS CONTROLLED BY HIS WIFE AND TWO DAUGHTERS AND FDRS HAS BEEN TRANSFERRED IN THE NAME OF SMT. SATISH BALA MA LHOTRA WIFE OF ASHOK KUMAR MALHOTRA. THE LD. AR SUBMITTED THAT THE BANK HAS CO NFIRMED VIDE CERTIFICATE DATED 01.08.2016 THAT THE FIXED DEPOSITS WERE UNDER THEIR LIEN AGAINST OD LIMIT GRANTED TO THE ASSESSEE AND THEREFORE IT WAS ARGUED THAT SINCE ALL THE FDRS WERE UTILIZED BY ASSESSEE TO AVAIL THE CREDIT FACILITIES AND THEREFORE IF THE FDRS WERE NOT CONTINUED TO BE OFFERED AS A SECURITY BANK WOUL D HAVE WITHDRAWN, THE OD LIMITS AND THUS THE BUSINESS OF ASSESSEE WOULD HAVE SUFFERED AND IN VIEW OF THE ABOVE FACTS HE ARGUED THAT IT WAS IN THE INTEREST O F BUSINESS TO CONTINUE WITH THE OVERDRAFT LIMIT AND THEREFORE, THESE FIXED DEPOSITS WERE PLEDGED FOR BUSINESS EXPEDIENCY AND CONTINUATION OF OVERDRAFT LIMITS WAS UNAVOIDABLE. 5. THE LD. DR ON THE OTHER HAND SUBMITTED THAT LD. CIT(A) HAS CLEARLY HELD THAT ASSESSEE WAS NOT HAVING SUFFICIENT NON INTERES T BEARING FUNDS TO ADVANCE MONEY TO ITS SISTER CONCERN AND THEREFORE THE EARLI ER YEAR CASE LAWS DECIDED BY HON'BLE ITAT BENCH IS NOT APPLICABLE IN THIS YEAR A S IN THE EARLIER YEAR, THE HON'BLE TRIBUNAL HAS HELD THAT THERE WERE SUFFICIEN T NON INTEREST BEARING FUNDS. THE LD. DR IN RESPECT OF ARGUMENTS OF LD. AR REGARD ING COMMERCIAL EXPEDIENCY HEAVILY PLACED HIS RELIANCE ON THE ORDER OF AUTHORI TIES BELOW. 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH OUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS AN UNDISPUTED FACT TH AT NO NEW INVESTMENT HAS BEEN MADE BY ASSESSEE DURING THE YEAR UNDER CONSIDERATIO N AND THE INVESTMENT WAS ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 8 MADE ONLY IN THE EARLIER YEARS. THIS FACT IS VERIFI ABLE FROM THE ORDER OF LD. CIT(A) ITSELF WHEREIN THE COMPARATIVE FIGURES OF INVESTMEN T AS ON 31.03.2011 AND 31.03.2012 HAS BEEN MENTIONED IN THE FORM OF A TABL E. THE TABLE REPRODUCED BY LD. CIT(A) IN HIS ORDER IS REPRODUCED BELOW: PARTICULARS BALANCE AS ON 31.03.2010 BALANCE AS ON 31.03.2011 BALANCE AS ON 31.03.2012 SHARE APPLICATION MONEY PAID 723815998 574558998 423412328 FROM THE ABOVE TABLE IT IS APPARENT THAT THE SHARE APPLICATION MONEY AS ON 31.03.2010 WAS TO THE TUNE OF RS.723815998/- AND WH ICH HAD REDUCED TO RS.423412328/- DURING THE YEAR UNDER CONSIDERATION. DURING ASSESSMENT YEAR 2010-11, THE ASSESSING OFFICER HAD DISALLOWED INTER EST U/S 36(1)(III) OF THE ACT ON THE WHOLE OF INVESTMENTS AMOUNTING TO RS.72.38 C RORES. HOWEVER, THE LD. CIT(A) VIDE ITS ORDER DATED 10.08.2015 HAD DELETED ADDITION BY HOLDING AS UNDER: 1 AM, THEREFORE, OF THE OPINION THAT THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUNDS TO THE EXTENT OF RS.88 CRORES A PPROXIMATELY IN THE FORM OF BALANCES OF SUNDRY CREDITORS AND PARTNERS CAPITAL O UT OF WHICH AN INVESTMENT OF RS.72.38 CRORE IN NON INCOME GENERATI NG ASSETS CAN EASILY BE MADE. I AM ALSO OF THE OPINION THAT THE ASSESSING O FFICER HAS NO AUTHORITY TO DICTATE TERMS TO THE ASSESSEE THAT AS TO HOW THE AS SESSEE SHOULD RUN HIS BUSINESS AND TO WHAT EXTENT THE ASSESSEE SHOULD RAI SE AND UTILIZE ITS OWN AND BORROWED FUNDS. LAST BUT NOT THE LEAST, THE ASSESSE E HAS ALSO SHOWN INTEREST INCOME OF RS.86,03,021/- WHICH OTHERWISE WOULD NOT HAVE BEEN SHOWN HAD THE ASSESSEE DECIDE TO UTILIZE THESE FUNDS AFTER ENCASH ING 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 EXTEN T. 6.6 IN VIEW OF THE ABOVE STATED FACTS AND IN THE CI RCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OFFICE R IS NOT JUSTIFIED IN MAKING ADDITION OF RS.72,41,192/- TO THE RETURNED INCOME O F 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 ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 9 EXPENSES IS, THEREFORE, DIRECTED TO BE DELETED. IN THE RESULT, GROUNDS NO. 2 AND 3 OF APPEAL TAKEN BY THE ASSESSEE ARE ALLOWED. ON A FURTHER APPEAL BY REVENUE, THE HON'BLE TRIBUN AL IN ITA NO.579/ASR/2015 VIDE ORDER DATED 15.03.2017 HAS DIS MISSED THE APPEAL OF REVENUE BY HOLDING AS UNDER: 9. WE HAVE HEARD THE RIVAL PARTIES AND HAVE G ONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE INTEREST FREE FUNDS AVA ILABLE WITH THE ASSESSEE IN THE FORM OF CAPITAL AND SUNDRY CREDITORS WAS TO THE EXT ENT OF RS.88.35 CRORES WHICH FACT IS VERIFIABLE FROM (PB-1) AND FROM COPY OF BAL ANCE SHEET PLACED AT (PB-3). THESE FACTS HAS ALSO BEEN NOTED BY LD. CIT(A) IN HIS ORDE R. IT IS ALSO AN UNDISPUTED FACT THAT ASSESSEE HAD MADE INVESTMENTS IN THE GROUP COM PANIES TO THE EXTENT OF RS.72.38 CRORES. THEREFORE, CONSIDERING THE SUNDRY CREDITORS WHICH FORMED PART OF AVAILABLE FUNDS WITH ASSESSEE, THE ASSESSEE HAD DEF INITELY SUFFICIENT NON INTEREST BEARING FUNDS. WE FURTHER FIND THAT ASSESSEE HAD DE CLARED INTEREST INCOME OF RS.86.03 LACS AS INCOME FROM FIXED DEPOSITS WHICH F ACT IS VERIFIABLE FROM (PB-6) WHICH IS A COPY OF P&L ACCOUNT OF THE ASSESSEE. AGA INST THE FIXED DEPOSITS, THE ASSESSEE HAD AVAILED LOANS FROM CENTRAL BANK OF IND IA AND HAD PAID INTEREST ON SUCH LOANS. HOWEVER, THE FACT REMAINS THAT HAD THE ASSESSEE ENCASHED FDRS AND HAD NOT TAKEN OVER DRAFT FACILITIES AGAINST FIXED D EPOSITS, THE ASSESSEE WOULD NOT HAVE BEEN REQUIRED TO PAY INTEREST TO THE BANK AND AT THE 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 INT EREST 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 POSIT ION AS ASSESSEE HAD DECLARED NET INTEREST INCOME TO THE TUNE OF RS.10.77 LACS. T HESE FINDINGS HAS BEEN MADE BY LD. CIT(A) AT PARA 6.4 OF THE ORDER. FURTHER WE FIN D THAT ASSESSEE HAD SUFFICIENT NON INTEREST BEARING FUNDS WHICH WERE IN THE FORM OF OW N CAPITAL AND SUNDRY CREDITORS AVAILABLE WITH THE ASSESSEE. THE GRIEVANCE OF THE R EVENUE IS THAT LD. CIT(A) SHOULD NOT HAVE CONSIDERED SUNDRY CREDITORS AS PART OF AVA ILABLE NON INTEREST BEARING FUNDS. HOWEVER, WE HOLD THAT AVAILABILITY OF NON IN TEREST BEARING FUNDS IN THE FORM OF OWN CAPITAL, UNSECURED LOANS OR SUNDRY CREDITORS DO NOT MAKE ANY DIFFERENCE AS ALL THE COMPONENTS OF CREDIT BALANCES DO NOT BEAR A NY COST IN THE FORM OF INTEREST. THEREFORE, NON INTEREST BEARING FUNDS HAS TO BE COM PARED WITH THE NON INTEREST BEARING INVESTMENTS FOR THE PURPOSES OF CALCULATION OF AVAILABILITY OF NET NON INTEREST HEARING FUNDS. THE LD. CIT(A) HAS RELIED O N A NUMBER OF CASE LAWS, FOR THE PROPOSITION THAT WHERE THE AVAILABILITY OF NON INTE REST BEARING FUNDS IS MORE THAN NON INTEREST BEARING INVESTMENTS THE DISALLOWANCE U /S 36(1)(III) CANNOT BE MADE. THE REVENUE IS AGGRIEVED THAT LD. CIT(A) HAD IGNORE D THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES LTD. (SUPRA). HOWEVER, WE FIND THAT THE DECISION OF ABHISHEK INDU STRIES LTD. (SUPRA) HAS BEEN OVERRULED BY THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. VS. CIT (CENTRAL), LUDHIANA REPORTED IN 379 IT R 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 BALANCE IN THE BANK ACCOUNT ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 10 WHEN THE SAID ADVANCE OF RS.34 LAKHS WAS GIVEN. REM ARKABLY, AS OBSERVED BY THE CIT(APPEAL) IN HIS ORDER, THE COMPANY HAD RE SERVE/SURPLUS TO THE TUNE OF ALMOST 15 CRORES AND THEREFORE, THE ASSESSE E COMPANY COULD IN ANY CASE, UTILIZE THOSE FUNDS FOR GIVING ADVANCE TO ITS DIRECTORS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE JUDICIAL PRECEDENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CI T(A) AND THEREFORE, THE APPEAL FILED BY REVENUE IS DISMISSED. THE INVESTMENT IN THE FORM OF SHARE APPLICATION MO NEY TO THE TUNE OF RS. 423412328/- IS PART OF THE ORIGINAL INVESTMENT AS O N 31.03.2010 WHICH WAS TO THE TUNE OF RS. 723815998/- THEREFORE ONE FACT IS C LEAR THAT THE DISALLOWANCE OF INTEREST U/S 36(1)(III) HAS ALREADY BEEN CONSIDERED DURING ASSESSMENT YEAR 2010- 11 AND THE APPEAL HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE FACT THAT THE AMOUNT OUTSTANDING AS ON THE CLOSE OF THE YEAR UNDE R CONSIDERATION IS PART OF ORIGINAL INVESTMENT AS ON 31.03.2010 ALSO BECOMES A PPARENT FROM THE BREAKUP OF INVESTMENT IN THESE COMPANIES WHICH IS PLACED AT P.B. PAGE 6 AND WHICH FOR THE SAKE OF COMPLETENESS IS REPRODUCED BELOW: M/S. MODEM PUBLISHERS MBD HOUSE, RAILWAY ROAD, JALANDHAR PAN: AARFM5313R DETAIL OF SHARE APPLICATION MONEY PAID SR. NO. PARTICULARS BALANCE AS ON 31-03- 2011 (01/04/201 0 TO 31/03/2011 ) BALANCE AS ON 31-03- 2012 (01/04/20 11 TO 31/03/20 12) BALANCE AS ON 31-03- 2015 (01/04/20 14 TO 31/03/20 15) REMARKS 1. M. GULAB SINGH & SONS PVT. LTD. (SHARES 1,646,700 - - AMOUNT OF RS. 1 I,46;700/- TRANSFER TO PARTNER'S CAPITAL ACCOUNT DURING FY 2011-12 AS THE ORIGINAL INVESTMENT MAD* BY SH. ASHOK KUMAR MALHOTRA (IND). (DECEASED) PROP, OF M/S. MODERN PUBLISHERS 2. BRIGHT ENTERPRISES PVT. LTD. 115,389,332 115,389,33 2 - AMOUNT RECEIVED BACK 3. AKM ENTERPRISES PVT LTD. 197,329,970 138,310,00 0 - SHARES ALLOTTED DURING THE FY 2014-15 FOR RS. 14,22,04,920/- (SHARE ALLOTMENT EVIDENCES ENCLOSED) ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 11 4. MBD ALCHEMIE PVT LTD. 66,721,996 66,721,996 - AMOUNT RECEIVED BACK 5. SHARP ENTERPRISES PVT LTD. 127,421,000 40,951,000 - AMOUNT OF RS. 9 ,S6,00,II00/-TRANSFER TO PARTNER'S CAPITAL ACCOUNT DURING FY 2011-12 AS THE ORIGINAL INVESTMENT MADE BY SH. ASHOK KUMAR MALHOTRA (IND). (DECEASED) PROP, OF M/S. MODERN PUBLISHERS AND FURTHER SHARES ALLOTTED IN THE FY 2014-15 FOR RS4,85,20,400/- (SHARE ALLOTMENT EVIDENCES ENCLOSED) 6. OXBRIDGE INTERNATION AL PVT LTD. 750,000 - - AMOUNT OF RS. 7,50,000/- TRANSFER TO PARTNER'S CAPITAL ACCOUNT DURING FY 2011-12 AS THE ORIGINAL INVESTMENT MADE BY SH. ASHOK KUMAR MALHOTRA (IND). (DECEASED) PROP, OF M/S. MODERN PUBLISHER: 7. HOLYFAITH INTERNATION AL PVT LTD. 58 , 500,000 58 , 500,000 - AMOUNT RECEIVED BACK 8. DOVE IMPEX INDIA PVT. LTD. 6,800,000 3,540,000 - AMOUNT RECEIVED BA CK TOTAL 574,558,998 423,412,3 28 - NOW THERE IS NO INVESTMENT MADE DURING THE YEAR AN D THE INVESTMENT MADE IN EARLIER YEARS HAS ALREADY BEEN HELD TO BE O UT OF NON INTEREST BEARING FUNDS, THEREFORE, THE ACTION OF THE AUTHORITIES BEL OW IN MAKING THE DISALLOWANCE AND SUSTAINING THE SAME IS NOT JUSTIFIED, IN VIEW O F THE JUDGMENT OF AMRITSAR BENCH OF THE TRIBUNAL IN ITA NO.571(ASR)/2013 THE C ASE OF ITO VS. EURO INFRASTRUCTURE & POWER LTD. VIDE ORDER DATED 26.03. 2015, WHEREIN IT HAS BEEN HELD THAT NO DISALLOWANCE U/S 36(1)(III) CAN BE MAD E FOR ADVANCES WHICH WERE NOT MADE DURING THE YEAR. THE FINDINGS OF HON'BLE TRIBU NAL IN ITA NO. 571/ASR/2013 ARE REPRODUCED BELOW: 38. AS REGARDS GROUND NO.L (II) IN THE CASE OF M/S . EURO INFRASTRUCTURE & POWER LTD, IN ITA NO.571(ASR)/2013 FOR THE ASSESSMENT YEA R 2010-11, REGARD TO CHARGING OF INTEREST FROM DEBTORS. THE FACTS ARE THAT THE AO MADE AN ADDITION OF RS.6,60,000/- ON ACCOUNT OF NON CHARGING OF INTERES T FROM DEBTORS TO WHOM NO FRESH ADVANCES HAVE BEEN MADE DURING THE ASSESSMENT YEAR 2009-10 AND THERE IS ONLY OPENING BROUGHT FORWARD DEBIT BALANCE. IT HAS BEEN ADMITTED BY THE AO THAT NO FRESH ADVANCES HAVE BEEN GIVEN TO DEBTORS DURING TH E A.Y. 2009-10 AND THERE IS ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 12 OPENING BROUGHT FORWARD DEBIT BALANCE OF RS.50,00,0 00/- ON 01.04.2009 IN THE ACCOUNT OF SH. PARIKEY GARG AND RS.5,00,000/- IN TH E ACCOUNT OF M/S. RAM KUMAR BANSAL, WHICH HAS BEEN CARRIED FORWARD AS ON 31.03. 2010. 39. THE ID. CIT(A) ON CONSIDERING THE SUBMISSIONS M ADE BEFORE HIM HAS DELETED THE ADDITION, SINCE NO ADVANCE HAS BEEN MADE DURING THE YEAR AND IT WAS ONLY BROUGHT FORWARD DEBIT BALANCE OUTSTANDING IN THE BO OKS OF ACCOUNT OF THE DEBTORS. 40. AFTER HEARING THE PARTIES, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), SINCE NO ADVANCE HAS BEEN MADE DURING THE YEAR AND AS SUCH NO ADDITION CAN BE MADE. THUS, THE GROUND OF THE REVENUE IS DISMISSED ACCORDINGLY. THE ABOVE SAID DECISION OF HON'BLE AMIRTSAR BENCH H AS BEEN FOLLOWED BY AMRITSAR BENCH IN THE CASE OF AJAY ELECTRONIC VS. I NCOME TAX OFFICER VIDE ITS ORDER DATED 15.09.2016 REPORTED IN 52 ITR (TRIB) 33 2. THEREFORE, THE DISALLOWANCE U/S 36(1)(III) WAS NOT WARRANTED AS TH E INVESTMENTS WERE MADE IN EARLIER YEARS AND NO INVESTMENT WAS MADE DURING THE YEAR. EVEN OTHERWISE THE ASSESSEE HAS MADE INVESTMENTS I N THE GROUP COMPANIES TO CONTROL THE MANAGEMENT OF THESE COMPAN IES WHICH FACT IS APPARENT FROM P.B. PAGE 9 AND 10 WHEREIN THE LIST OF SHARE H OLDERS IN THE INVESTEE COMPANIES ALONGWITH LIST OF PARTNERS OF THE ASSESSE E FIRM IS PLACED AND WHICH FOR THE SAKE OF COMPLETENESS IS REPRODUCED BELOW: MODERN PUBLISHERS ITA NO. 62/ASR - 2016 A.Y. 2012 - 13 MODERN PUBLISHERS LIST OF PARTNERS AS ON 31.03.2012 PARTICULARS PROFIT SHARING RATIO SMT. SATISH BALA MALHOTRA 44.00% MS. SONICA MALHOTRA 28.00% MS. MONICA MALHOTRA 28.00% TOTAL - 100.00% ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 13 MBD A LCHEMIE PRIVATE LIMITED . LIST OF SHARE HOLDE RS AS ON 31.03.2012 PARTICULARS NO. OF EQUITY SHARES HOLDING (%) SMT. SATISH BALA MALHOTRA 442 44.02% MS. SONICA MALHOTFA 281 27.99% MS. MONICA MALHOTRA 281 27.99% TOTAL 1,004 100.00% SHARP ENTERPRISES PVT. LTD LIST OF SHARE HOLDERS AS ON 31.03.2012 PARTICULARS NO. OF EQUITY SHARES HOLDING (%) SMT. SATISH BALA MALHOTRA 442 44.07% MS. SONICA MALHOTRA 280 27.92% MS. MONICA MALHOTRA 281 28.02% T OTAL 1,00 3 100.00% M.GULAB SINGH & SONS PVT. LTD LIST OF SHARE HOLDERS AS ON 31.03.2012 PARTICULARS NO. OF EQUITY SHARES HOLDING (%) SMT. SATISH BALA MALHOTRA 3,679 53.85% MS. SONICA MALHOTRA 1,104 16.16% MS. MONICA MALHOTRA 1,104 16.16% MBD ENTERPRISES PRIVATE LIMITED 945 13.83% TOTAL 6,832 100.00% AIC M ENTERPRISES PRIVATE LIMITED LIST OF SHARE HOLDERS AS ON 31.03.2012 PARTICULARS NO. OF EQUITY SHARES HOLDING (%) SMT. SATISH BALA MALHOTRA 880,000 44.00% MS. SONICA MALHOTRA 560,000 28.00% MS. MONICA MALHOTRA 560,000 28.00% TOTAL ' 2,000,000 100.00% BRIGHT ENTERPRISES PRIVATE LIMITED LIST OF SHARE HOLDERS AS ON 31.03.2012 PARTICULARS NO. OF EQUITY SHARES HOLDING (%) SMT. SATISH BALA MALHOTRA 1,746,203 43.66% MS. SONICA MALHOTRA 1,126,899 28.17% MS. MONICA MALHOTRA 1,126,898 28.17% TOTAL 4,000,000 100.00% OXBRIDGE INTERNA TIONAL PRIVATE LIMITED ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 14 LIST OF SHARE HOLDERS AS ON 31.03.2012 PARTICULARS NO. OF EQUITY SHARES HOLDING (%) SMT. SATISH BALA MALHOTRA 760 42.22% MS. SONICA MALHOTRA 520 28.89 % MS. MONICA MALHOTRA 520 28.89% TOTAL 1,800 100.00% HOLYFAITH INT ERNATIONAL PRIVATE LIMITED LIST OF S HARE HOLDERS AS ON 31.03.2012 PARTICULARS NO. OF EQUITY SHARES HOLDING (%) SMT. SATISH BALA MALHOTRA 26,402 44.00% MS. SONICA MALHOTRA 16,800 28.00% MS. MONICA MALHOTRA 16,800 '28.00% TOTAL 60,002 100.00% DOVE IMPEX PRIVATE LIMITED LIST OF S HARE HOLDERS AS ON 31.03.2012 PARTICULARS NO. OF EQUITY SHARES HOLDING (%) SMT. SATISH BALA MALHOTRA 69,128 71.99% MS. SONICA MALHOTRA 13,446 14.00% MS. MONICA MALHOTRA 13,446 14.00% TOTAL 96,020 100.00% SIMILARLY WE FIND THAT ALL THE THREE PARTNERS OF A SSESSEE FIRM ARE DIRECTORS IN THE INVESTEE COMPANIES WHICH FACT IS VERIFIABLE FROM THE FOLLOWING TABLES: ITA NO. 62/ASR-2016 MODERN PUBLISHERS A.Y. 2012-13 MODERN PUBLISHER LIST OF PARTNERS AS ON 31.03.2012 NAME OF PARTNERS SMT. SATISH BALA MALHOTRA ADDRESS A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A PAN AARPM7569B MS. SONICA MALHOTRA 12, SUNDER NAGAR, NEW DELHI, 110003, DELHI, INDIA AAZPM7202K MS. MONICA MALHOTRA A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A AARPM2971P SHARP ENTERPRISES PVT. LTD. LIST OF DIRECTORS AS ON 31.03.2012 NAME OF DIRECTOR SMT. SATISH BALA MALHOTRA ADDRESS A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A PAN AARPM7569B MS. SONICA MALHOTRA 12, SUNDER NAGAR, NEW DELHI, 110003, DELHI, INDIA AAZPM7202K ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 15 MS. MONICA MALHOTRA A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A AARPM2971P MBD ALCHEMIE PVT. LTD. LIST OF DIRECTORS AS ON 31.03.2012 NAME OF DIRECTOR SMT. SATISH BALA MALHOTRA ADDRESS A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A PAN AARPM7569B MS. SONICA MALHOTRA 12, SUNDER NAGAR, NEW DELHI, 110003, DELHI, INDIA . AAZPM7202K MS. MONICA MALHOTRA A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A AARPM2971P HOLYFAITH INTERNATIONAL PVT. LTD. LIST OF DIRECTORS AS ON 31.03.2012 NAME OF DIRECTOR SMT. SATISH BALA MALHOTRA ADDRESS A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A PAN AARPM7569B MS. SONICA MALHOTRA 12, SUNDER NAGAR, NEW DELHI, 110003, DELHI, INDIA AAZPM7202K MS. MONICA MALHOTRA ' A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A AARPM2971P AKM ENTERPRISES PVT. LTD. T LIST OF DIRECTORS AS ON 31.03.2012 NAME OF DIRECTOR SMT. SATISH BALA MALHOTRA ADDRESS A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A PAN AARPM7569B MS. SONICA MALHOTRA 12, SUNDER NAGAR, NEW DELHI, 110003, DELHI, INDIA AAZPM7202K MS. MONICA MALHOTRA A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A AARPM2971P BRIGHT ENTERPRISES PVT. LTD. LIST OF DIRECTORS AS ON 31.03.2012 NAME OF DIRECTOR SMT. SATISH BALA MALHOTRA ADDRESS A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A PAN AARPM7569B MS. SONICA MALHOTRA 12, SUNDER NAGAR, NEW DELHI, 110003, DELHI, INDIA AAZPM7202K MS. MONICA MALHOTRA A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A AARPM2971P M.GULAB SINGH & SONS PVT. LTD. LIST OF DIRECTORS AS ON 31.03.2012 NAME OF DIRECTOR SMT SATISH BALA MALHOTRA ADDRESS A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A PAN AARPM7569B MS. SONICA MALHOTRA 12, SUNDER NAGAR, NEW DELHI, 110003, DELHI, INDIA AAZPM7202K MS. MONICA MALHOTRA A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A AARPM2971P OXBRIDGE INTERNATIONAL PVT. LTD. LIST OF DIRECTORS AS ON 31.03.2012 ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 16 NAME OF DIRECTOR ADDRESS PAN SMT. SATISH BALA MALHOTRA A - 9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDIA AARPM7569B MS. SONICA MALHOTRA . 12, SUNDER NAGAR, NEW DELHI, 110003, DELHI, INDIA AAZPM7202K MS. MONICA MALHOTRA A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A AARPM2971P DOVE IMPEX PVT. LTD. LIST OF DIRECTORS AS ON 31.03.2012 NAME OF DIRECTOR SMT. SATISH BALA MALHOTRA ADDRESS A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A PAN AARPM7569B MS. SONICA MALHOTRA 12, SUNDER NAGAR, NEW DELHI, 110003, DELHI, INDIA AAZPM7202K MS. MONICA MALHOTRA A-9/6, VASANT VIHAR, NEW DELHI, 110057, DELHI, INDI A AARPM2971P THEREFORE THE INVESTMENT IN THE INVESTEE COMPANIES WAS MADE FOR BUSINESS EXPEDIENCY AS THE INVESTMENT IN THE INVESTEE COMPAN IES WILL AUTOMATICALLY RESULT INTO BENEFIT TO THE ASSESSEE WHO ARE SHAREHOLDERS I N THESE COMPANIES IN THE SAME RATIO AS ARE A PARTNERS IN THE ASSESSEE FIRM. THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. V S. CIT HAS HELD THAT WHERE AN ADVANCE IS MADE TO SISTER CONCERNS WHICH IS CONTROL LED 89% BY THE HOLDING COMPANY THEN THE SUCH INVESTMENT WILL BE TREATED AS FOR BUSINESS EXPEDIENCIES. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE, A FTER CONSIDERING THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. WHICH THE ASSESSING OFFICER HAS RELIED WHILE MAKING THE DISAL LOWANCE. THE RELEVANT FINDINGS OF THE HON'BLE COURT ARE REPRODUCED BELOW: THE VIEW OF THE TRIBUNAL THAT THE COMMISSIONER OF INCORNE-TAX (APPEALS) HAD NOT CONSIDERED THE DECISION OF THE SUPREME COURT IN S. A. BUILDERS LTD. V. CIT (APPEALS) (SUPRA) IN RIGHT SPIRITS AND THAT THE COMMISSIONE R OF INCOME-TAX HAD WRONGLY INTERPRETED THE JUDGMENT IS NOT WELL FOUNDED IN S. A. BUILDER V. CIT (APPEALS) (SUPRA), THE SUPREME COURT OBSERVED (PAGE 8 OF 288 ITR): 'IT IS TRUE THAT THE BORROWED AMOUNT IN QUESTION WA S NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS, BUT HAD BEEN ADVANCED AS INTEREST-FREE LOAN ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 17 TO ITS SISTER CONCERN. HOWEVER, IN OUR OPINION, THA T FACT IS NOT REALLY RELEVANT. WHAT IS RELEVANT IS WHETHER THE ASSESSEE ADVANCED S UCH AMOUNT TO ITS SISTER CONCERN AS A MEASURE, OF COMMERCIAL EXPEDIENCY.' (E MPHASIS SUPPLIED) IT IS PRECISELY THIS TEST THAT WAS APPLIED BY THE C OMMISSIONER OF INCOME-TAX THE COMMERCIAL EXPEDIENCY IN ADVANCING THE AMOUNT I S ESTABLISHED BEYOND DOUBT. THE APPELLANT OWNS ABOUT 89 PER CENT OF THE EQUITY CAPITAL. A DIVISION BENCH OF THIS COURT IN CIT V. MARUDHAR CHEMICALS AND PHARMACEUTIC ALS (P.) LTC/.'[2009] 319 ITR75 (P&H-) HELD (PAGE 81): 'SECTION 36(1 )(III) OF THEIACT PROVIDES THAJ THE A MOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION HAS TO BE ALLOWED AS A DEDUCTION IN COMPUTING THE I NCOME UNDER SECTION 28 OF THE ACT. THE EXPRESSION FOR THE PURPOSE OF BUSIN ESS HAS BEEN HELD TO BE WIDER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING INCOME, PROFITS OR GAINS. IT HAS BEEN HELD IN SA. BUILDERS LTD.'S C ASE (SUPRA) THAT WHEN THE ASSESSEE BORROWED THE FUND FROM THE BANK AND LENT S OME OF IT [TO ITS SISTER CONCERN AS AN INTEREST-FREE LOAN, THEN THE REAL TES T TO ALLOW THE INTEREST AS DEDUCTION UNDER SECTION 36(1 )(III) OF THE ACT IS W HETHER 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 E XPENDED, NOT ON NECESSITY AND WITH A VIEW TO DIRECT AND IMMEDIATE BENEFIT, BU T VOLUNTARILY AND ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND IN ORDER TO IN DIRECTLY TO FACILITATE THE CARRYING ON THE BUSINESS. THE EXPRESSION COMMERCI AL EXPEDIENCY IS AN EXPRESSION OF WIDE IMPORTS AND INCLUDES SUCH EXPEND ITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE .EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION, BUT YET [IT IS ALLOWABLE AS BUSINESS EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. IN S. A. BUILDERS LTD.'S CASE (SUPRA), IT WAS HELD THAT IN ORDER TO DECIDE WHETHER IT WAS FOR COMMERCIAL EXPEDIENCY, TH E AUTHORITIES AND THE COURTS SHOULD HAVE EXAMINED THE PURPOSE FOR WHICH T HE ASSESSEE ADVANCED MONEY TO ITS SISTER CONCERN AND WHAT THE SISTER CON CERN DID WITH THE MONEY. IT WAS FURTHER HELD THAT IT IS NOT RELEVANT WHETHER THE ASSESSEE HAS UTILIZED THE BORROWED AMOUNT IN ITS OWN BUSINESS OR HAS ADVA NCED THE SAME AS INTEREST-FREE LOAN TP ITS SISTER CONCERN. WHAT IS R ELEVANT IS WHETHER THE AMOUNT, SO ADVANCED WAS AS A MEASURE OF COMMERCIAL EXPEDIENCY OR NOT. IT IS NOT NECESSARY THAT THE AMOUNT SO ADVANCED IS EAR NING PROFIT OR HOT BUT THERE MUST BE SOME NEXUS BETWEEN EXPENSES AND THE P URPOSE OF BUSINESS.' IT IS IMPORTANT: TO NOTE THAT THE DIVISION BENCH IN ARRIVING AT ITS CONCLUSION FOLLOWED THE JUDGMENT OF THE SUPREME COURT IN S. A. BUILDER S LTD. V. HIT (APPEALS), (SUPRA). THE DIVISION BENCH, IN FACT, AFTER REMANDING THE MA TTER, EXPRESSLY DIRECTED THE TRIBUNAL TO CONSIDER THE: MATTER IN THE LIGHT OF TH E PRINCIPLES LAID DOWN BY THE SUPREME COURT IN S. A. BUILDERS LTD. V. GIT (APPEAL S) (SUPRA). THE APPELLANT'S CASE MEETS EACH OF THE TESTS STIPULATED BY THE DIVISION BENCH. IN FACT, IT MEETS A HIGHER TEST. WHEN A HOLDING COMPANY INVESTS AMOUNTS FOR TH E PURPOSE OF THE MUST OF NECESSITY BE HELD TO BE AN EXPENSE ON ACCOUNT OF CO MMERCIAL EXPEDIENCY. A FINANCIAL BENEFIT OF ANY NATURE DERIVED BY THE SUBS IDIARY ON ACCOUNT OF THE AMOUNTS ADVANCED TO IT BY THE HOLDING COMPANY WOULD NOT MER ELY 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 ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 18 ACCOUNT OF AN EROSION OF ITS ENTIRE INVESTMENT IN T HE SUBSIDIARY. IN THIS CASE, THE FINANCIAL WAS NOT ONLY PRUDENT BUT OF UTMOST NECESS ITY FOR WITHOUT IT THE SUBSIDIARY WOULD HAVE SUFFERED PREJUDICE. THE TRIBUNAL, THEREFORE, ERRED IN COMING TO THE CON CLUSION THAT THE (APPEALS) HAD NOT CONSIDERED THE JUDGMENT OF : THE SUPREME COURT IN THE CORRECT PERSPECTIVE. WITH IN RESPECT, WE FIND THAT THE TRIBUNAL HAS NOT EVEN ANA LYZED THE JUDGMENT BUILDERS LTD. V. CIT (APPEALS) (SUPRA). SIMILARLY, WE FIND THAT AHMEDABAD HIGH COURT IN TH E CASE OF PRAMUKH OXYGEN PVT. LTD. VS. DCIT VIDE ITS ORDER DATED 05.0 4.2016 HAS HELD AS UNDER: 14. EXAMINING THE FACTS OF THE PRESENT CASE IN TH E LIGHT OF THE PRINCIPLES PROPOUNDED IN THE ABOVE DECISIONS, THE FACTS AS EME RGING FROM THE RECORD REVEAL THAT THE ASSESSEE HAD BORROWED CAPITAL FOR THE PURP OSE OF ACQUIRING SHARES OF AKSHAR P. LTD., A SISTER CONCERN, AS IT INTENDED TO ACQUIRE THE CONTROLLING INTEREST IN THE SAID COMPANY TO EXPAND ITS BUSINESS OPERATION T HROUGH SUCH INVESTMENTS. SUCH AMOUNT WAS DIRECTLY PAID BY THE BARODA PEOPLES' CO. OP. BANK LTD., BARODA TO THE SISTER CONCERN. THE SHARE APPLICATION MONEY WAS KEP T LYING WITH AKSHAR P. LTD. AND WAS RETURNED WITHOUT ALLOTMENT OF SHARES AS DUE TO THE RECESSION IN THE MARKET AND OTHER UNFAVOURABLE MARKET CONDITIONS, THE SISTE R CONCERN COULD NOT EXPAND ITS BUSINESS OF SETTING UP A PROJECT AT DAMAN. THUS, TH E PURPOSE BEHIND BORROWING THE CAPITAL WAS FOR ACQUIRING SHARES FOR THE PURPOSE OF GAINING A CONTROLLING INTEREST IN THE SISTER CONCERN AND EXPANDING THE BUSINESS OF TH E ASSESSEE. EVIDENTLY THEREFORE, THE BASIC REQUIREMENT OF SECTION 36(1)(III) OF THE ACT STANDS SATISFIED, INASMUCH, THE ASSESSEE HAS BORROWED CAPITAL FOR THE PURPOSE OF BU SINESS AND HAD PAID INTEREST ON THE BORROWED AMOUNT. AS HELD BY THE SUPREME COUR T IN THE ABOVE REFERRED DECISIONS ALL THAT IS GERMANE IS WHETHER THE BORROW ING WAS OR WAS NOT FOR THE PURPOSE OF BUSINESS. ON THE FACTS AS EMERGING FROM THE RECORD, HAVING REGARD TO THE INTENTION OF THE ASSESSEE OF ACQUISITION OF SHARES OF THE ASSOCIATE CONCERN FOR THE PURPOSE OF GAINING CONTROLLING INTEREST THEREIN TO EXPAND ITS OWN BUSINESS, IT CAN NOT BE SAID THAT THE AMOUNT ADVANCED WAS NOT FOR TH E PURPOSE OF ITS BUSINESS. MERELY BECAUSE ULTIMATELY SUCH SHARES COULD NOT BE ACQUIRED FOR THE REASONS STATED HEREINABOVE, WOULD NOT DETRACT FROM THE FACT THAT THE AMOUNT HAD BEEN BORROWED FOR THE PURPOSE OF BUSINESS. WHEN FUNDS AR E INVESTED FOR BUSINESS PURPOSES, THERE CAN BE NO GUARANTEE THAT THE PURPOS E WOULD BE ACHIEVED. WHAT HAS TO BE LOOKED INTO IS WHETHER THE FUNDS WERE EXP ENDED AS A MEASURE OF COMMERCIAL EXPEDIENCY, WHICH INCLUDES SUCH EXPENDIT URE WHICH IS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. ONC E IT IS ESTABLISHED THAT THERE WAS A NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS, THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF THE BUSINESSMAN AND ASSUME THE ROLE REASONABLENESS OF SUCH EXPENDITURE. IN THE FACTS AN D CIRCUMSTANCES NARRATED HEREINABOVE, THE COURT IS OF THE VIEW THAT THE AMOU NT IN QUESTION HAVING BEEN BORROWED FOR THE PURPOSES OF ITS BUSINESS, THE REQU IREMENTS OF SECTION 36(1)(III) OF THE ACT STAND SATISFIED AND THE ASSESSEE WAS ENTITL ED TO DEDUCTION OF THE INTEREST PAID ON SUCH BORROWED FUNDS NOTWITHSTANDING THE FAC T THAT ULTIMATELY, THE PURPOSE FOR WHICH THE CAPITAL WAS BORROWED WAS NOT SERVED A ND THE SHARES WERE NOT ACTUALLY ALLOTTED TO THE ASSESSEE. ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 19 MOREOVER WE FIND THAT HON'BLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF SMT. SATISH BALA LEGAL HEIR OF ASHOK MALHOTRA VIDE ITS ORDER DATED 17.04.2017 HAS UPHELD THE ORDER OF HON'BLE AMRITSAR BENCH AND HAS DISMISSED THE APPEAL OF REVENUE BY REPRODUCING THE FINDINGS OF HON'BLE TRIB UNAL. 13. WE FURTHER FIND THE ASSESSEE IS A SOLE PROPRIE TOR OF M/S MODERN PUBLISHERS AND IS ALSO A MAJORITY SHAREHOLDERS IN T HE COMPANIES IN WHICH INTEREST FREE INVESTMENTS HAVE BEEN MADE. PAPER BOO K PAGE 12 IS THE LIST OF COMPANIES IN WHICH THE ASSESSEE IS HOLDING A MAJOR CHUNK OF SHARES. THE REST OF THE SHARES ARE ALSO HELD BY OTHER FAMILY ME MBERS OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE THE CHART SHOWING SHARE HOLDING OF ASSESSEE IN THE COMPANIES HAS BEEN MADE PART OF THIS ORDER. THEREFORE, FROM THE ABOVE CHART, IT CAN BE SAFELY CONCLUDED THAT ASSESSEE IS A MAJOR SHARE HOLDER AND THEREFORE THE ADVANCE/INVESTMENTS MADE B Y ASSESSEE IN THESE COMPANIES CANNOT BE SAID TO BE WITHOUT COMMERCIAL EXPEDIENCY. THERE WOULD BE A DIRECT BENEFIT TO THE ASSESSEE IF THE INTEREST FREE INVESTMENTS MADE IN T HESE COMPANIES RESULTS INTO MORE PROFITS TO THESE COMPANIES AND INDIRECTLY TO THE ASSESSEE. 5. LEARNED COUNSEL FOR THE APPELLANT HAS NOT BEE N ABLE TO SHOW THAT THE FINDINGS RECORDED BY THE TRIBUNAL ARE ILLEGAL OR PERVERSE WARRANTING INTERFERENCE BY THIS COURT. FURTHER, IT WAS NOT DISPUTED BY LEARNED COUNSEL FOR THE REVENUE THAT SIMILAR ISSUE HAS ALREADY BEEN ADJUDICATED BY THIS COURT AGAINST THE REVENUE IN IT A NO.31 OF 2017 ( THE PR. COMMISSIONER OF INCOME TAX (CENTRAL) LUDHIANA VS. M /S MALHOTRA BOOK DEPOT, MBD HOUSE, RAILWAY ROAD, JALANDHAR), DECIDED ON 23.2.2017. THUS NO SUBSTANTIAL QUESTION OF LAW ARISES. CONSEQUENTLY, THE APPEAL STANDS DISMISS ED. FURTHERMORE, WE FIND THAT OVERDRAFT LIMITS TAKEN BY ASSESSEE AGAINST THE PLEDGE OF FIXED DEPOSITS CONTINUED TO BE ENJOYED BY THE ASSESSEE AND ON THIS OVERDRAFT LIMIT THE ASSESSEE HAD PAID INTEREST AND WHICH THE ASSESSING OFFICER HAD DISALLOWED. WE FIND THAT OVERDRAFT LIMITS WERE BEING ENJOYED BY THE ASSESSEE IN THE EARLIER YEARS FOR THE PURPOSE OF BUSINESS AN D FOR WHICH DISALLOWANCE IN EARLIER YEARS HAS BEEN DELETED. THE ASSESSEE CONTIN UED TO UTILIZE OVERDRAFT LIMITS AS IT WAS NOT POSSIBLE FOR THE ASSESSEE TO CLOSE TH E OVERDRAFT LIMITS AND THEREFORE, ALSO THE FIXED DEPOSITS WERE PLEDGED FOR CONTINUATI ON OF THESE FACILITIES AND FROM ITA NO. 62(ASR)/2016 ASSESSMENT YEAR: 2012-13 20 THIS ANGLE ALSO THERE EXISTED BUSINESS EXPEDIENCES, IN PAYING INTEREST TO THE BANK. IN VIEW OF THESE FACTS AND CIRCUMSTANCES AND JUDICI AL PRECEDENTS, WE HOLD THAT DISALLOWANCE U/S 36(I)(III) WAS NOT WARRANTED AND THEREFORE, WE ALLOW GROUNDS NO 1 TO 3, GROUND NO. 4 HAS ALREADY BEEN DI SMISSED AS WITHDRAWN. 7. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24. 10.2017. SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24.10.2017. /GP/SR. 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