M/s Bharti Teletech Limited, V. DCIT, Circle-2(1),

ITA 753/DEL/2007

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8092 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-04-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 13-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Keywords: Depreciation; Business expenditure; Commercial expediency
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.753/DEL./2007 (ASSESSMENT YEAR : 2003-04) M/S. BHARTI TELETECH LIMITED, VS. DCIT, CIRCLE 2 ( 1), D 195, OKHLA INDUSTRIAL AREA, NEW DELHI. PHASE I, NEW DELHI 110 020. (PAN : AABCB8884F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL BHALLA, CA REVENUE BY : SHRI K.K. JAISWAL, DR DATE OF HEARING : 13.04.2016 DATE OF ORDER : 29.04.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. BHARTI TELETECH LIMITED (HEREINAFTE R REFERRED TO AS THE ASSESSEE), BY FILING THE PRESENT APPEAL , SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 18.10.2006 PASSED BY LD. CIT(A)- V, NEW DELHI QUA THE ASSESSMENT YEAR 2003-04 ON THE GROUNDS INTER ALIA THAT:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH ON FATS AND IN LAW IN CONFIRMING THE ACT ION OF THE LEARNED ASSESSING OFFICER (AO) IN DISALLOWING DEPRE CIATION ON ITA NO.753/DEL./2007 2 GOODWILL AMOUNTING TO RS.1,26,56,250/- ALLEGEDLY ON THE GROUND THAT THE SAME IS NOT ALLOWABLE U/S 32 OF THE INCOME TAX ACT, 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH ON FATS AND IN LAW IN UPHOLDING THE ACTI ON OF THE LEARNED AO IN DISALLOWING THE EXPENDITURE ON ACCOUNT OF INT EREST PAID AMOUNTING TO RS.48,08,518/- ALLEGEDLY ON THE GROUND THAT THE ASSESSEE HAS UTILIZED ITS INTEREST BEARING FUNDS TO ADVANCE LOANS TO ITS SUBSIDIARY COMPANIES. 2. BRIEFLY STATED, THE FACTS OF THIS CASE ARE : ORI GINALLY ASSESSEE HAS FILED RETURN QUA THE ASSESSMENT YEAR 2003-04 DE CLARING TOTAL INCOME OF RS.4,78,34,082/- WHICH WAS PROCESSED UNDE R SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER TH E ACT) ON 27.02.2004 BUT LATER ON THE RETURN WAS REVISED ON 1 0.03.2005 DECLARING AN INCOME OF RS.4,72,61,650/- TO CLAIM EX PENSES PERTAINING TO THE RELEVANT PREVIOUS YEAR BUT BOOKED IN THE NEXT FINANCIAL YEAR AND TO CLAIM BENEFIT OF LATE DEPOSIT OF EPF BY RELYING UPON THE DECISION OF THE ITAT, DELHI IN THE CASE OF VESTAS RRB INDIA LTD. THE ASSESSEE CLAIMED THE EXPENSES PERTA INING TO AY 2003-04 RECORDED IN THE TAX AUDIT REPORT FOR FY 200 3-04 RELEVANT TO AY 2004-05. THE SAME WAS CLAIMED IN THE RELEVANT P REVIOUS YEAR WHILE REVISING THE RETURN. THEREAFTER THE CASE WAS SUBJECTED TO SCRUTINY AND CONSEQUENT UPON THE ISSUE OF NOTICES U /S 143(2) AND 142(1), SHRI KARAN MEHTA, CA PUT IN APPEARANCE, FIL ED NECESSARY DETAILS, BOOKS OF ACCOUNTS AND ALSO DISCUSSED THE C ASE. ITA NO.753/DEL./2007 3 3. ASSESSEE COMPANY IS INTO THE BUSINESS OF MANUFAC TURING AND TRADING OF TELEPHONE INSTRUMENTS AND DURING THE REL EVANT PREVIOUS YEAR, THE ASSESSEE DECLARED TOTAL LOSS OF RS.36.33 CRORES AS COMPARED TO RS.37.72 CRORES IN THE IMMEDIATELY PREC EDING YEAR. THE AO DISALLOWED THE EXPENDITURE CLAIMED BY THE AS SESSEE ON ACCOUNT OF INTEREST PAID AMOUNTING TO RS.48,08,518/ - ON THE GROUND THAT ASSESSEE HAS UTILIZED ITS INTEREST BEARING FUN DS TO ADVANCE LOANS TO ITS SUBSIDIARY COMPANIES WHICH HAS ALSO BEEN AFF IRMED BY THE CIT (A). 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT (A) WHO HAS PARTLY ALLOWED THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PR ESENT APPEAL. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 6. THE LD. AR FOR THE ASSESSEE CHALLENGING THE IMPU GNED ORDER CONTENDED THAT AO AS WELL AS CIT (A) HAVE ERRED IN DISALLOWING THE DEPRECIATION OF GOODWILL AMOUNTING TO RS.126,56,250 /- U/S 32 OF THE ACT AND RELIED UPON THE ORDER PASSED BY ITAT, DELHI BENCH ITA NO.753/DEL./2007 4 A, NEW DELHI IN CASE CITED AS ACIT, CIRCLE 2 (1), NEW DELHI VS. BHARTI TELETECH LTD. IN ITA NOS.5321 & 5322/DEL /2012 FOR AYS 2008-09 & 2009-10 ORDER DATED 19.12.2012 . ON THE OTHER HAND LD. DR FOR THE REVENUE RELIED UPON THE ORDER O F THE CIT (A). 7. UNDISPUTEDLY, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF TELEPHONE INSTRUMENTS AND HAS CLAIMED DEPRECIATION ON GOODWILL AMOUNTING TO RS.126,56,250/-. THE AO DISALLOWED THE CLAIM OF DE PRECIATION ON GOODWILL CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE GOODWILL IS NOT AN INTANGIBLE ASSET AS DEFINED IN SECTION 32(1) (II) OF THE ACT. CIT (A) ALSO AFFIRMED THE FINDINGS RETURNED BY THE AO. 8. TO PROCEED FURTHER, SECTION 32(1)(II) IS REPRODU CED FOR READY REFERENCE AS UNDER :- 32. (1) [IN RESPECT OF DEPRECIATION OF ( I ) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS; ( II ) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICEN CES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED FOR THE PURPOSES OF THE BU SINESS OR PROFESSION, THE FOLLOWING DEDUCTIONS SHALL BE AL LOWED. 9. IDENTICAL ISSUE HAS BEEN DECIDED BY THE COORDINA TE BENCH OF THE TRIBUNAL IN THE CASE OF BHARTI TELETECH LTD. (SUPRA) BY ITA NO.753/DEL./2007 5 FOLLOWING THE LAW LAID DOWN BY HONBLE APEX COURT I N JUDGMENT CITED AS CIT VS. SMIFS SECURITIES LTD. 348 ITR 302 . 10. HONBLE APEX COURT DECIDED THE ISSUE IN CONTROV ERSY IN PARA 9 OF THE JUDGEMENT CITED AS SMIFS SECURITIES LTD. (SUPRA), WHICH IS REPRODUCED FOR READY REFERENCE, AS UNDER :- WE QUOTE HEREINBELOW EXPLANATION 3 TO SECTION 32(1 ) OF THE ACT: 'EXPLANATION 3.-- FOR THE PURPOSES OF THIS SUB-SECT ION, THE EXPRESSIONS `ASSETS' AND `BLOCK OF ASSETS' SHALL ME AN [A] TANGIBLE ASSETS, BEING BUILDINGS, MACHINERY, PL ANT OR FURNITURE; [B] INTANGIBLE ASSETS, BEING KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE.' EXPLANATION 3 STATES THAT THE EXPRESSION `ASSET' SH ALL MEAN AN INTANGIBLE ASSET, BEING KNOW-HOW, PATENTS, COPYR IGHTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSIN ESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. A READING THE WORDS `ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' IN CLAUSE (B) OF EXPLANATION 3 INDICATES TH AT GOODWILL WOULD FALL UNDER THE EXPRESSION `ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF A SIMILAR NATURE'. THE PRINCIPLE OF EJUSDEM GENERIS WOULD STRICTLY APPLY W HILE INTERPRETING THE SAID EXPRESSION WHICH FINDS PLACE IN EXPLANATION 3(B). IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT `GOOD WILL' IS AN ASSET UNDER EXPLANATION 3(B) TO SECTION 32(1) OF THE ACT. 11. FOLLOWING THE LAW LAID DOWN BY THE HONBLE APEX COURT, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE AO HAS NOT DISPUTED THE ITA NO.753/DEL./2007 6 FACT THAT THE ASSESSEE HAS NO GOODWILL TO CLAIM THE DEPRECIATION, DISALLOWANCE MADE BY THE AO AND AFFIRMED BY THE CIT (A) IS NOT SUSTAINABLE IN THE EYES OF LAW. MOREOVER, IN ASSES SEES OWN CASE QUA THE AYS 2008-09 AND 2009-10, THE COORDINATE BEN CH OF THE TRIBUNAL IN BHARTI TELETECH LTD. (SUPRA) HAS ALREADY HELD THAT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON GOODW ILL WHICH IS AN ASSET U/S EXPLANATION (3B) TO SECTION 32(1) OF THE ACT. CONSEQUENTLY, GROUND NO.1 IS DETERMINED IN FAVOUR O F THE ASSESSEE. GROUND NO.2 12. ASSESSEE CLAIMED EXPENDITURE TO THE TUNE OF RS. 91,40,242/- OUT OF WHICH AO HAS DISALLOWED AN AMOUNT OF RS.48,0 8,518/- ON ACCOUNT OF INTEREST ON PRORATA BASIS. 13. UNDISPUTEDLY, ASSESSEE COMPANY HAS ADVANCED THE LOAN TO M/S. BHARTI INFOTEC LTD., ONE OF ITS SUBSIDIARIES, WHICH IS INTO THE BUSINESS OF BPO/CALL CENTRE AND OTHER VALUE ADDED T ELECOM SERVICE. IT IS ALSO NOT DISPUTED THAT VIDE MEMORAN DUM AND ARTICLES OF ASSOCIATION, LYING AT PAGE 90 OF THE PAPER BOOK, IT IS PERMITTED TO INVEST INTO THE COMPANIES TO DO SUCH BUSINESS. IT IS ALSO NOT DISPUTED THAT THE AMOUNT ADVANCED BY THE ASSESSEE H AS BEEN ACCEPTED AS BUSINESS ADVANCE. AT THE SAME TIME, IT IS ALSO NOT DISPUTED THAT THIS COMPANY IS HAVING ENOUGH INTERES T FREE FUNDS AS ITA NO.753/DEL./2007 7 HAS BEEN REFLECTED IN THE BALANCE SHEET FOR THE YEA R ENDING 31.03.2003, LYING AT PAGE 132 OF THE PAPER BOOK. 14. THE LD. CIT (A) AFFIRMED THE DISALLOWANCE MADE BY THE AO BY RETURNING THE FOLLOWING FINDINGS :- 4.2 DURING THE APPELLATE PROCEEDINGS IT IS SUBMITT ED THAT THE APPELLANT COMPANY IS IN THE BUSINESS OF MANUFAC TURING AND TRADING OF TELECOM PRODUCTS AND TO PROMOTE COMP ANIES WITH OBJECTS HARMONIZED WITH THAT COMPANY. TO DO TH E DOWNSTREAM BUSINESS IN THE LINE OF CALL CENTERS THE APPELLANT COMPANY PROMOTED A SUBSIDIARY NAMED BHARTI INFOTEC LIMITED, AND ADVANCED A SUM OF RS.18.43 CRORES AS A DVANCE AGAINST SHARE APPLICATION MONEY IN THE PRECEDING PR EVIOUS YEAR. ACCORDING TO THE APPELLANT GIVING SUCH ADVANC E TO THE SUBSIDIARIES WAS CONSIDERED BY THE THEN AO AS BUSIN ESS ADVANCES AND THE THEN AO DID NOT DISALLOW THE APPEL LANTS CLAIM. IN ITS SUPPORT THE APPELLANT HAS PRODUCED TH E COPY OF MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATI ON TO SNOW THAT IT WAS ALLOWED TO INVEST IN SUBSIDIARIES AS ALSO TO CARRYOUT SUCH BUSINESS. THE APPELLANT HAS FURTHER S UBMITTED THAT IT WAS HAVING SUFFICIENT INTEREST FREE FUNDS T O INVEST IN SUBSIDIARIES AND THAT INVESTMENTS IN SUCH SHARES WA S MADE OUT OF MIXED FUNDS PRESUMPTION SHOULD BE THAT THE SAME WAS MADE OUT OF INTEREST FREE FUNDS. IN THIS REGARD THE APPELLANT HAS SUBMITTED SOME FIGURES OF DEPOSITS AND WITHDRAW ALS MADE OUT OF VARIOUS BANK ACCOUNTS AND SUBMITTED THAT DUE TO HUGE VOLUME OF TRANSACTIONS IT WAS NOT POSSIBLE TO FIND OUT THE NEXUS BETWEEN THE AMOUNT RECEIVED FROM BHARTI ENTER PRISES AND AMOUNT GIVEN TO BHARTI INFOTEC LIMITED. IT IS T HUS SUBMITTED THAT CONSIDERING THE FACT THAT AO HAS ALS O NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THE NEXUS NO DISALLOWANCE WAS TO BE MADE. IN ITS SUPPORT THE APP ELLANT HAS RELIED ON THE JUDGEMENT OF CALCUTTA HIGH COURT IN C ASE OF INDIAN EXPLOSIVE 147 ITR 392, WOOLCOM BERS 134 ITR 219 AND BRITISH PAINTS 190 ITR 196. THE APPELLANT HAS A LSO SUBMITTED THAT EXCEPT FOR PAYMENT OF INTEREST TO BH ARTI ENTERPRISES ALL OTHER INTEREST WAS PAID ON SECURED LOANS AS WELL AS AGAINST OVERDRAFT FACILITIES. ACCORDING TO THE A PPELLANT IT WAS ALSO IN THE BUSINESS OF ADVANCING AND THAT IT H AD EARNED INCOME BY WAY OF INTEREST IN PRECEDING PREVIOUS YEA RS WHICH WERE OFFERED TO TAX. THE APPELLANT HAS HARPED ON TH E GROUND THAT THE AMOUNT ADVANCED TO SUBSIDIARY WAS OUT OF M IXED FUNDS AND HENCE NO DISALLOWANCE SHOULD BE MADE. ITA NO.753/DEL./2007 8 4.3 I HAVE GONE THROUGH THE CONTENTION OF THE APPEL LANT AND DO NOT FIND ANY MERIT IN ITS CASE. IT IS WELL SETTL ED NOW THAT ONUS LIES WITH ASSESSEE TO PROVE ITS CLAIM WITH COG ENT MATERIAL WHEREAS IN THE INSTANT CASE THE APPELLANT HAS NOT P RODUCED ANY EVIDENCE TO PROVE THAT INTEREST FREE FUNDS WERE ONL Y USED FOR ADVANCING MONEY TO BHARTI INFOTRAC LIMITED. FURTHER APPELLANT'S ARGUMENT THAT IT WAS INVESTING IN SUBSI DIARIES TO HARMONIZE ITS BUSINESS ACTIVITIES AND THEREFORE AMO UNT INVESTED IN SUBSIDIARIES SHOULD BE TREATED AS FOR B USINESS PURPOSE CAN ALSO NOT BE ACCEPTED FOR THE REASON THA T APPELLANT HAS FAILED TO ESTABLISH AS TO HOW SUCH INVESTMENT H AS ADVANCED THE EXISTING BUSINESS ACTIVITIES OF THE AP PELLANT COMPANY AND THEREFORE IN ABSENCE OF SUCH EXPLANATIO N OFFERED I AM UNABLE TO ACCEPT THE ARGUMENT OF THE APPELLANT THAT INVESTMENT IN SUBSIDIARIES HAD IN ANY WAY PROMOTED THE BUSINESS ACTIVITIES OF THE APPELLANT COMPANY. IT IS ALSO NOT IN DISPUTE THAT BOTH INTEREST FREE FUNDS AND INTEREST BEARING FUNDS WERE ROUTED THROUGH COMMON HOTCHPOTCH I.E. ALL THE FUNDS WERE INTERMINGLED IN SUCH A WAY THAT IT WAS NOT POS SIBLE TO IDENTIFY THE NEXUS BETWEEN THE ADVANCES RECEIVED AN D ADVANCES MADE AND THEREFORE UNDER THE CIRCUMSTANCES IT WOULD BE APT TO ADOPT THE METHOD OF APPORTIONMENT T AKING INTO CONSIDERATION THE TOTAL FUNDS AS WELL AS INTER EST FREE FUNDS SO ADVANCED, WHICH IN THE INSTANT CASE AO HAS FOLLO WED AND THEREFORE IN ABSENCE OF ANY MATERIAL BROUGHT ON REC ORD TO PROVE THE NEXUS OF INTEREST FREE FUNDS AVAILABLE WI TH THE COMPANY TO ADVANCES MADE INTEREST FREE, I AM NOT IN CLINED TO ACCEPT THE ARGUMENT OF THE APPELLANT THAT NO DISALL OWANCE SHOULD BE MADE. AS REGARD RELIANCE PLACED BY THE AP PELLANT ON VARIOUS JUDGEMENTS THE SAME ARE OF NO AVAIL AS FACT S OF THOSE CASE ARE DISTINGUISHABLE FROM THAT OF THE APPELLANT 'S CASE. THUS CONSIDERING THE FACTS OF THE CASE DISALLOWANCE MADE BY THE AO IS CONFIRMED. 15. THE LD. AR FOR THE ASSESSEE, BY RELYING UPON TH E JUDGMENT PASSED BY THE HONBLE SUPREME COURT IN THE CASE CIT ED AS HERO CYCLES PVT. LTD. 63 TAXMANN.COM 308 (SC) , CONTENDED THAT WHEN THE LOAN HAS UNDISPUTEDLY BEEN ADVANCED TO PRO MOTE A SUBSIDIARY COMPANY, THE INTEREST PAID CANNOT BE DIS ALLOWED. ITA NO.753/DEL./2007 9 16. THE OPERATIVE PART OF THE JUDGMENT (SUPRA) IS R EPRODUCED FOR READY REFERENCE AS UNDER :- 12. INSOFAR AS LOANS TO THE SISTER CONCERN/SUBSIDI ARY COMPANY ARE CONCERNED, LAW IN THIS BEHALF IS RECAPI TULATED BY THIS COURT IN THE CASE OF S.A. BUILDERS LTD. V. CIT (APPEALS) [2007 (288) ITR 1/158 TAXMAN 74]. AFTER TAKING NOTE OF AND DISCUSSING ON THE SCOPE OF COMMERCIAL EXPEDIENCY, T HE COURT SUMMED UP THE LEGAL POSITION IN THE FOLLOWING MANNE R:-. '26. THE EXPRESSION 'COMMERCIAL EXPEDIENCY' IS AN EXPRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION, BUT YET I T IS ALLOWABLE AS A BUSINESS EXPENDITURE IF IT WAS INCUR RED ON GROUNDS OF COMMERCIAL EXPEDIENCY. 27. NO DOUBT, AS HELD IN MADHAV PRASAD JATIA V. CIT [1979 (118) ITR 200 (SC )],IF THE BORROWED AMOUNT WAS DONATED FOR SOME SENTIMENTAL OR PERSONAL REASONS AND NOT ON THE GROUND OF COMMERCIAL EXPEDIENCY, THE INTEREST THEREON COULD NOT HAVE BEE N ALLOWED UNDER SECTION 36 (1)(III) OF THE ACT. IN MA DHAV PRASAD'S CASE [1979 (118) ITR 200 (SC )], THE BORROWED AMOUNT WAS DONATED TO A COLLEGE WITH A VIE W TO COMMEMORATE THE MEMORY OF THE ASSESSEE'S DECEASED HUSBAND AFTER WHOM THE COLLEGE WAS TO BE NAMED, IT WAS HELD BY THIS COURT THAT THE INTEREST ON THE BORROWED FUND IN SUCH A CASE COULD NOT BE ALLOWED, AS IT COULD NOT BE SAID THAT IT WAS FOR COMMERCIAL EXPEDIENCY. 28. THUS, THE RATIO OF MADHAV PRASAD JATIA'S CASE [1979 (118) ITR 100 (SC)] IS THAT THE BORROWED FUND ADVANCED TO A THIRD PARTY SHOULD BE FOR COMMERCIAL EXPEDIENCY IF IT IS SOUGHT TO BE ALLOWED UNDER SECT ION 36(1)(III) OF THE ACT. 29. IN THE PRESENT CASE, NEITHER THE HIGH COURT NOR THE TRIBUNAL NOR OTHER AUTHORITIES HAVE EXAMINED WHETHER THE AMOUNT ADVANCED TO THE SISTER CONCERN W AS BY WAY OF COMMERCIAL EXPEDIENCY. ITA NO.753/DEL./2007 10 30. IT HAS BEEN REPEATEDLY HELD BY THIS COURT THAT THE EXPRESSION 'FOR THE PURPOSE OF BUSINESS' IS WIDER I N SCOPE THAN THE EXPRESSION 'FOR THE PURPOSE OF EARNI NG PROFITS' VIDE CIT V. MALAYALAM PLANTATIONS LTD. [19 64 53 ITR 140 (SC),CIT V. BIRLA COTTON SPINNING AND WEAVING MILLS LTD. [1971 82 ITR 166 (SC], ETC. 17. BY FOLLOWING THE RATIO OF THE JUDGMENT IN HERO CYCLES PVT. LTD. (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT WHEN A O HAS NOT DISPUTED THAT THE LOAN WAS ADVANCED TO M/S. BHARTI INFOTEC LTD. AS PER MEMORANDUM AND ARTICLES OF ASSOCIATION TO PROMO TE BUSINESS OF ITS SUBSIDIARY, THE INTEREST CLAIMED BY ASSESSEE THEREON CANNOT BE DISALLOWED. MOREOVER, IT WAS COMMERCIAL EXPEDIENCY OF THE ASSESSEE COMPANY TO ADVANCE THE LOAN TO PROMOTE BUS INESS OF ITS SUBSIDIARY COMPANY. SO, WE ARE OF THE CONSIDERED V IEW THAT THE ADVANCES MADE TO THE SUBSIDIARY COMPANIES ARE TO BE TREATED AS BUSINESS ADVANCES. 18. MOREOVER, WHEN THE ASSESSEE COMPANY WAS CARRYIN G OUT ITS BUSINESS ACTIVITIES THROUGH ITS SUBSIDIARIES AND TH E ASSESSEE COMPANY WAS HAVING INTEREST FREE FUNDS TO THE TUNE OF RS.99.27 CRORES AND RS.101.11 CRORES AVAILABLE WITH THE ASSE SSEE COMPANY IN THE BEGINNING AND END OF THE FINANCIAL YEAR RESPECT IVELY UNDER CONSIDERATION AS PER BALANCE SHEET NOT DISPUTED BY THE AO WHEN THE ASSESSEE HAS CLAIMED TO HAVE PAID LOAN AMOUNT TO IT S SUBSIDIARY FROM THE MIXED FUND, THEN, IT SHOULD BE ASSUMED THA T PAYMENT WAS ITA NO.753/DEL./2007 11 MADE OUT OF INTEREST FREE FUNDS. SO, WHEN THE AO H AS NOT DISPUTED THE FACT THAT THE ASSESSEE COMPANY HAS USED INTERES T FREE FUNDS ONLY FOR ADVANCING MONEY TO M/S. BHARTI INFOTEC LTD., TH E QUESTION OF MAKING DISALLOWANCE ON PRORATA BASIS DOES NOT ARISE . 19. BY FOLLOWING THE RATIO OF THE JUDGMENT IN THE C ASE OF HERO CYCLES PVT. LTD. (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSEE HAS MADE INVESTMENT FOR BUSINESS EXPED IENCY TO PROMOTE THE BUSINESS OF ITS SUBSIDIARY, THE INTERES T PAID THEREON HAS TO BE ALLOWED AND AS SUCH, AO AS WELL AS CIT (A) HA VE ERRED IN MAKING DISALLOWANCE OF ASSESSEES CLAIM OF DEDUCTIO N ON ACCOUNT OF INTEREST ON PRORATA BASIS. CONSEQUENTLY, GROUND NO.2 IS DETERMINED IN FAVOUR OF THE ASSESSEE. 20. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE HE REBY ALLOW THE PRESENT APPEAL FILED BY THE ASSESSEE. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF APRIL, 2016. SD/- SD/- (N.K. SAINI) (KULDIP SIN GH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF APRIL, 2016/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.