M/.s Baba Rayon Fabrics Pvt. Ltd., Surat V. The Income tax Officer, Ward-1(1), Surat

ITA 713/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63274 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-11-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 05-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: R N VEPARI
• Keywords: Business expenditure; Proportionate interest; Commercial expediency
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD D BENCH BEFORE: SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI ANIL CHATURVEDI, ACCOUNTANT ME MBER I.T.A. NO.713/AHD/2010 A. Y. 2001-02 BABA RAYON FABRICS PVT. LTD. 206-207, ZUBER CHAMBERS, SALABATPURA, SURAT PAN-AAACB9124D APPELLANT VS. THE INCOME TAX OFFICER, WARD-1(1), SURAT RESPONDENT DEPARTMENT BY : SHRI T. SANKAR, SR. D.R. ASSESSEE BY : SHRI R.N. VEPARI, A.R. DATE OF HEARING : 27.11.2012 DATE OF PRONOUNCEMENT 28.12.2012 / ORDER PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A)-1, SURAT DATED 27.01.2010. 2. THE FACTS AS CULLED OUT FROM THE ORDERS ARE AS U NDER:- ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF T RADING OF YARN AND HIGH SEAS SALES OF YARN. IT FILED ITS RETURN O F INCOME ON 30.10.2001 DECLARING TOTAL INCOME OF RS.76800/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 27.02.2004 AND THE INCOME WAS ASSESSED AT RS.192379 5/-. ASSESSEE BEING AGGRIEVED BY THE ORDER OF A.O. CARRIED THE MA TTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 27.01.2010 DISMISSED THE AP PEAL OF THE ASSESSEE. AGAINST THE AFORESAID ORDER OF CIT(A) THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE R EADS AS UNDER:- I.T.A. NO.713/AHD/2010 A. Y. 2001-02 2 (I) DISALLOWANCE OF COMMISSION:- (1) THE LD. CIT(A) ERRED IN CONFIRMING A SUM OF RS.17,20,403/- IN RESPECT OF COMMISSION WHEN THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF THE BUSINESS. (2) THE APPELLANT SUBMITS THAT THE LD. CIT(A) HAS NOT PROPERLY CONSTRUED THE FACTS AND EVIDENCE PLACED BEFORE HIM. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE IS REQUIRED TO BE DELETED. (II) DISALLOWANCE OF INTEREST:- (1) THE LD. CIT(A) ERRED IN DISALLOWING A SUM OF RS.79,692/- OUT OF INTEREST OF RS.5,57,130/- WHEN THE BORROWED FUNDS WERE NOT UTILIZED FOR GIVING ADVANCE TO MOTILAL SYNTHETICS AND EVIDENCE THEREOF OUGHT TO HAVE BEEN TAKEN INTO CONSIDERATION. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE HAS BEEN WRONGLY MADE AND IS REQUIRED TO BE DELETED. (III)MISCELLANEOUS:- (1) THE LD. CIT(A) ERRED IN NOT CONSIDERING CHARGE OF INTEREST U/S 234B OF THE ACT. 3. 1 ST GROUND: ADDITION OF RS.17,20,403/- ON ACCOUNT OF C OMMISSION:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON PERU SAL OF THE AUDIT REPORT AND OTHER DETAILS, AO NOTICED THAT ASSESSEE HAD MAD E PAYMENT OF RS.1720403/- TO A FIRM (M/S MOTILON SYNTHETICS), HA VING 3 PARTNERS WHEREIN THE DIRECTORS OF THE ASSESSEE COMPANY WAS H AVING SUBSTANTIAL INTEREST AND THEREFORE ACCORDING TO A.O. THE PAYMEN T WAS COVERED U/S 40A(2)(B). ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF PAYMENT AND ITS JUSTIFICATION. ASSESSEE SUBMITTED THAT THE PAYMENT WAS TOWARDS BROKERAGE AS SELLING AGENT AND WAS INCURRED FOR THE PURPOSE O F BUSINESS. IT ALSO SUBMITTED CERTAIN OTHER DETAILS INCLUDING THE RESOL UTION PASSED BY THE I.T.A. NO.713/AHD/2010 A. Y. 2001-02 3 BOARD OF DIRECTORS IN ITS SUPPORT. THE SUBMISSIONS WERE NOT FOUND ACCEPTABLE TO THE A.O. A.O. WAS OF THE VIEW THAT M ERE PASSING OF THE RESOLUTION BY THE ASSESSEE CANNOT BE CONSIDERED TO BE A JUSTIFICATION FOR MAKING THE PAYMENT TO SISTER CONCERN AND THEREFORE FOR THE PURPOSE OF BUSINESS. HE FURTHER OBSERVED THAT M/S MOTILON SYNT HETICS DID NOT ENGAGE ITSELF IN ANY ACTIVITY OTHER THAN THE ALLEGED HIGH SEAS SALES AND HAD NO OTHER INCOME EXCEPT THE INCOME FROM THE ASSESSEE WH ICH PROVES THAT THE SISTER CONCERN HAD NO EXPERIENCE AS REGARDS THE HIG H SEAS SALES AND THEREFORE THE PAYMENT OF COMMISSION WAS WHOLLY UNJU STIFIED. HE FURTHER HELD THAT ALL EFFORTS OF HIGH SEAS SALES WERE IN FA CT MADE BY THE ASSESSEE HIMSELF. HE FURTHER CONCLUDED THAT NO SERVICE WAS R ENDERED BY MOTILON SYNTHETICS AND THE PAYMENT WAS PURELY FOR EXTRA COM MERCIAL CONSIDERATIONS. HE FURTHER OBSERVED THAT IN THE PRE CEDING YEAR (F.Y.1999- 2000) AND IN SUBSEQUENT FINANCIAL YEAR (F.Y. 2001-0 2) ASSESSEE HAD NOT SHOWN ANY PAYMENT BY WAY OF COMMISSION TO MOTILON S YNTHETICS. HE THUS HELD THAT THE PAYMENT OF COMMISSION OF RS.1720403/- SHOWN AS BUSINESS EXPENDITURE DID NOT SATISFY THE TEST OF COMMERCIAL EXPEDIENCY AND THEREFORE IT CANNOT BE ALLOWED AS PERMISSIBLE DEDUC TION. AGGRIEVED BY THE ACTION OF AO, ASSESSEE PREFERRED APPEAL BEFORE CIT( A). CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AGAINST WHICH THE ASSESS EE PREFERRED APPEAL BEFORE HON'BLE ITAT. ITAT VIDE ORDER DATED 12.8.200 9 (ITA NO 2266/AHD/2004) SET ASIDE THE MATTER BACK TO THE FIL E OF CIT(A) TO PASS A REASONED ORDER. PURSUANT TO THE DIRECTION OF HON'BL E ITAT, CIT(A) VIDE ORDER DATED 27.1.2012 DISMISSED THE GROUND OF ASSES SEE BY HOLDING AS UNDER: I.T.A. NO.713/AHD/2010 A. Y. 2001-02 4 3.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE A.O. I HAVE PERUSED THR OUGH COPIES OF SUBMISSION GIVEN BY THE APPELLANT BEFORE THE A.O . FROM TIME TO TIME AS WELL AS THE COPIES OF ANNEXURES ENCLOSED WITH THEM. FROM THE SUBMISSION AND THE ANNEXURES ATTACHED, IT IS CLEAR THAT THE APPELLANT HAS ONLY GIVEN COPIES OF BILLS A ND COPIES OF CREDIT NOTES, COPIES OF DEBIT NOTES, COPY OF LEDGER ACCOUNT AND COPY OF RESOLUTION OF BOARD OF DIRECTORS. THERE IS NOT A SINGLE DOCUMENT OR EVIDENCE WHICH SHOWS THAT M/S MOTILON S YNTHETICS HAD RENDERED ANY SERVICES AT ALL. THERE IS NOTHING ON RECORD TO SHOW ANY EFFORT THAT MIGHT HAVE BEEN MADE TO ENSURE THE SAFETY OF PAYMENTS. IN VIEW OF THIS REASON, I AGRE E WITH THE A.O. THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LACHIMINARAYAN MADAN LAL (SUPRA) AND SWADES HI COTTON MILLS LTD. (SUPRA) ARE SQUARELY APPLICABLE. THE HONBLE SUPREME COURT IN BOTH THE CASES HAVE CLEARLY STATE D THAT MERE EXISTENCE OF AN AGREEMENT WITH SELLING AGENTS OR PAYMENT OF COMMISSION DOES NOT PROVE THAT SERVICES ARE RENDERED AND THAT THE PAYMENT IS WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS. THIS PROVES THAT THE SERV ICES WERE NOT RENDERED AND THE PAYMENT WAS NOT WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF BUSINESS. AS IS CLEAR FROM THE ABOVE DISCUSSION, IN THE ABSENCE OF ANY DOCUMENTARY EVIDE NCE FOR THE EXISTENCE OF ANY SERVICES EITHER IN RESPECT OF SALES OR IN RESPECT OF INTRODUCTION OF NEW PARTIES OR IN RESPEC T OF SECURING OF PAYMENTS, THE AGREEMENT MADE BY THE ASSESSEE COM PANY IS NOT FOR THE PURPOSE OF BUSINESS. THIS BECOMES MORE CLEAR WHEN IT IS SEEN THAT THE DIRECTORS OF THE ASSESSEE COMPANY ARE ALSO PARTNERS OF THE SELLING AGENCY FIRM, M/S MOTIL ON SYNTHETICS. FURTHER, IT IS CLEARLY ADMITTED BY THE APPELLANT THAT M/S MOTILON SYNTHETICS HAS NO EXPERIENCE BECAUSE TH E APPELLANT HAS GIVEN DETAILS OF COMMISSION SUBSEQUEN TLY EARNED BY M/S MOTILON SYNTHTICS, BUT HAS NOT GIVEN ANY DET AILS OF COMMISSION EARNED BY M/S MOTILON SYNTHETICS PRIOR T O THE DATE ON WHICH IT WAS APPOINTED AS SELLING AGENT. THIS A LSO SHOWS THAT THE ENTIRE PAYMENT WAS NOTHING BUT A DEVICE TO EVADE THE TAX. IN VIEW OF THE ABOVE REASONS, THE DISALLOWANC E MADE BY THE A.O. IS UPHELD AND THIS GROUND OF APPEAL IS DIS MISSED. AGAINST THE AFORESAID ORDER OF CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 4. BEFORE US, THE LD. A.R. SUBMITTED THAT THE ASSES SEE HAD PAID COMMISSION AT THE RATE OF RS.0.50 PER KG ON HIGH SE AS SALES TO MOTILON SYNTHETICS. HE POINTED OUT THAT IN THE YEAR PRECEDI NG AND SUCCEEDING THE I.T.A. NO.713/AHD/2010 A. Y. 2001-02 5 PRESENT ASSESSMENT YEAR, NO COMMISSION WAS PAID TO MOTILON SYNTHETICS WHICH HAD RESULTED IN FALL IN TURNOVER WHICH GOES T O PROVE THAT ONLY BECAUSE OF THE UTILISIATION OF SERVICES OF MOTILON, THE ASSESSEE COULD INCREASE ITS SALES. HE FURTHER SUBMITTED THAT FOR Y EAR ENDING 31 ST MARCH 2002 AND 2003, MOTILON HAS EARNED COMMISSION FROM O THER PARTIES WHICH PROVES THAT IT HAD THE CAPACITY TO ACT AS BROKERS. HE POINTED AT PAGE 8 OF THE PAPER BOOK THE TURNOVER OF ASSESSEE AND COMMISS ION INCOME OF MOTILON. HE THUS SUBMITTED THAT THE DISALLOWANCE U/ S 40A(2) CANNOT BE MADE AS THE REQUIRED CONDITIONS HAVE BEEN SATISFIED BY THE ASSESSEE (NAMELY LEGITIMATE BUSINESS, BENEFIT DERIVED IN FOR M OF INCREASE IN SALES). HE PLACED COPIES OF THE CORRESPONDENCE ENTERED BETW EEN THE ASSESSEE AND MOTILON SYNTHETICS AND LETTERS EXCHANGED BETWEEN MO TILON SYNTHETICS AND THE CUSTOMERS (PAGE 38 TO 57 OF PAPER BOOK). HE FURTHER SUBMITTED THAT THE DECISIONS RELIED BY THE AO ARE DISTINGUISHABLE ON FACTS AND THEREFORE CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. HE THUS URGED THAT THE DISALLOWANCE MADE BY AO BE DELETED. 5. ON THE OTHER HAND THE LD. D.R. POINTED OUT TO TH E LETTERS WRITTEN BY THE PARTIES TO MOTILON SYNTHETICS (AT PAGE 52 TO 57 OF PAPER BOOK). HE POINTED TO THE FACT THAT THE LETTER HEADS OF THE PA RTNERS ONLY HAS THE NAME AND THEIR ADDRESSES. THE OTHER DETAILS LIKE THE PHO NE NUMBERS, FAX NOS, SALES TAX NOS. ETC ARE NOT INDICATED AND THEREFORE THEIR IDENTITY COULD NOT BE PROVED. HE THUS SUPPORTED THE ORDER OF AO AND CI T. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACTUAL POSITION IS THAT THE ASSESSEE H AS PAID COMMISSION OF RS.1704203 (@ RS.0.50%) FOR HIGH SEAS SALES TO A FI RM IN WHICH THE I.T.A. NO.713/AHD/2010 A. Y. 2001-02 6 DIRECTORS HOLD SUBSTANTIAL INTEREST. THE PAYMENT HA S BEEN DISALLOWED BY AO BY INVOKING THE PROVISIONS OF S. 40A(2B) OF THE ACT . WHILE UPHOLDING THE ADDITION, CIT(A) HAS INTER ALIA GIVEN FINDING THAT NO DOCUMENT HAS BEEN FURNISHED WHICH WOULD SUBSTANTIATE THE RENDERING OF SERVICE BY THE FIRM TO THE ASSESSEE OR ANY EVIDENCE TO SHOW THAT FIRMS WER E INTRODUCED BY THE FIRM OR THE SALES WERE BROUGHT IN BY THE FIRM. FROM THE SAMPLE COPIES OF CORRESPONDENCE ENTERED BY THE PARTIES WITH MOTILON IT CAN BE SEEN APART FROM THE ADDRESS OF THE PARTIES, THERE ARE NO OTHER DETAILS LIKE THEIR TELEPHONE NUMBERS, FAX NUMBERS, CST REGISTRATION NU MBERS ETC. THE LD. A.R. HAS PLACED ON RECORD THE COPY OF THE LETTER DA TED 1.4.2000 APPOINTING MOTILON SYNTHETICS AS SOLE SELLING AGENT (PLACED AT PAGE 22 OF PB). AS PER THE AFORESAID LETTER CERTAIN CONDITIONS WERE TO BE COMPLIED BY THE FIRM NAMELY TO PROCURE BUSINESS AND INTRODUCE CUSTOMERS, ACHIEVE THE TARGET OF RS.15 CRORE DURING THE CURRENT FINANCIAL YEAR WITH EXPECTED GROWTH RATE OF 10% IN SUBSEQUENT YEARS AND IT WAS TO STAND GUARANT OR FOR AMOUNTS DUE FROM PARTIES. NOTHING HAS BEEN BROUGHT ON RECORD TO PROVE THE COMPLIANCE OF THE AFORESAID CONDITIONS. THE ASSESSEE HAS PLACE D ON RECORD THE COPY OF TRADING AND PROFIT AND LOSS ACCOUNT FOR YEAR ENDED 31 ST MARCH 2001. FROM THE SCHEDULE OF THE PROFIT AND LOSS ACCOUNT IT IS S EEN THAT MOTILON HAS EARNED THE COMMISSION ONLY FROM THE ASSESSEE. IT HA S NOT EARNED ANY COMMISSION FROM ANY OTHER PARTY AND THEREFORE IT CO ULD NOT BE ESTABLISHED THAT MOTILON IS IN THE BUSINESS OF COMMISSION AGENC Y AND HAS ALSO EARNED COMMISSION FROM OTHER PARTIES. FURTHER, FROM THE SC HEDULE ATTACHED TO THE BALANCE SHEET IT IS SEEN THAT THE FIRM (MOTILON SYN THETICS) WAS HAVING BROUGHT FORWARD LOSS OF RS.38.35 LACS AND EVEN AFTE R ADJUSTING THE PROFITS I.T.A. NO.713/AHD/2010 A. Y. 2001-02 7 OF RS.21.19 LACS, THE FIRM WAS HAVING LOSSES OF RS 17.15 LACS TO BE CARRIED FORWARD. IN VIEW OF THE TOTALITY OF AFORESAID FACTS WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS WE DISM ISS THIS GROUND OF ASSESSEE. 7. 2 ND GROUND IS WITH RESPECT TO DISALLOWANCE OF INTEREST : AO NOTICED THAT ASSESSEE HAS TAKEN LOAN FROM MOTILON SYNTHETIC S (ITS SISTER CONCERN) AND PAID INTEREST OF RS.557130/-. HE ALSO NOTICED T HAT ASSESSEE HAS GIVEN INTEREST FREE ADVANCE OF RS.3850000/- TO BABA SYNTH ETICS (ALSO ITS SISTER CONCERN). THE ASSESSEE WAS ASKED TO EXPLAIN AS TO W HY THE INTEREST NOT BE DISALLOWED. AFTER CONSIDERING THE SUBMISSIONS AND M ATERIAL BEFORE HIM, AO CONCLUDED THAT THE INTEREST BEARING FUNDS WERE PASS ED ON BY THE ASSESSEE AS INTEREST FREE FUNDS ON THE NEARBY DATES OF ITS R ECEIPT AND ACCORDINGLY HE CONCLUDED THAT INTEREST BEARING FUNDS BORROWED HAVE NOT BEEN UTILISED FOR BUSINESS PURPOSES AND THEREFORE INTEREST CANNOT BE ALLOWED. HE ACCORDINGLY WORKED OUT THE PROPORTIONATE INTEREST OF RS.79692/- (CALCULATED AT MONTHLY BASIS AT 18%) AND DISALLOWED THE SAME. ASSESSEE CA RRIED THE MATTER BEFORE CIT(A) AND THEREAFTER BEFORE ITAT. ITAT VIDE ORDER DATED 12.8.2009 SET ASIDE THE MATTER TO THE FILE OF CIT(A) TO PASS A SPEAKING ORDER. PURSUANT TO THE ORDER OF ITAT, CIT(A) AFTER CONSIDE RING THE SUBMISSIONS OF ASSESSEE UPHELD THE ORDER OF AO BY HOLDING AS UNDER :- I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPEL LANT AND THE OBSERVATION OF THE A.O. THE FACT THAT THE ASSE SSEE HAS BORROWED INTEREST BEARING FUNDS FROM ITS SISTER CON CERN AND ALSO GIVEN INTEREST FREE FUNDS TO THE SISTER CONCER N ARE NOT DISPUTED. ON THESE FACTS THE POSITION OF LAW IS SE TTLED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F S.A. BUILDERS (288-ITR-1) WHEREIN THE HONBLE SUPREME CO URT STATED THAT IF THE LOAN/ADVANCE HAVE BEEN GIVEN TO THE SISTER CONCERN OR ANYONE ELSE WITHOUT CHARGING INTEREST TH EN WHAT IS IMPORTANT TO SEE IS WHETHER THE LOANS AND ADVANCES ARE GIVEN I.T.A. NO.713/AHD/2010 A. Y. 2001-02 8 ARE FOR COMMERCIAL EXPEDIENCY OR NOT. NO DISALLOWA NCE CAN BE MADE WHEN THE ASSESSEE PROVES ITS COMMERCIAL EXPEDI ENCY ON LOANS AND ADVANCES GIVEN. HOWEVER, NEITHER BEFORE THE A.O. NOR DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS BEEN ABLE TO SHOW ANY COMMERCIAL EXPEDIENCY WHEREBY IT W AS REQUIRED TO GIVE INTEREST FREE FUNDS TO M/S BABA SY NTHETICS, ITS SISTER CONCERN. IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS (288-ITR-1), IT IS CLEAR THAT WHEN THERE IS NO COMMERCIAL EXPEDIENCY THEN THE DEC ISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES [286 ITR 1] IS APPLICABLE WHEREIN THE HI GH COURT STATED AS UNDER:- WE DO NOT SUBSCRIBE TO THE OBSERVATION IN THE JUDG MENTS TO THE EFFECT THAT IF THE AMOUNT IS ADVANCED FROM A MI XED ACCOUNT OR SHARE CAPITAL OR SALE PROCEEDS OR PROFITS, ETC., THE SAME WOULD NOT BE TERMED AS DIVERSION OF BORROWED CAPITA L OR THAT THE REVENUE HAD NOT BEEN ABLE TO ESTABLISH NEXUS OF THE FUNDS ADVANCED TO THE SISTER CONCERNS WITH THE BORROWED F UNDS. ONCE IT IS BORNE OUT FROM THE RECORD THAT THE ASSES SEE HAD BORROWED CERTAIN FUNDS ON WHICH LIABILITY TO PAY TA X IS BEING ADVANCED TO SISTER CONCERNS OR OTHERS WITHOUT CARRY ING ANY INTEREST AND WITHOUT ANY BUSINESS PURPOSE, THE INTE REST TO THE EXTENT THE ADVANCE HAD BEEN MADE WITHOUT CARRYING A NY INTEREST IS TO BE DISALLOWED UNDER SECTION 36(1)(II I) OF THE ACT. SUCH BORROWINGS TO THAT EXTENT CANNOT POSSIBLY BE H ELD FOR THE PURPOSE OF BUSINESS BUT FOR SUPPLEMENTING THE CASH DIVERTED WITHOUT DERIVING ANY BENEFIT OUT OF IT. ACCORDINGL Y, THE ASSESSEE WILL NOT BE ENTITLED TO CLAIM DEDUCTION OF THE INTEREST ON THE BORROWINGS TO THE EXTENT THOSE ARE DIVERTED TO SISTER CONCERNS OR OTHER PERSONS WITHOUT INTEREST. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. 8. BEFORE US, THE LD. A.R. SUBMITTED THAT ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AT ITS DISPOSAL FROM WHICH IT H AD LENT THE AMOUNT TO BABA SYNTHETICS AND NOT OUT OF INTEREST BEARING FUN DS. HE THUS URGED THAT THE DISALLOWANCE MADE BY THE AO BE DELETED. 9. ON THE OTHER HAND THE LD. D.R. SUPPORTED THE ORD ER OF AO AND CIT(A). I.T.A. NO.713/AHD/2010 A. Y. 2001-02 9 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS PAID INTEREST ON BORROWED FUNDS AND HAD ALSO LEND INTEREST FREE LOAN TO ITS SISTER CONCERN. CIT(A) WHILE UPHOLDING THE DECISION OF AO HAS GIVEN A FINDING THAT ASSESSEE HAS NOT BEEN IN A POSITION TO PROVE THE COMMERCIAL EXPEDIENCY WHEREBY IT WAS REQUIRED TO GIVE INTEREST FREE LOANS TO BABA SY NTHTICS. BEFORE US ALSO THE LD. A.R. COULD NOT CONTROVERT THE FINDINGS OF C IT(A) BY BRINGING ANY MATERIAL ON RECORD. IN VIEW OF THESE FACTS WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS UPHOLD HIS ORDER. IN THE RESULT THIS GROUND OF ASSESSEE IS DISMISSED. 11. OTHER GROUNDS RAISED ARE GENERAL AND CONSEQUENT IAL IN NATURE AND THEREFORE NOT ADJUDICATED. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 28.12.2 012 SD/- SD/- (G.C. GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '# *