DCIT, Mandi Gobindgarh V. Industrial Cables (India) Limited., Rajpura

ITA 799/CHANDI/2009

• Counselvise Citation: 79921514 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K GOYAL
• Assessee Lawyers: AJAY SHARMA
• Keywords: Business income; Business expenditure; Rule of consistency; Tax effect; Commercial expediency; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: CHANDIGARH BENCH A BEFORE HONBLE MS SUSHMA CHOWLA, JM AND HONBLE SHRI MEHAR SINGH, AM ITA NO. 799/CHANDI/2009 ASSESSMENT YEAR 2006-07 D.C.I.T. CIRCLE V. INDUS TRIAL CABLES (INDIA) LTD MANDI GOBINDGARH INDUSTRIA L AREA, RAJPURA PAN: AAACI 3489 P ITA NO. 842/CHANDI/2009 ASSESSMENT YEAR 2006-07 INDUSTRIAL CABLES (INDIA) LTD V. D.C.I.T, CIRCLE INDUSTRIAL AREA, RAJPURA MANDI GOBINDGARH PAN: AAACI 3489 P (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI AJAY SHARMA APPELLANT BY: SHRI D.K. GOYAL DATE OF HEARING: 25.8.2011 DATE OF PRONOUNCEMENT: 30.8.2011 ORDER PER MEHAR SINGH, AM THESE ARE CROSS APPEALS FILED BY THE REVENUE AND T HE ASSESSEE. FIRSTLY, THE APPEAL OF THE REVENUE IS TA KEN UP FOR ADJUDICATION. THE PRESENT APPEALS FILED BY THE REVE NUE AND THE ASSESSEE, FOR ASSESSMENT YEAR 2006-07, ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) PATIALA DATED 15.6.2009, U/S 25 0(6) OF THE INCOME-TAX ACT (FOR SHORT IN ACT). ITA NO. 799/CHANDI/2009 REVENUES APPEAL 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 2 1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 62 ,45,847/- MADE ON ACCOUNT OF DISALLOWANCES OF INTEREST ON INT EREST-FREE ADVANCES/LOANS GIVEN BY THE ASSESSEE TO THE SUBSIDI ARY COMPANY, M/S HARYANA TELECOM LTD., BY ACCEPTING THE GROUND OF COMMERCIAL EXPEDIENCY WHEREAS NO CASE OF COMMERC IAL EXPEDIENCY WAS MADE OUT. 2. IN THE FACTS AND CIRCUMSTANCES THE LD. CIT(A) H AS FURTHER ERRED IN PLACING RELIANCE ON THE HON'BLE TRIBUNALS DECISION IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 20 05-06 IGNORING THAT THE DEPARTMENT HAS NOT ACCEPTING THE SAIDDCN AND IS IN APPEAL BEFORE HON'BLE HIGH COURT. 3 IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS FURTHER ERRED IN PLACING RELIANCE UPON T HE HON'BLE TRIBUNALS DECISION IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06, IGNORING THAT HE DEPARTMEN T HAS ALSO FILED A MISC. APPLICATION WITH THE HON'BLE TRI BUNAL, WHICH IS STILL PENDING. 4 IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO RESTORED. 3. BRIEF FACTS OF THE CASE ARE THAT DURING ASSESSME NT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAD CLA IMED A DEDUCTION OF RS. 4,39,20,000/- IN THE RETURN OF INC OME ON ACCOUNT OF INTEREST PAID / PAYABLE ON LOANS RAISED FROM BANKS AND CORPORATE BODIES. THE AO HAS DISALLOWED INTEREST AMOUNTING T O RS. 71,27,000/- AS PER PARA 4 OF THE ASSESSMENT ORDER O N ACCOUNT OF INTEREST-FREE LOANS ADVANCED TO ITS SUBSIDIARIES AS PER DETAILS GIVEN BELOW: ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 3 NAME OF THE SUBSIDIARY CO AS ON 1.4.05 AS ON 31. 3.06 (AMOUNT IN RUPEES) GOODS STAR CREDIT & PORTFOL 48,07,044 48,07,044 HARYANA TELECOM LTD 3,47,00,000 3,47 ,00,000 ICL TOWER LTD 88,251 88,251 3,95,95,295 3,95,95,295 FROM THE ABOVE DETAILS, THE AO FOUND THAT ASSESSEE HAD DIVERTED INTEREST BEARING LOANS, FOR NON-BUSINESS PURPOSES A ND HAD CHARGED NO INTEREST, ON THESE LOANS GIVEN TO ITS SUBSIDIARY COMPANIES. HE, FURTHER, HELD THAT WHEN THE ASSESSEE HAS CLAIMED A HUGE DEDUCTION ON ACCOUNT OF INTEREST PAID / PAYABLE, ON LOANS RAI SED FROM BANKS AND CORPORATE BODIES, THEN, IT IS NOT TENABLE THAT THE ASSESSEE WOULD ADVANCE INTEREST FREE LOANS, TO SISTER CONCERNS. H E, THEREFORE DISALLOWED THE AMOUNT OF RS. 71,27,000/- @ 18% OF T HE ABOVE MENTIONED LOANS. 4. THE FINDINGS OF LD. CIT(A) ARE REPRODUCED HEREUN DER: I HAVE CONSIDERED THE FACTS OF THE CASE, RIVAL SUB MISSIONS AND COUNTER COMMENTS THEREON. AS REGARDS TO LOAN IN TH E CASE OF GOOD STAR CREDIT & PORTFOLIO PVT LTD AND ICL TOWERS LTD IS CONCERNED, I DO NOT AGREE WITH THE CONTENTION OF TH E APPELLANT THAT THE SAME CANNOT BE DISALLOWED AS NO INTEREST W AS DISALLOWED IN ASSESSMENT YEAR 2005-06. I AM OF THE FIRM VIEW THAT EVERY YEAR IS AN INDEPENDENT YEAR AND, AS SUCH , INTEREST ON THESE TWO LOANS HAS BEEN RIGHTLY DISALLOWED BY T HE AO. HENCE, DISALLOWANCES OF INTEREST AMOUNTING TO RS. 8 ,81,153/- IS CONFIRMED. FURTHER, AS FAR AS LOAN TO HARYANA T ELECOM LTD IS CONCERNED, I AM BOUND BY THE ORDER OF THE INCOME -TAX APPELLLATE TRIBUNAL, CHANDIGARH BENCH A, CHANDIGARH AND, AS ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 4 SUCH, THE AO IS DIRECTED TO DELETE THE AMOUNT OF IN TEREST DISALLOWED ON THE SAID LOAN AMOUNTING TO RS. 62,45, 847/-. 3.4 HENCE, GROUND OF APPEAL IS PARTLY ALLOWED. 5. THE DR PLALCED RELIANCE ON THE ASSESSMENT ORDE R. 6. THE AR FOR THE ASSESSEE PLACED RELIANCE ON TH E DECISION OF ITAT CHANDIGARH DATED 12.8.2010 IN ASSESSEES OWN C ASE DECIDED IN ITA NO. 537/CHANDI/2010, FOR THE ASSESSMENT YEAR 2007-08. 7. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RELEVANT PAPER BOOK FILED BY THE ASSESSEE AND THE SUBMISSION S OF BOTH THE PARTIES. IT IS EVIDENT THAT THE ISSUE RAISED BY TH E REVENUE IN ITS GROUNDS OF APPEAL IS SQUARELY COVERED BY THE DECISI ON OF ITAT CHANDIGARH DATED 12.8.2010 IN ITA NO. 537/CHANDI/20 10 IN THE ASSESSEES CASE. THE RELEVANT PART OF THE DECISION IS REPRODUCED HEREUNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY. AFTER HAVING HEARD THE PARTIES AND PERUSING THE ORD ERS OF THE LOWER AUTHORITIES, IT IS CLEAR THAT THE FACTUAL POS ITION IN RELATION TO THE AMOUNT ADVANCED TO M/S HARYANA TELECOM LTD., A SUBSIDIARY COMPANY, STANDS ON SIMILAR FOOTING AS WA S IN THE ASSESSMENT YEAR 2005-06, WHICH HAS BEEN A SUBJECT M ATTER OF CONSIDERATION BY THE TRIBUNAL VIDE ITS ORDER DATED 28.11.2008 (SUPRA). THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL IS WORTHY OF NOTICE : 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD. IN THE INSTANT CASE, REHABI LITATION SCHEME WAS SANCTIONED BY THE BIFR ON 05.07.2001. A COPY OF THE SUMMARY RECORD OF THE PROCEEDINGS OF THE HEA RING HELD ON 5.7.2001 BEFORE BIFR HAVE BEEN PLACED IN TH E PAPER BOOK. IT HAS BEEN HELD IN THE AFORESAID PROC EEDINGS IN PARA 22 AS UNDER: ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 5 22. AFTER HEARING THE SUBMISSIONS AND NO CAREFULLY CONSIDERING THE OBSERVATIONS MADE BY ALL IN TODAYS HEARING AND THE MATERIAL ON RECORD, THE BENCH SANCTIONED THE SCHEME U/S 18(4) OF THE ACT AND THE SANCTIONED SCHEME WILL COME INTO FORCE WITH IMMEDIATE EFFECT. 9. IT IS THUS EVIDENT FROM THE ABOVE THAT, BIFR SANCTIONED THE SCHEME UNDER SECTION 18(4) OF THE AC T AND THE SANCTIONED SCHEME CAME INTO FORCE WITH IMMEDIAT E EFFECT. A COPY OF THE SANCTIONED SCHEME HAS ALSO BE EN PLACED IN THE PAPER BOOK AT PAGES 25 TO 56. FROM TH E PERUSAL OF THE SCHEME, IT IS SEEN THAT THE APPELLAN T COMPANY WAS TO PROVIDE PROMOTERS CONTRIBUTION OF A SUM OF RS. 3,50,00,000/- TO ITS SUBSIDIARY COMPANY, NAMELY , M/S HARYANA TELECOM LTD. INFACT, THE SCHEME ALSO PROVID ES IN PARA 6.2 AS UNDER: D) THE COMPANY SHALL SATISFY MA THAT THE PHYSICAL PROGRESS AND ALL ASPECTS OF COST OF THE SCHEME/MEANS OF FINANCE OF THE SCHEME IS COMPLIED WITH AS PER SCHEDULE. TO THIS END, THE COMPANY SHALL FURNISH TO MA SUCH INFORMATION AND DATA AS MAY BE REQUIRED BY IT AT QUARTERLY INTERVALS. ANY FINANCIAL SHORTFALL ARISING OUT OF THE DELAYED IMPLEMENTATION OF THE SCHEDULE OR FOR ANY OTHER REASON SHALL B MET BY THE COMPANY/PROMOTERS WITHOUT ANY RECOURSE TO FI/BANKS OR SEEKING ANY FURTHER RELIEFS/CONCESSIONS INCLUDING MARGIN MONEY FROM THEM THAN WHAT HA ALREADY BEEN PROVIDED FOR IN THE SCHEME WITHIN A PERIOD NOT EXCEEDING THREE MONTHS. 10. IT IS THEREFORE, CLEAR THAT, THE ASSESSEE WAS O BLIGED TO PROVIDE FUNDS TO THE SUBSIDIARY COMPANY UNDER A REHABILITATION SCHEME SANCTIONED BY BIFR. IN OTHER WORDS, THESE FUNDS WERE PROVIDED BY THE ASSESSEE TO ITS SUBSIDIARY COMPANY, NAMELY M/S HARYANA TELECOM LTD. , AS PER THE SCHEME FOR REHABILITATION SANCTIONED BY THE BIFR. OBVIOUSLY, THE APPELLANT CAN BE SAID TO HAVE A DEEP INTEREST IN THE REHABILITATION OF THE BUSINESS OF T HE SUBSIDIARY COMPANY. OSTENSIBLY, THE FUNDS HAVE BEEN PUT TO USE BY THE SUBSIDIARY FOR ITS BUSINESS. IT IS TH US A CASE WHERE FUNDS HAVE BEEN ADVANCED BY THE ASSESSEE TO I TS SUBSIDIARY COMPANY ON GROUNDS OF COMMERCIAL EXPEDIE NCY. IN SOMEWHAT SIMILAR SITUATION, APEX COURT IN S.A. B UILDERS (SUPRA) OBSERVED AS UNDER: WE WISH TO MAKE IT CLEAR THAT IT IS NOT OUR OPINION THAT IN EVERY CASE INTEREST ON BORROWED LOAN HAS TO BE ALLOWED IF THE ASSESSEE ADVANCES IT TO A SISTER CONCERN. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE RESPECTIVE CASE. FOR INSTANCE, IF THE DIRECTORS OF THE SISTER CONCERN UTILIZE THE AMOUNT ADVANCED TO IT BY THE ASSESSEE FOR ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 6 THEIR PERSONAL BENEFIT, OBVIOUSLY IT CANNOT BE SAID THAT SUCH MONEY WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY. HOWEVER, MONEY CAN BE SAID TO BE ADVANCED TO A SISTER CONCERN FOR COMMERCIAL EXPEDIENCY IN MANY OTHER CIRCUMSTANCES (WHICH NEED NOT BE ENUMERATED HERE). HOWEVER, WHERE IT IS OBVIOUS THAT A HOLDING COMPANY HAS A DEEP INTEREST IN ITS SUBSIDIARY, AND HENCE IF THE HOLDING COMPANY ADVANCES BORROWED MONEY TO A SUBSIDIARY AND THE SAME IS USED BY THE SUBSIDIARY FOR SOME BUSINESS PURPOSES, THE ASSESSEE WOULD, IN OUR OPINION, ORDINARILY BE ENTITLED TO DEDUCTION OF INTEREST ON ITS BORROWED LOANS. 11. FROM THE AFORESAID, IT IS SAFE TO DEDUCE THAT, ALL THAT IS REQUIRED TO BE SEEN IS WHETHER THE MONEY HAS BEE N ADVANCED BY THE ASSESSEE ON GROUNDS OF COMMERCIAL EXPEDIENCY OR NOT? IF IT IS SO, THEN NO DISALLOWANC E OF INTEREST IS TENABLE AND THE ASSESSEE WOULD BE ENTIT LED TO CLAIM OF DEDUCTION OF INTEREST ON BORROWED LOANS. I N THE INSTANT CASE, AS IS EVIDENT FROM THE FACTS STATED A BOVE, IT IS A CASE WHERE FUNDS HAVE BEEN ADVANCED BY THE ASS ESSEE TO ITS SUBSIDIARY COMPANY ON THE GROUND OF COMMERCI AL EXPEDIENCY. IT MAY BE RELEVANT TO STATE HERE THAT, THIS FACT WAS DULY STATED BEFORE ASSESSING OFFICER, AS WOULD BE EVIDENT FROM THE REPLY FILED BEFORE ASSESSING OFFIC ER DATED 09.10.2007 AS UNDER: A SUM OF RS. 3,47,00,000/- WAS ADVANCED TO HARYANA TELECOM LTD. ROHTAK ON VARIOUS DATES AS PER DETAILS ATTACHED. HARYANA TELECOM LTD. IS A SUBSIDIARY OF INDUSTRIAL CABLES (I) LTD. IT WAS DECLARED SICK AS PER SICK INDUSTRIAL COMPANIES SPECIAL PROVISIONS ACT, 1985 VIDE BOARD FOR FINANCIAL & INDUSTRIAL RECONSTRUCTION (BIFR) ORDER DATED 28-06-1999. THE AMOUNT UNDER REFERENCE WAS PAID BY INDUSTRIAL CABLES (INDIA) LTD. IN PURSUANCE OF ORDER OF BIFR VIDE THEIR ORDER DATED 27-08-2001 AS PROMOTERS CONTRIBUTION FOR REHABILITATION SCHEME OF HARYANA TELECOM LTD. REFERENCE MAY BE MADE TO PARA 3.0 OF THE ORDER DATED 27-08-2001. IN VIEW OF THE FACT STATED ABOVE, NO INTEREST-FREE ADVANCE HAS BEEN MADE TO A SUBSIDIARY COMPANY, BUT THE AMOUNT HAS BEEN PAID UNDER LEGAL OBLIGATION IN VIEW OF THE ORDER OF BIFR. MOREOVER, AS AFORESAID, HARYANA TELECOM LTD. IS A SUBSIDIARY OF YOURE ASSESSEE COMPANY AND THE AMOUNT HAS BEEN PAID IN ADDITION TO THE ORDER OF BIFR FOR COMMERCIAL EXPEDIENCY AND, AS SUCH, IS FULLY COVERED BY THE JUDGEMENT OF THE APEX COURT IN THE CASE OF SA BUILDERS VS. CIT, 288 ITR 1. COPIES OF ORDERS OF BIFR REFERRED TO ABOVE ARE ENCLOSED. ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 7 12. INFACT, THIS SUBMISSION WAS ALSO REITERATED BEF ORE CIT(A). HOWEVER, BOTH THE AUTHORITIES BELOW OVERLOO KED THE ABOVE FACTUAL POSITION AND, HELD THE DISALLOWANCE O F THE INTEREST TO BE TENABLE. WE ARE OF THE RESPECTFUL OP INION THAT, JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF THE APPELLANT FOR ASSESSMENT YEARS 1991-92, 1992-93 , 1993-94 AND 1996-97 ARE NO DOUBT BINDING BUT ONLY W HEN THE FACTS OF THE CASE OF THE APPELLANT IN THE INSTA NT YEAR AND, THOSE YEARS ARE IDENTICAL. IN THE PRESENT CASE , IT IS UNDISPUTED THAT THE MONEY HAS BEEN ADVANCED BY THE ASSESSEE COMPANY UNDER A SANCTIONED SCHEME OF BIFR AND IT IS A CASE WHERE MONEY HAD BEEN ADVANCED ON THE G ROUND OF COMMERCIAL EXPEDIENCY. IT IS NOT A CASE AND NOR IT CAN BE HELD THAT, THE MONEY HAD BEEN ADVANCED BY THE ASSES SEE FOR NON-BUSINESS PURPOSES. INFACT, THERE IS NO SUCH FINDING EITHER BY ASSESSING OFFICER OR CIT(A) SO AS TO ENAB LE US TO CONCLUDE THAT MONEY HAD BEEN DIVERTED FOR NON-BUSIN ESS PURPOSES. ON THE CONTRARY, MECHANICAL RELIANCE ON T HE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IS ALSO NOT A CORRECT WAY OF FOLLOWING THE JUDGEMENT. A GAI NFUL REFERENCE CAN BE MADE TO THE JUDGMENT OF THE HONBL E PUNJAB & HARYANA HIGH COURT IN THE CASE OF THE APPE LLANT FOR ASSESSMENT YEAR 1995-96, WHEREIN THE JUDGEMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF THE APPELLANT IN ITA NO. 88 OF 2004 DATED 28.03.2006 WA S NOT FOLLOWED AND, IT WAS HELD AS UNDER: WE MAY NOTICE THAT ALTHOUGH THE PRINCIPLE OF CONSISTENCY IS APPLICABLE AND THE DECISION ON THE ISSUE HAVING BEEN TAKEN IN FAVOUR OF THE ASSESSEE FOR THE PREVIOUS YEAR THE SAME HAS TO BE FOLLOWED, BUT EACH ASSESSMENT YEAR BEING AN INDEPENDENT ONE, IN VIEW OF CONSCIOUS JUDGMENT OF THIS COURT ON THE ISSUE AFTER REFERRING TO OTHER JUDGMENTS AND IN ABSENCE OF ANY DIRECT JUDGMENT OF THE HONBLE SUPREME COURT, WE ARE OF THE VIEW THAT THE EARLIER ORDER OF THIS COURT DISMISSING APPEAL OF THE REVENUE IN LIMINE CANNOT BE TAKEN TO BE CONCLUSIVE. 13. IT IS THUS EVIDENT THAT, THE HONBLE COURT THUS HELD THAT FACTS OF EACH YEAR ARE INDEPENDENT AND HAVE TO BE TAKEN INTO ACCOUNT FOR DETERMINATION WHETHER THE DISALLOWANCE OF INTEREST IS TENABLE OR NOT. IN THE INSTANT CASE SINCE WE FIND IN THE YEAR UNDER CONSIDERATION THAT FRESH ADVANCES HAVE BEEN MADE ON THE GROUND OF COMMERCIAL EXPEDIENCY, THUS THE INTEREST DISALLOWED BY THE ASSESSING OFFICER IS UNJUSTIFIED AND THUS IS NOT SUSTAINABLE. MOREOVER, IT IS ALSO EVIDENT FROM THE AFORESAID OBSERVATIONS OF THE HONBLE HIGH COURT THAT THERE W AS NO DIRECT JUDGMENT OF THE SUPREME COURT ON THIS ISSUE AND AS SUCH, THEY HAD PLACED RELIANCE ON THE JUDGMENT OF S .A. BUILDERS LTD. VS CIT AND ANOTHER (P&H) REPORTED IN 269 ITR 535 WHICH HAS BEEN EXTRACTED AT PAGES 3 AND 4 OF TH E JUDGMENT. THE JUDGMENT OF S.A. BUILDERS REPORTED IN 269 ITR 535 ALREADY STANDS SET ASIDE BY THE HONBLE APE X COURT AS S.A. BUILDERS VS. CIT (SUPRA). HERE, WE AL SO SEEK TO PLACE RELIANCE ON THE JUDGEMENT OF APEX COURT IN THE ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 8 CASE OF CIT V MODI INDS REPORTED IN 40 STC 173 WHER EIN IT HAS BEEN HELD THAT, ORDER OF APEX COURT IS TO BE FO LLOWED, EVEN IF THE HONBLE HIGH COURT HAS SENT THE REFEREN CE FOR A PARTICULAR PURPOSE. IN VIEW THEREOF, WE ARE OF THE CONSIDERED OPINION THAT IN THE INSTANT CASE, DISALL OWANCE HAD BEEN MADE BY THE LOWER AUTHORITIES WITHOUT APPRECIATING THE FACTS OF THE CASE AND THE PROVISIO NS OF LAW AND HENCE THE DISALLOWANCE OF INTEREST OF RS. 32,98 ,500/- IS THEREFORE, DIRECTED TO BE DELETED. AS THE IDENTICAL ISSUE HAS BEEN ADJUDICATED BY ITAT CHANDIGARH BENCH, RESPECTFULLY FOLLOWING THE ABOVE DECISION, T HE APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 842/CHANDI/2009 ASSESSEES APPEAL NOW, WE WOULD DEAL WITH THE APPEAL FILED BY THE ASS ESSEE. 8. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1 A) THAT THE LD. CIT(A) PATIALA HAS ERRED IN CON FIRMING THE ADDITION OF RS. 8,81,153/- AS PER PARA 3 OF THE ORDER U/S 250(6) OF INCOME-TAX ACT ON ACCOUNT OF INTEREST FR EE LOAN TO SUBSIDIARY COMPANY. B) THAT WITHOUT PREJUDICE TO THE ABOVE THE INTERE ST DISALLOWED@ 18% OF INTEREST FREE LOAN IS MOST EXCESSIVE. 2 THAT THE PART ORDER IS AGAINST THE PROVISIONS OF LAW AND FACTS OF THE CASE AND RIGHT IS RESERVED TO ASSAIL T HE SAME ON SUCH OTHER GROUNDS AS MAYBE ADVANCED AT THE TIME OF HEARING FOR WHICH THE APPELLANT REQUEST TO LEAVE TO AMEND, VARY FROM OR ADD TO THE GROUND OF APPEAL HEREIN ABOVE APPEARING. 9. BRIEF FACTS OF THE CASE ARE THAT DURING ASSESSME NT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS. 4,39,20,000/- IN THE RETURN OF INC OME ON ACCOUNT OF INTEREST PAID / PAYABLE ON LOANS RAISED FROM BANKS AND CORPORATE BODIES. THE AO HAS DISALLOWED INTEREST AMOUNTING T O RS. ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 9 71,27,000/- AS PER PARA 4 OF THE ASSESSMENT ORDER O N ACCOUNT OF INTEREST-FREE LOANS ADVANCED TO ITS SUBSIDIARIES AS PER DETAILS GIVEN BELOW: NAME OF THE SUBSIDIARY CO AS ON 1.4.05 AS ON 31. 3.06 (AMOUNT IN RS.) GOODS STAR CREDIT & PORTFOL 48,07,044 48,07,044 HARYANA TELECOM LTD 3,47,00,000 3,47 ,00,000 ICL TOWER LTD 88,251 88,251 3,95,95,295 3,95,95,295 FROM THE ABOVE DETAILS, THE AO CONCLUDED THAT ASSES SEE HAD DIVERTED INTEREST BEARING LOANS, FOR NON-BUSINESS P URPOSES AND HAD CHARGED, NO INTEREST, ON THESE LOANS GIVEN TO ITS S UBSIDIARY COMPANIES. HE, FURTHER, HELD THAT WHEN THE ASSESSE E HAD CLAIMED A HUGE DEDUCTION, ON ACCOUNT OF INTEREST PAID / PAYAB LE, ON LOANS RAISED FROM BANKS AND CORPORATE BODIES, THEN, IT IS NOT TENABLE THAT THE ASSESSEE WOULD ADVANCE INTEREST FREE LOANS, TO SISTER CONCERNS. HE, THEREFORE DISALLOWED THE AMOUNT OF RS. 71,27,00 0/- @ 18% OF THE ABOVE MENTIONED LOANS. 10. THE FINDINGS OF LD. CIT(A) ARE REPRODUCED HERE UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE, RIVAL SUB MISSIONS AND COUNTER COMMENTS THEREON. AS REGARDS TO LOAN IN TH E CASE OF GOOD STAR CREDIT & PORTFOLIO PVT LTD AND ICL TOWERS LTD IS CONCERNED, I DO NOT AGREE WITH THE CONTENTION OF TH E APPELLANT THAT THE SAME CANNOT BE DISALLOWED AS NO INTEREST W AS DISALLOWED IN ASSESSMENT YEAR 2005-06. I AM OF THE FIRM VIEW ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 10 THAT EVERY YEAR IS AN INDEPENDENT YEAR AND, AS SUCH , INTEREST ON THESE TWO LOANS HAS BEEN RIGHTLY DISALLOWED BY T HE AO. HENCE, DISALLOWANCES OF INTEREST AMOUNTING TO RS. 8 ,81,153/- IS CONFIRMED. FURTHER, AS FAR AS LOAN TO HARYANA T ELECOM LTD IS CONCERNED, I AM BOUND BY THE ORDER OF THE INCOME -TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A, CHANDIGARH AND, AS SUCH, THE AO IS DIRECTED TO DELETE THE AMOUNT OF IN TEREST DISALLOWED ON THE SAID LOAN AMOUNTING TO RS. 62,45, 847/-. 3.4 HENCE, GROUND OF APPEAL IS PARTLY ALLOWED. 11. THE AR FOR THE ASSESSEE SUBMITTED THAT THE LO ANS ARE OLD AND THE ADDITION ON ACCOUNT OF DISALLOWANCES OF INTERES T CANNOT BE MADE IN THE CURRENT THE ASSESSMENT YEAR, UNDER REFERENCE . HE WAS FAIR ENOUGH TO STATE THAT AS FAR AS, LOAN AGAINST ICL TO WER LTD IS CONCERNED, THE ISSUE OF IMPUGNED DISALLOWANCES OF I NTEREST HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE DECISION O F HON'BLE JURISDICTIONAL HIGH COURT AND THE APPELLANT HAD FIL ED SLP BEFORE THE HON'BLE SUPREME COURT AND THE SAME HAS BEEN ADMITTE D, (PHOTOCOPY OF HON'BLE SUPREME COURT ORDER DATED 19. 9.2009 GRANTING LEAVE FILED). 12. THE DR, ON THE OTHER HAND, VEHEMENTLY CONTEND ED THAT LOAN HAS NOT BEEN GIVEN FOR ANY BUSINESS EXPEDIENCY BUT FOR NON- BUSINESS PURPOSE. THEREFORE, THE DECISION OF HON'B LE SUPREME COURT, IN THE CASE OF S.A. BUILDERS V. CIT, 288 ITR 1, IS NOT APPLICABLE TO THE FACTS OF THE CASE. ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 11 13 (I) BOTH THE AR AND THE DR WERE OF THE OPINI ON THAT THE LOAN GIVEN TO HARYANA TELECOM LTD. IS COVERED BY TH E DECISION OF THE TRIBUNAL IN ITA NO. 237/CHANDI/2009, ASSESSMENT YEAR 2005-06 IN THE ASSESSEES OWN CASE, VIDE ORDER DATED 28.11. 2008 IN FAVOUR OF THE ASSESSEE. 13 (II) THE ISSUE OF DISALLOWANCES IN THE CASE OF I CL TOWERS LTD. IS DECIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT AGAINST THE ASSESSEE ASS ADMITTED IN THE COURSE OF PRESENT APPE LLATE PROCEEDINGS. 14. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE , RELEVANT PAPER BOOK FILED BY THE ASSESSEE AND THE SUBMISSION S MADE BY THE CONTENDING PARTIES. AS FAR AS INTEREST FREE LOAN T O HARYANA TELECOM LTD. IS CONCERNED THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THEREFORE, RESPECTFULLY FOL LOWING THE DECISION OF ITAT CHANDIGARH DATED 12.8.2010 IN ITA NO. 537/CHANDI/2010, IN THE ASSESSEES CASE THE ISSUE I S DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE D ECISION IS REPRODUCED HEREUNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY. AFTER HAVING HEARD THE PARTIES AND PERUSING THE ORD ERS OF THE LOWER AUTHORITIES, IT IS CLEAR THAT THE FACTUAL POS ITION IN RELATION TO THE AMOUNT ADVANCED TO M/S HARYANA TELECOM LTD., A SUBSIDIARY COMPANY, STANDS ON SIMILAR FOOTING AS WA S IN THE ASSESSMENT YEAR 2005-06, WHICH HAS BEEN A SUBJECT M ATTER OF CONSIDERATION BY THE TRIBUNAL VIDE ITS ORDER DATED 28.11.2008 ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 12 (SUPRA). THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL IS WORTHY OF NOTICE : 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD. IN THE INSTANT CASE, REHABI LITATION SCHEME WAS SANCTIONED BY THE BIFR ON 05.07.2001. A COPY OF THE SUMMARY RECORD OF THE PROCEEDINGS OF THE HEA RING HELD ON 5.7.2001 BEFORE BIFR HAVE BEEN PLACED IN TH E PAPER BOOK. IT HAS BEEN HELD IN THE AFORESAID PROC EEDINGS IN PARA 22 AS UNDER: 22. AFTER HEARING THE SUBMISSIONS AND NO CAREFULLY CONSIDERING THE OBSERVATIONS MADE BY ALL IN TODAYS HEARING AND THE MATERIAL ON RECORD, THE BENCH SANCTIONED THE SCHEME U/S 18(4) OF THE ACT AND THE SANCTIONED SCHEME WILL COME INTO FORCE WITH IMMEDIATE EFFECT. 9. IT IS THUS EVIDENT FROM THE ABOVE THAT, BIFR SANCTIONED THE SCHEME UNDER SECTION 18(4) OF THE AC T AND THE SANCTIONED SCHEME CAME INTO FORCE WITH IMMEDIAT E EFFECT. A COPY OF THE SANCTIONED SCHEME HAS ALSO BE EN PLACED IN THE PAPER BOOK AT PAGES 25 TO 56. FROM TH E PERUSAL OF THE SCHEME, IT IS SEEN THAT THE APPELLAN T COMPANY WAS TO PROVIDE PROMOTERS CONTRIBUTION OF A SUM OF RS. 3,50,00,000/- TO ITS SUBSIDIARY COMPANY, NAMELY , M/S HARYANA TELECOM LTD. INFACT, THE SCHEME ALSO PROVID ES IN PARA 6.2 AS UNDER: D) THE COMPANY SHALL SATISFY MA THAT THE PHYSICAL PROGRESS AND ALL ASPECTS OF COST OF THE SCHEME/MEANS OF FINANCE OF THE SCHEME IS COMPLIED WITH AS PER SCHEDULE. TO THIS END, THE COMPANY SHALL FURNISH TO MA SUCH INFORMATION AND DATA AS MAY BE REQUIRED BY IT AT QUARTERLY INTERVALS. ANY FINANCIAL SHORTFALL ARISING OUT OF THE DELAYED IMPLEMENTATION OF THE SCHEDULE OR FOR ANY OTHER REASON SHALL B MET BY THE COMPANY/PROMOTERS WITHOUT ANY RECOURSE TO FI/BANKS OR SEEKING ANY FURTHER RELIEFS/CONCESSIONS INCLUDING MARGIN MONEY FROM THEM THAN WHAT HA ALREADY BEEN PROVIDED FOR IN THE SCHEME WITHIN A PERIOD NOT EXCEEDING THREE MONTHS. 10. IT IS THEREFORE, CLEAR THAT, THE ASSESSEE WAS O BLIGED TO PROVIDE FUNDS TO THE SUBSIDIARY COMPANY UNDER A ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 13 REHABILITATION SCHEME SANCTIONED BY BIFR. IN OTHER WORDS, THESE FUNDS WERE PROVIDED BY THE ASSESSEE TO ITS SUBSIDIARY COMPANY, NAMELY M/S HARYANA TELECOM LTD. , AS PER THE SCHEME FOR REHABILITATION SANCTIONED BY THE BIFR. OBVIOUSLY, THE APPELLANT CAN BE SAID TO HAVE A DEEP INTEREST IN THE REHABILITATION OF THE BUSINESS OF T HE SUBSIDIARY COMPANY. OSTENSIBLY, THE FUNDS HAVE BEEN PUT TO USE BY THE SUBSIDIARY FOR ITS BUSINESS. IT IS TH US A CASE WHERE FUNDS HAVE BEEN ADVANCED BY THE ASSESSEE TO I TS SUBSIDIARY COMPANY ON GROUNDS OF COMMERCIAL EXPEDIE NCY. IN SOMEWHAT SIMILAR SITUATION, APEX COURT IN S.A. B UILDERS (SUPRA) OBSERVED AS UNDER: WE WISH TO MAKE IT CLEAR THAT IT IS NOT OUR OPINION THAT IN EVERY CASE INTEREST ON BORROWED LOAN HAS TO BE ALLOWED IF THE ASSESSEE ADVANCES IT TO A SISTER CONCERN. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE RESPECTIVE CASE. FOR INSTANCE, IF THE DIRECTORS OF THE SISTER CONCERN UTILIZE THE AMOUNT ADVANCED TO IT BY THE ASSESSEE FOR THEIR PERSONAL BENEFIT, OBVIOUSLY IT CANNOT BE SAID THAT SUCH MONEY WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY. HOWEVER, MONEY CAN BE SAID TO BE ADVANCED TO A SISTER CONCERN FOR COMMERCIAL EXPEDIENCY IN MANY OTHER CIRCUMSTANCES (WHICH NEED NOT BE ENUMERATED HERE). HOWEVER, WHERE IT IS OBVIOUS THAT A HOLDING COMPANY HAS A DEEP INTEREST IN ITS SUBSIDIARY, AND HENCE IF THE HOLDING COMPANY ADVANCES BORROWED MONEY TO A SUBSIDIARY AND THE SAME IS USED BY THE SUBSIDIARY FOR SOME BUSINESS PURPOSES, THE ASSESSEE WOULD, IN OUR OPINION, ORDINARILY BE ENTITLED TO DEDUCTION OF INTEREST ON ITS BORROWED LOANS. 11. FROM THE AFORESAID, IT IS SAFE TO DEDUCE THAT, ALL THAT IS REQUIRED TO BE SEEN IS WHETHER THE MONEY HAS BEE N ADVANCED BY THE ASSESSEE ON GROUNDS OF COMMERCIAL EXPEDIENCY OR NOT? IF IT IS SO, THEN NO DISALLOWANC E OF INTEREST IS TENABLE AND THE ASSESSEE WOULD BE ENTIT LED TO CLAIM OF DEDUCTION OF INTEREST ON BORROWED LOANS. I N THE INSTANT CASE, AS IS EVIDENT FROM THE FACTS STATED A BOVE, IT IS A CASE WHERE FUNDS HAVE BEEN ADVANCED BY THE ASS ESSEE TO ITS SUBSIDIARY COMPANY ON THE GROUND OF COMMERCI AL EXPEDIENCY. IT MAY BE RELEVANT TO STATE HERE THAT, THIS FACT WAS DULY STATED BEFORE ASSESSING OFFICER, AS WOULD BE EVIDENT FROM THE REPLY FILED BEFORE ASSESSING OFFIC ER DATED 09.10.2007 AS UNDER: A SUM OF RS. 3,47,00,000/- WAS ADVANCED TO HARYANA TELECOM LTD. ROHTAK ON VARIOUS DATES ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 14 AS PER DETAILS ATTACHED. HARYANA TELECOM LTD. IS A SUBSIDIARY OF INDUSTRIAL CABLES (I) LTD. IT WAS DECLARED SICK AS PER SICK INDUSTRIAL COMPANIES SPECIAL PROVISIONS ACT, 1985 VIDE BOARD FOR FINANCIAL & INDUSTRIAL RECONSTRUCTION (BIFR) ORDER DATED 28-06-1999. THE AMOUNT UNDER REFERENCE WAS PAID BY INDUSTRIAL CABLES (INDIA) LTD. IN PURSUANCE OF ORDER OF BIFR VIDE THEIR ORDER DATED 27-08-2001 AS PROMOTERS CONTRIBUTION FOR REHABILITATION SCHEME OF HARYANA TELECOM LTD. REFERENCE MAY BE MADE TO PARA 3.0 OF THE ORDER DATED 27-08-2001. IN VIEW OF THE FACT STATED ABOVE, NO INTEREST-FREE ADVANCE HAS BEEN MADE TO A SUBSIDIARY COMPANY, BUT THE AMOUNT HAS BEEN PAID UNDER LEGAL OBLIGATION IN VIEW OF THE ORDER OF BIFR. MOREOVER, AS AFORESAID, HARYANA TELECOM LTD. IS A SUBSIDIARY OF YOURE ASSESSEE COMPANY AND THE AMOUNT HAS BEEN PAID IN ADDITION TO THE ORDER OF BIFR FOR COMMERCIAL EXPEDIENCY AND, AS SUCH, IS FULLY COVERED BY THE JUDGEMENT OF THE APEX COURT IN THE CASE OF SA BUILDERS VS. CIT, 288 ITR 1. COPIES OF ORDERS OF BIFR REFERRED TO ABOVE ARE ENCLOSED. 12. INFACT, THIS SUBMISSION WAS ALSO REITERATED BEF ORE CIT(A). HOWEVER, BOTH THE AUTHORITIES BELOW OVERLOO KED THE ABOVE FACTUAL POSITION AND, HELD THE DISALLOWANCE O F THE INTEREST TO BE TENABLE. WE ARE OF THE RESPECTFUL OP INION THAT, JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF THE APPELLANT FOR ASSESSMENT YEARS 1991-92, 1992-93 , 1993-94 AND 1996-97 ARE NO DOUBT BINDING BUT ONLY W HEN THE FACTS OF THE CASE OF THE APPELLANT IN THE INSTA NT YEAR AND, THOSE YEARS ARE IDENTICAL. IN THE PRESENT CASE , IT IS UNDISPUTED THAT THE MONEY HAS BEEN ADVANCED BY THE ASSESSEE COMPANY UNDER A SANCTIONED SCHEME OF BIFR AND IT IS A CASE WHERE MONEY HAD BEEN ADVANCED ON THE G ROUND OF COMMERCIAL EXPEDIENCY. IT IS NOT A CASE AND NOR IT CAN BE HELD THAT, THE MONEY HAD BEEN ADVANCED BY THE ASSES SEE FOR NON-BUSINESS PURPOSES. INFACT, THERE IS NO SUCH FINDING EITHER BY ASSESSING OFFICER OR CIT(A) SO AS TO ENAB LE US TO CONCLUDE THAT MONEY HAD BEEN DIVERTED FOR NON-BUSIN ESS PURPOSES. ON THE CONTRARY, MECHANICAL RELIANCE ON T HE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IS ALSO NOT A CORRECT WAY OF FOLLOWING THE JUDGEMENT. A GAI NFUL REFERENCE CAN BE MADE TO THE JUDGMENT OF THE HONBL E PUNJAB & HARYANA HIGH COURT IN THE CASE OF THE APPE LLANT FOR ASSESSMENT YEAR 1995-96, WHEREIN THE JUDGEMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF THE APPELLANT IN ITA NO. 88 OF 2004 DATED 28.03.2006 WA S NOT FOLLOWED AND, IT WAS HELD AS UNDER: WE MAY NOTICE THAT ALTHOUGH THE PRINCIPLE OF CONSISTENCY IS APPLICABLE AND THE DECISION ON THE ISSUE HAVING BEEN TAKEN IN FAVOUR OF THE ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 15 ASSESSEE FOR THE PREVIOUS YEAR THE SAME HAS TO BE FOLLOWED, BUT EACH ASSESSMENT YEAR BEING AN INDEPENDENT ONE, IN VIEW OF CONSCIOUS JUDGMENT OF THIS COURT ON THE ISSUE AFTER REFERRING TO OTHER JUDGMENTS AND IN ABSENCE OF ANY DIRECT JUDGMENT OF THE HONBLE SUPREME COURT, WE ARE OF THE VIEW THAT THE EARLIER ORDER OF THIS COURT DISMISSING APPEAL OF THE REVENUE IN LIMINE CANNOT BE TAKEN TO BE CONCLUSIVE. 13. IT IS THUS EVIDENT THAT, THE HONBLE COURT THUS HELD THAT FACTS OF EACH YEAR ARE INDEPENDENT AND HAVE TO BE T AKEN INTO ACCOUNT FOR DETERMINATION WHETHER THE DISALLOWANCE OF INTEREST IS TENABLE OR NOT. IN THE INSTANT CASE SINCE WE FIN D IN THE YEAR UNDER CONSIDERATION THAT FRESH ADVANCES HAVE BEEN M ADE ON THE GROUND OF COMMERCIAL EXPEDIENCY, THUS THE INTEREST DISALLOWED BY THE ASSESSING OFFICER IS UNJUSTIFIED AND THUS IS NOT SUSTAINABLE. MOREOVER, IT IS ALSO EVIDENT FROM THE AFORESAID OBSERVATIONS OF THE HONBLE HIGH COURT THAT THERE W AS NO DIRECT JUDGMENT OF THE SUPREME COURT ON THIS ISSUE AND AS SUCH, THEY HAD PLACED RELIANCE ON THE JUDGMENT OF S.A. BUILDER S LTD. VS CIT AND ANOTHER (P&H) REPORTED IN 269 ITR 535 WHICH HAS BEEN EXTRACTED AT PAGES 3 AND 4 OF THE JUDGMENT. THE JUD GMENT OF S.A. BUILDERS REPORTED IN 269 ITR 535 ALREADY STAND S SET ASIDE BY THE HONBLE APEX COURT AS S.A. BUILDERS VS. CIT (SUPRA). HERE, WE ALSO SEEK TO PLACE RELIANCE ON THE JUDGEME NT OF APEX COURT IN THE CASE OF CIT V MODI INDS REPORTED IN 40 STC 173 WHEREIN IT HAS BEEN HELD THAT, ORDER OF APEX COURT IS TO BE FOLLOWED, EVEN IF THE HONBLE HIGH COURT HAS SENT T HE REFERENCE FOR A PARTICULAR PURPOSE. IN VIEW THEREOF, WE ARE O F THE CONSIDERED OPINION THAT IN THE INSTANT CASE, DISALL OWANCE HAD BEEN MADE BY THE LOWER AUTHORITIES WITHOUT APPRECIA TING THE FACTS OF THE CASE AND THE PROVISIONS OF LAW AND HEN CE THE ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 16 DISALLOWANCE OF INTEREST OF RS. 32,98,500/- IS THER EFORE, DIRECTED TO BE DELETED. 15 (I) THE SAME ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE IN ITA NO. 237/CHANDI/2008 , ASSESSMENT YEAR 2005-06. 15 (II) IN VIEW OF THE RATIO LAID DOWN IN THE ABOVE CASE, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 16. AS FAR AS, THE INTEREST FREE-LOAN TO ICL TOWER LTD IS CONCERNED, THE ISSUE IS ADJUDICATED AGAINST THE ASSESSEE BY TH E HON'BLE JURISDICTIONAL HIGH COURT AS ADMITTED BY THE AR, FOR THE ASSESSEE, AT THE TIME OF HEARING BEFORE THE BENCH. FURTHER T HE AR FOR THE ASSESSEE SUBMITTED A COPY OF PHOTOCOPY OF SLP FILED AGAINST THE ORDER OF HON'BLE JURISDICTIONAL HIGH COURT. HOWEVE R, AS OF NOW THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IS BI NDING AND HAS NOT BEEN REVERSED BY THE HON'BLE APEX COURT. THEREFORE , RESPECTFULLY FOLLOWING THE DECISION DATED 21.12.2006, AT 2005-06 THE HON'BLE JURISDICTIONAL HIGH COURT, THE ISSUE IN QUESTION IS DECIDED IN FAROUR OF THE REVENUE AND AGAINST THE ASSESSEE. 17. FURTHER THE LD. CIT(A), CONFIRMED, DISALLOWANCE OF INTEREST, TO THE TUNE OF RS. 8,81,153/-, IN RESPECT OF INTEREST FREE LOAN ADVANCED TO GOODS STAR CREDIT AND PORTFOLIO PVT LTD. THE CO NTENTION OF THE ASSESSEE THAT THE LOAN PERTAINS TO EARLIER YEARS, C ANNOT BE ACCEPTED AS PLAUSIBLE EXPLANATION. IN THE LIGHT OF DECISION OF HON'BLE JURISDICTIONAL HIGH COURT, IN THE CASE OF CIT V. AB HISHEK INDUSTRIES, 286 ITR 1 (P & H), THE ISSUE IN QUESTION, IS DECIDE D, IN FAVOUR OF THE REVENUE. THE RELEVANT PORTION OF THE DECISION OF H ON'BLE ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 17 JURISDICTIONAL HIGH COURT, IS REPRODUCED, HEREUNDER , FOR THE PURPOSE OF APPRECIATING THE SAME: BUSINESS EXPENDITURE INTEREST ON BORROWED CAPITA L CONDITION PRECEDENT FOR GRANT BORROWED CAPITAL MU ST BE USED FOR BUSINESS PURPOSES LOANS ADVANCED INTERES T-FREE TO SISTER CONCERNS WHILE PAYMENT OUTSTANDING ON BORROWINGS BY COMPANY INFERENCE THAT ADVANCES WER E FROM BORROWED FUNDS AND FOR NON-BUSINESS PURPOSES ONUS ON ASSESSEE TO SHOW BORROWINGS USED FOR BUSINE SS PURPOSES NOT ON REVENUE TO SHOW NEXUS BETWEEN BORROWINGS AND ADVANCES THAT ADVANCES BY COMPANY WERE OUT OF ITS OWN FUNDS OF SHARE CAPITAL OR OUT O F MIXED FUNDS, NOT SUFFICIENT TO DISCHARGE ONUS INTEREST TO EXTENT RELATING TO SUMS ADVANCED INTEREST-FREE TO BE DISAL LOWED INCOME-TAX ACT, 1961, S. 36(1)(III). SECTION 36(1)(III) OF THE INCOME-TAX ACT PROVIDE FO R DEDUCTIONS OF INTEREST ON LOANS RAISED FOR BUSINESS PURPOSES. ONCE THE ASSESSEE CLAIMS ANY SUCH DEDUCTION IN THE BOOKS OF ACCOUNT, THE ONUS WILL BE ON THE ASSESSEE TO SATISFY THE AO THAT WHATEVER LOANS WERE RAISED BY THE ASSESSEE WERE USE D FOR BUSINESS PURPOSES. IF IN THE PROCESS OF EXAMINATIO N OF GENUINENESS OF SUCH A DEDUCTION, IT TRANSPIRES THA T THE ASSESSEE HAD ADVANCED CERTAIN FUNDS TO SISTER CONCE RNS OR ANY OTHER PERSON WITHOUT ANY INTEREST, THERE WOULD BE A VERY HEAVY ONUS ON THE ASSESSEE TO DISCHARGE BEFORE THE AO TO THE EFFECT THAT IN SPITE OF PENDING TERM LOANS AND WORK ING CAPITAL LOANS ON WHICH THE ASSESSEE IS INCURRING LIABILITY TO PAY INTEREST, THERE WAS JUSTIFICATION TO ADVANCE LOANS TO SISTER CONCERNS FOR NON-BUSINESS PURPOSES WITHOUT ANY INTE REST AND ACCORDINGLY THE ASSESSEE SHOULD BE ALLOWED DEDUCTIO N OF INTEREST BEING PAID ON THE LOANS RAISED BY IT TO TH AT EXTENT. THE ENTIRE MONEY IN A BUSINESS ENTITY COMES IN A CO MMON KITTY. MONIES RECEIVED AS SHARE CAPITAL OR AS TERM LOAN OR AS WORKING CAPITAL LOAN OR AS SALE PROCEEDS DO NOT HAV E A ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 18 DIFFERENT COLOUR. WHATEVER ARE THE RECEIPTS IN THE BUSINESS HAVE THE COLOUR OF BUSINESS RECEIPTS AND HAVE NO SE PARATE IDENTIFICATION. THE ONLY THING SUFFICIENT TO DISAL LOW THE INTEREST PAID ON THE BORROWINGS TO THE EXTENT THE AMOUNT IS LENT TO A SISTER CONCERN WITHOUT CARRYING ANY INTEREST FOR NO N-BUSINESS PURPOSES WOULD BE THAT THE ASSESSEE HAS SOME LOANS OR OTHER INTEREST BEARING DEBTS TO BE REPAID. IN CASE THE A SSESSEE HAD A SURPLUS WHICH, ACCORDING TO IT, COULD NOT BE REPA ID PREMATURELY TO ANY FINANCIAL INSTITUTION, IT WOULD EITHER BE REQUIRED TO BE CIRCULATED AND UTILIZED FOR THE PURP OSE OF BUSINESS OR TO BE INVESTED IN A MANNER IN WHICH IT GENERATES INCOME AND NOT DIVERTED TOWARDS SISTER CONCERNS FRE E OF INTEREST. THIS WOULD RESULT IN NOT PRESENTING THE TRUE AND CORRECT PICTURE OF THE ACCOUNTS OF THE ASSESSEE AS AT THE COST BEING INCURRED BY THE ASSESSEE, THE SISTER CONCERN WOULD BE ENJOYING THE BENEFITS THEREOF. THERE SHOULD BE NEX US BETWEEN THE USE OF BORROWED FUNDS FOR THE PURPOSE OF BUSINE SS TO CLAIM DEDUCTION U/S 36(1)(III) OF THE ACT. THAT BEING TH E POSITION, THERE IS NO ESCAPE FROM THE FINDING THAT INTEREST B EING PAID BY THE ASSESSEE TO THE EXTENT THE AMOUNTS ARE DIVERTED TO SISTER CONCERNS ON INTEREST FREE BASIS ARE TO BE DISALLOWE D. IF THE PLEA OF THE ASSESSEE IS ACCEPTED THAT THE I NTEREST FREE ADVANCES MADE TO THE SISTER CONCERNS FOR NON-B USINESS PURPOSES WERE OUT OF ITS OWN FUNDS IN THE FORM OF C APITAL INTRODUCED IN BUSINESS, THAT AGAIN WILL SHOW A CAMO UFLAGE BY THE ASSESSEE AS AT THE TIME OF RAISING OF LOAN, THE ASSESSEE WOULD SHOW THE FIGURES OF CAPITAL INTRODUCED BY IT AS A MARGIN FOR LOANS BEING RAISED AND AFTER THE LOANS ARE RAIS ED, WHEN SUBSTANTIAL AMOUNTS ARE DIVERTED TO SISTER CONCERNS FOR NON- BUSINESS PURPOSES WITHOUT INTEREST, A PLEA WOULD B E RAISED THAT THE AMOUNT ADVANCED WAS OUT OF ITS CAPITAL, WH ICH IN FACT STOOD EXHAUSTED IN SETTING UP OF THE UNIT. SUCH A PLEA MAY BE ACCEPTABLE AT A STAGE WHEN NO LOANS HAVE BEEN RAISE D BY THE ASSESSEE AT THE TIME OF DISBURSEMENT OF FUNDS. THI S WOULD DEPEND ON THE FACTS OF EACH CASE. ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 19 THE VIEW THAT WHERE THE AMOUNT IS ADVANCED FROM A MIXED ACCOUNT OR SHARE CAPITAL OR SALE PROCEEDS OR PROFITS, IT WOULD NOT BE DEEMED DIVERSION OF BORROWED CAPITAL O R THAT THE REVENUE HAD NOT BEEN ABLE TO ESTABLISH NEXUS OF THE FUNDS ADVANCED TO THE SISTER CONCERNS WITH THE BORROWED F UNDS, IS NOT CORRECT. ONCE IT IS BORNE OUT FROM THE RECORD THAT THE ASSESSEE HAD BORROWED CERTAIN FUNDS ON WHICH LIABIL ITY TO PAY TAX IS BEING INCURRED AND ON THE OTHER HAND, CERTAI N AMOUNTS HAD BEEN ADVANCED TO SISTER CONCERNS OR OTHERS WITH OUT CARRYING ANY INTEREST AND WITHOUT ANY BUSINESS PURP OSE, THE INTEREST TO THE EXTENT THE ADVANCE HAD BEEN MADE WI THOUT CARRYING ANY INTEREST IS TO BE DISALLOWED U/S 36(1) (III) OF THE ACT. CIT V. TIN BOX CO. (2003) 260 ITR 637 (DELHI), CIT V. ORISSA CEMENT LTD. (2001) 252 ITR 878 (DELHI), CIT V. RADICO KHAITAN LTD. (2005) 274 ITR 354 (ALL), CIT V. PREM HEAVY ENGINEERING WORKS P. LTD (2006) 285 ITR 554 (ALL), CIT V. BRITANNIA INDUSTRIES LTD. (2006) 280 ITR 525 (CAL) AND R.D. JOSHI AND CO. V. CIT (2001) 251 ITR 332 (MP) DISSEN TED FROM. THE ASSESSEE, A PUBLIC LIMITED COMPANY, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 1993-94 SHOWING I TS INCOME AS NIL. SUBSEQUENTLY, A REVISED RETURN WA S FILED DECLARING A LOSS OF RS. 4,53,07,410/-. THE ASSESSM ENT WAS COMPLETED ASSESSING THE LOSS AT RS. 96,81,213/-, IN TER ALIA, DISALLOWING INTEREST U/S 36(1)(III) OF THE ACT ON T HE GROUND OF INTEREST-FREE PURPOSES AND TREATING THE RECEIPT OF SALES TAX SUBSIDY BY THE ASSESSEE AS REVENUE RECEIPT, REJECTI NG THE ASSESSEES EXPLANATION THAT THE LOANS WERE GIVEN OU T OF THE COMPANYS OWN FUNDS REPRESENTED BY SHARE CAPITAL AN D THAT NO BORROWED FUNDS HAD BEEN UTILIZED IN GIVING THE INTE REST FREE LOANS, THAT THE INTEREST-FREE LOANS WERE ADVANCED TO THE SISTER CONCERNS BEFORE THE COMMENCEMENT OF PRODUCTION AND ALSO AFTER THE COMMENCEMENT OF PRODUCTION. THE TRIBUNAL HELD IN FAVOUR OF THE ASSESSEE. ON APPEAL CONTENDING, INTE R ALIA, THAT THE TAX EFFECT IN THE PRESENT CASE BEING NIL AS E VEN IF THE DEDUCTIONS IN QUESTION WERE DISALLOWED, NO TAX WOUL D BE ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 20 PAYABLE AND SINCE BY CIRCULARS OF THE BOARD A LIMIT HAD BEEN PRESCRIBED FOR FILING APPEALS BEFORE THE COURT, THE APPEAL SHOULD NOT BE ENTERTAINED: HELD, (I) THAT THE SHARE CAPITAL IS MEANT TO BE US ED FOR PRODUCTIVE USE IN THE BUSINESS. IF THE SHARE CAPIT AL, ACCORDING TO THE ASSESSEE, WAS SURPLUS AND IT COULD PART WITH THE SAME TO ITS SISTER CONCERN FOR NON-BUSINESS PURPOSES WIT HOUT ANY INTEREST, THERE WAS NO NEED TO RAISE THE LOANS TO T HAT EXTENT AND THE AMOUNT OF SUCH SHARE CAPITAL SHOULD HAVE BE EN UTILIZED FOR THE PROJECT ITSELF. IN CASE THE ASSESS EE HAD NOT ADVANCED LOANS TO ITS SISTER CONCERN ON INTEREST-FE E BASIS, EVEN IF THE ALLEGED SURPLUS AMOUNT COULD NOT BE REP AID TO THE FINANCIAL INSTITUTION BEFORE THE SCHEDULED DATE AS FAR AS THE TERM LOAN WAS CONCERNED, THE INTEREST BEING PAID BY THE AWE ON THE WORKING CAPITAL COULD HAVE CERTAINLY BEEN SA VED TO THAT EXTENT. THE BORROWING OF THE FUNDS BY THE COMPANY TO THAT EXTENT WAS NOT FOR THE PURPOSE OF BUSINESS AND THER E WAS NOTHING ON RECORD TO SUGGEST THAT AMOUNTS WERE ADVA NCED TO THE SISTER CONCERNS TO ADVANCE SOME BUSINESS OBJECT . ACCORDINGLY, THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION OF THE INTEREST ON THE BORROWINGS TO THE EXTENT THO SE WERE DIVERTED TO SISTER CONCERNS OR OTHER PERSONS WITHOU T INTEREST. 18. IN VIEW OF THE ABOVE DISCUSSION, IT IS EVIDENT THAT THE ISSUE IS COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL H IGH COURT IN THE CASE OF ABHISHEK INDUSTRIES (SUPRA). RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT, THE ISSUE IS DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE AS SESSEE. ITA NO. 799 & 842/CHANDI/2009 DCIT V. INDUSTRIAL CABLES (INDIA) LTD 21 19 IN VIEW OF ABOVE DISCUSSIONS, THE ISSUES ARE ADJ UDICATED AS INDICATED ABOVE. 20 IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 30.8.2011 SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNANT MEMBER CHANDIGARH, THE 30.8.2011 SURESH COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR