ACIT, Jaipur V. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD., Jaipur

ITA 913/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99323 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 27-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A B DANGAYACH C A DHK
• Keywords: Opportunity of being heard; Commercial expediency
• Section: 80IB

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 913 & 914/JP/2013 FU/KZKJ.K O'K Z @ ASSTT. YEAR : 2009-10 & 2010-11. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2, JAIPUR. CUKE VS. M/S. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD., GOLECHA TRADE CENTRE, M.I. ROAD, JAIPUR. LFKK;H YS[KK LA - @THVKBZVKJ LA - @ PAN/GIR NO. AAACU 8461 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI AJAY MALIK (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI A.B. DANGAYACH, (C.A.) LQUOKBZ DH RKJH[K @ DATE OF HEARING : 07.09.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 24/09/2015. VKNS'K@ ORDER PER SHRI T.R. MEENA, A.M. THESE ARE TWO APPEALS FILED BY THE REVENUE EMANATING FROM THE ORDER OF LD. CIT (A)-I, JAIPUR DATED 24.09.2013 FOR THE A.YS. 20 09-10 AND 2010-11. THE GROUNDS RAISED IN THE APPEALS ARE AS UNDER :- ITA NO. 913/JP/2013 A.Y. 2009-10 : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT (A) WAS JUSTIFIED IN ALLOWING THE DEDUC TION OF RS. 89,25,908/- U/S 80IB OF THE I.T. ACT, 1961 WHICH WAS RIGHTLY DI SALLOWED BY THE AO AS THE ASSESSEE IS NOT ENGAGED IN ANY MANUFACTURING ACTIVITY. 2 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDIT ION OF RS. 4,81,558/- MADE BY THE AO U/S 36(1)(III) OF THE I.T. ACT. ITA NO. 914/JP/2013 A.Y. 2010-11 : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT (A) WAS JUSTIFIED IN ALLOWING THE DEDUC TION OF RS. 18,35,896/- U/S 80IB OF THE I.T. ACT, 1961 WHICH WAS RIGHTLY DI SALLOWED BY THE AO AS THE ASSESSEE IS NOT ENGAGED IN ANY MANUFACTURING ACTIVITY. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDIT ION OF RS. 60,29,856/- MADE BY THE AO U/S 36(1)(III) OF THE I.T. ACT. 2. THE FIRST GROUND IN BOTH THE APPEALS FILED BY THE R EVENUE IS AGAINST THE DEDUCTION ALLOWED BY LD. CIT (A) OF RS. RS. 89,25,9 08/- AND RS. 18,35,896/- U/S 80IB OF THE I.T. ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF EXTRACTING AND PROCESSING OF SOAP STONE LUMPS AN D SOAP STONE POWDER WHICH IS USED IN VARIOUS INDUSTRIES LIKE PAPER, PAINT, SOAP, COSM ETICS, AUTOMOBILE ETC. THE RETURN OF INCOME DECLARING LOSS OF RS. 10,00,090/- FOR THE A. Y. 2009-10 AND RETURN DECLARING TOTAL INCOME OF RS. 69,46,033/- FOR A.Y. 10-11 WERE FILED ON 30.09.2009 AND 15.10.2010 RESPECTIVELY. DURING THE A.Y. 2009-10, THE ASSESSE E HAS SHOWN GP RATE OF 34.74% AND NP RATE OF 6.03% IN COMPARISON TO GP RATE OF 32.92% AND NP RATE OF 10.18% SHOWN IN THE PRECEDING YEAR I.E. A.Y. 2008-09. SIMILARLY, F OR THE A.Y. 2010-11, THE ASSESSEE HAS SHOWN GP RATE OF 34.83% AND NP RATE OF 0.49% IN COM PARISON TO GP RATE OF 34.73% AND NP RATE OF 6.05% IN THE PRECEDING YEAR I.E. A.Y . 2009-10. THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IB OF THE IT ACT AT RS. 89,25,908/- FOR THE 3 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. A.Y. 2009-10, AND RS. 18,35,896/- FOR A.Y. 2010-11. HE ALSO VIEWED THAT THE ASSESSEES BUSINESS LIKE EXCAVATION OF SOAP STONES DOES NOT COME WITHIN THE PURVIEW OF MANUFACTURING OR PRODUCTION OF AN ARTICLE OR A THIN G. THE AO GAVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE ON THIS ISSUE WHICH WAS AVAILED BY THE ASSESSEE VIDE LETTERS DATED 15.11.2011 AND 01.02.20 13. THE AO REPRODUCED THE ASSESSEES SUBMISSIONS AT PAGES 2 TO 27 OF THE ASSE SSMENT ORDER. THE AO AFTER CONSIDERING THE ASSESSEES REPLY HELD THAT THE ASSE SSEE IS NOT DOING ANY MANUFACTURE OR PRODUCTION AS DEFINED U/S 80IB OF THE ACT. AS P ER SECTION 80IB OF THE ACT, THE TERM MANUFACTURE OR PRODUCE U/S 80IB CAN BE CONSIDER ED ONLY WHEN A COMMERCIALLY NEW AND DISTINCT PRODUCT COMES INTO EXISTENCE AFTER UND ERGOING MANUFACTURING ACTIVITIES. THE AO QUOTED THE MEANING OF MANUFACTURE AS DEFINED I N THE BLACKS LAW DICTIONARY. FURTHER, THE DECISION ON MANUFACTURING IN CASE OF DCIT VS. PIO FOOD PACKERS (SC) HAS BEEN CONSIDERED BY THE AO. IN THE CASE OF CIT VS. S ESA GOA, THE HONBLE APEX COURT DISCUSSED THE WORD PRODUCTION AS DEFINED IN THE C ASE OF CHRESTINA MICA INDUSTRIES LTD. VS. STATE OF BIHAR 12 STC 150 DEFINED THE WORD PRO DUCTION, ALBEIT, IN CONNECTION WITH THE BIHAR SALES TAX ACT, 1947 HAS BEEN CONSIDERED B Y THE AO. IT HAS BEEN HELD THAT MINING ACTIVITY COUPLED WITH PROCESSES TO CHANGE TH E PHYSICAL FORM OF THE ARTICLE CANNOT AMOUNT TO MANUFACTURING OR PRODUCTION AS CONTEMPLAT ED BY THE LEGISLATURE U/S 80IB OF THE ACT. IN THE CASE OF SESA GOA LTD. (SUPRA) WHER EIN THE COMPANY WAS ENGAGED IN MINING AND EXTRACTION OF IRON ORE WHILE THE ASSESSE E COMPANY WAS ENGAGED IN EXCAVATION OF SOAPSTONE BLOCKS AND CRUSHING THEM IN TO POWDER. THE CASE OF THE ASSESSEE COMPANY DIFFERS WITH THE CASE OF M/S. SESA GOA LTD ON THIS VITAL ISSUE. THEY DO NOT BRING INTO EXISTENCE ANY NEW MATERIAL. THERE IS NO CONSUMPTION OF RAW MATERIAL 4 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. AS REQUIRED IN PROCESS OF MANUFACTURING AS HELD IN THE CASE OF CIT VS. SACS EAGLES CHICORY, 242 ITR 319 (MAD.). FURTHER IN THE CASE O F DCIT VS. BHERAGHAT MINERAL INDUSTRIES, 246 ITR 30 (SC), THE ASSESSEE WAS ENGAG ED IN THE PURCHASE OF DOLOMITE LUMPS AND CRUSHED THE SAME INTO CHIPS AND POWDER. I T WAS HELD THAT NO NEW COMMERCIAL COMMODITY WAS PRODUCED. SIMILAR ISSUE OF DISALLOWANCE OF DEDUCTION U/S 80IB WAS INVOLVED IN THE A.Y. 2004-05, 2005-06, 200 6-07 & 2007-08. THE REPLY OF THE ASSESSEE FOR ALL THESE ASSESSMENT YEARS WAS ALSO ID ENTICAL TO CLAIM DEDUCTION U/S 80IB OF THE ACT WHICH HAS BEEN CONSIDERED BY THE THEN AO AND FINALLY THE AO HAD NOT ALLOWED DEDUCTION U/S 80IB TO THE ASSESSEE. THEREF ORE, HE MADE THE ADDITION OF RS. 89,25,908/- FOR THE A.Y. 2009-10 AND RS. 18,35,896/ - FOR A.Y. 2010-11. 4. BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASSE SSEE CARRIED THE MATTER BEFORE LD. CIT (A) WHO ALLOWED THIS GROUND OF APPEA L FOR A.Y. 09-10 OF THE ASSESSEE OBSERVING AS UNDER :- 4. I HAVE CONSIDERED SUBMISSIONS OF THE APPELLAN T AND HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. IT IS NOTICED THAT TH E AO HAS MADE THE ADDITION BY DISALLOWING THE DEDUCTION OF RS. 89,25, 908/- CLAIMED U/S 80IB. THE CLAIM WAS DENIED BY THE AO ON THE GROUND THAT T HE APPELLANT WAS INVOLVED IN MINING ACTIVITY WHICH WAS NEITHER A MAN UFACTURING ACTIVITY NOR A PRODUCTION ACTIVITY. THE AO FOLLOWING ORDERS OF HIS PREDECESSORS DISALLOWED THE CLAIM. WHILE DISALLOWING THE CLAIM THE AO HAS O BSERVED AS UNDER :- SIMILAR ISSUE OF DISALLOWANCE OF DEDUCTION U/S 80 IB WAS INVOLVED THE A.Y. 2004-05, 2005-06, 2006-07, 2007-08 & 2008- 09 AND THE REPLY OF THE ASSESSEE DURING THE YEAR UNDER CONSIDE RATION IS THE SAME AS GIVEN DURING THE ASSESSMENT PROCEEDINGS FOR PREVIOUS ASSESSMENT YEARS IT IS ALSO POINTED OUT THAT THE DEDUCTION U/S 80IB WHICH HADE BEEN DISALLOWED IN EARLIER A.YS. WE RE ALLOWED AT THE APPELLATE STAGE BUT THE DEPARTMENT HAS FILED AP PEALS BEFORE 5 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. HONBLE HIGH COURT, JAIPUR ON THIS ISSUE WHICH ARE STILL PENDING AND THEREFORE, THE MATTER IS SUB-JUDICE. 4.1. IT IS, THEREFORE, OBVIOUS THAT THE CLAIM HAS BEEN DISALLOWED BY THE AO FOLLOWING THE EARLIER ORDERS IN THE CASE OF THE APPELLANT. IT IS ALSO SEEN THAT THIS DISALLOWANCE HAS BEEN DELETED BY THE APPE LLATE AUTHORITIES, INCLUDING THE ITAT IN THE EARLIER YEARS. THE CLAIM IN THE YEAR UNDER CONSIDERATION HAS BEEN DISALLOWED ON THE GROUND THA T THE DEPARTMENTS APPEAL IS PENDING IN THE HIGH COURT. SINCE THE FACT S OF THE CASE ARE SIMILAR TO THOSE OF THE EARLIER YEARS AND COVERED BY THE DECIS IONS OF THE ITAT IN THE APPELLANTS FAVOUR, THE DISALLOWANCE APPEARS TO BE UNCALLED FOR AND IS, ACCORDINGLY, DELETED. SIMILAR FINDING HAS BEEN GIVEN FOR A.Y. 2010-11 BY LD. CIT (A). 5. NOW THE REVENUE IS BEFORE US. THE LD. D/R SUPPO RTED THE ORDER OF ASSESSING OFFICER. 6. AT THE OUTSET, THE LD. A/R SUPPORTED THE ORDER O F THE LD. CIT (A) AND ARGUED THAT IN PAST ALSO THE TRIBUNAL HAS ALLOWED DEDUCTIO N U/S 80IB OF THE ACT IN ASSESSEES OWN CASE FOR THE A.YS. 2001-02 & 2003-04 TO 2008-09 . THEREFORE, HE REQUESTED TO CONFIRM THE ORDER OF THE LD. CIT (A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE COORDINATE BENCH OF THE TR IBUNAL HAD DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN VARIOUS DECISION S AS MENTIONED IN THE FOREGOING PARAS ABOVE. THE FACTS OF THE CASE ARE IDENTICAL AND THE LD. D/R HAD NOT CONTROVERTED THE FINDINGS OF THE LD. CIT (A). THUS IN VIEW OF THE FA CTS AND CIRCUMSTANCES OF THE CASE AND THE DECISIONS OF THIS COORDINATE BENCH, WE DISMISS THE REVENUES GROUND FOR BOTH THE ASSESSMENT YEARS ON THIS ISSUE. 6 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. 8. THE SECOND GROUND IN BOTH THE APPEALS RELATES TO DELETION OF ADDITION OF RS. 4,81,558/- AND RS. 60,29,856/- FOR A.Y. 2009-10 & 2 010-11 RESPECTIVELY BY THE LD. CIT (A), MADE BY THE AO U/S 36(1)(III) OF THE IT ACT, 1 961. 9. THE FACTS RELATING TO THIS GROUND ARE THAT THE A SSESSEE HAD ADVANCED INTEREST FREE LOANS TO ITS SISTER CONCERNS FOR A.YS. 2009-10 AND 2010-11 ARE AS UNDER :- A.Y. 2009-10 : M/S. GOLCHA BUILDTECH PVT. LTD. RS. 98,24,276/- M/S. PRERNA GRANITES PVT. LTD. RS. 58,52,300/- M/S. KRISHNA LEELA ESTATE PVT. LTD. RS. 3,00,00,0 00/- M/S. TRIVENI SANGAM ESTATE PVT. LTD. RS. 50,00,00 0/- M/S. GOLECHA PLASTOCHEM PVT. LTD. RS. 4,90,279/- ----------------------- RS. 5,11,66,855/- ----------------------- A.Y. 2010-11 : M/S. GOLCHA BUILDTECH PVT. LTD. RS. 93,96,507/- M/S. PRERNA GRANITES PVT. LTD. RS. 58,52,300/- M/S. KRISHNA LEELA ESTATE PVT. LTD. RS. 3,00,00,0 00/- M/S. TRIVENI SANGAM ESTATE PVT. LTD. RS. 50,00,00 0/- 9.1. THE AO BY GIVING REASONABLE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE, VIDE ORDER SHEET ENTRY DATED 09.11.2011 AND 24.12.2 012 ASKED TO GIVE JUSTIFICATION FOR INTEREST FREE ADVANCES TO THESE PARTIES. THE ASSESS EE VIDE ITS LETTERS DATED 15.11.2011 & 01.02.2013 CLARIFIED THAT DURING THE YEARS UNDER CONSIDERATION, THE ASSESSEE PAID INTEREST OF RS. 1,26,86,063/- AND RS. 1,72,18,072/- FOR THE A.Y. 2009-10 & 2010-11 RESPECTIVELY ON THE LOANS TAKEN BY THE ASSESSEE, TH E DETAILS OF WHICH ARE AS UNDER :- 7 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. A.Y. 2009-10 : S.NO. PARTICULARS AMOUNT 1. INTEREST AND FINANCE CHARGES PAID TO IDBI ON CC LIM IT. RS. 23,15,553/- 2. INTEREST AND FINANCE CHARGES PAID TO KOTAK MAHINDRA BANK (TOWARDS LOAN TAKEN FOR PURCHASE OF MINING MACHINER IES) RS. 93,70,818/- 3. INTEREST PAID TO GOVT. DEPTT. SERVICE TAX : 27 548 VA T/CST : 118165 ROAD TAX : 659014 RS. 8,04,727/- 4. BANK INTEREST ON VEHICLE LOAN RS. 1,94,964/- TOTAL RS.1,26,86,063/ - A.Y. 2010-11 : S.NO. PARTICULARS AMOUNT 1. INTEREST AND FINANCE CHARGES PAID TO IDBI ON TERM L OAN A/C. RS. 93,16,443/- 2. INTEREST AND FINANCE CHARGES PAID TO KOTAK MAHINDRA BANK (TOWARDS LOAN TAKEN FOR PURCHASE OF MINING MACHINER IES) RS. 62,84,509/- 3. INTEREST PAID TO GOVT. DEPTT. SERVICE TAX : 1 7,770 VA T/CST : 4,94,496 RS. 5,12,266/- 4. BANK INTEREST ON VEHICLE LOAN RS. 11,04,854/- TOTAL RS.1,72,18,072/ - DURING THE COURSE OF HEARING FOR THE A.Y. 2009-10, THE ASSESSEE WAS REQUIRED TO SUBMIT AS TO WHY PART OF THE INTEREST MAY NOT BE DISALLOWE D IN VIEW OF THE ADVANCES MADE TO SISTER CONCERNS TO THE EXTENT OF RS. 4,72,48,807/- TO FOLLOWING COMPANIES AS IN PRECEDING YEAR :- M/S. GOLCHA BUILDTECH PVT. LTD. RS. 93,96,507/- M/S. PRERNA GRANITES PVT. LTD. RS. 58,52,300/- M/S. KRISHNA LEELA ESTATE PVT. LTD. RS. 3,20,00,0 00/- ------------------------ RS. 4,72,48,807/- 8 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. THE LD. A/R OF THE ASSESSEE SUBMITTED BEFORE THE AO THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD NOT ADVANCED INTERES T FREE LOANS TO ITS SISTER CONCERNS OUT OF THE BORROWED FUNDS. IT HAD ONLY PAID INTERES T TO THE IDBI AND KOTAK MAHINDRA BANK LTD. AGAINST PURCHASE OF MINING MACHINERIES AN D TERM LOAN ON GHEWARIA MINING PROJECT, ON VEHICLE LOAN RAISED. THERE ARE NO NEXUS BETWEEN BORROWINGS FROM ABOVE BANKS AND GRANT OF ABOVE ADVANCES TO SISTER CONCERN S. THE ASSESSEE WAS HAVING A ACCUMULATED PROFIT TO THE TUNE OF RS. 26.61 CRORES AND THE ABOVE ADVANCES HAVE BEEN MADE OUT OF THE ABOVE FUNDS. THUS THE LD. A/R REQUE STED THAT NO DISALLOWANCE SHOULD BE MADE IN THIS REGARD. 9.2. THE AO CONSIDERED THE EXPLANATION OF THE ASSES SEE BUT HE DECLINED TO ACCEPT THE SAME. THE AO PLACING RELIANCE ON THE VA RIOUS DECISIONS OF HONBLE HIGH COURTS VIZ. CIT VS. H.R. SUGAR FACTORY PVT. LTD., 1 87 ITR 363 (ALL.), K. SOMSUNDRAM & BROS VS. CIT, 238 ITR 939 (MAD.) AND CIT VS. V.I. B ABY & CO., 254 ITR 248 (KER.) ON THIS ISSUE, HAS HELD THAT IN ASSESSEES CASE HEAVY ONUS LIES ON THE ASSESSEE WHEN THE ASSESSEE IS PAYING INTEREST ON LOANS AND ADVANCE IN TEREST FREE LOANS TO ITS SISTER CONCERNS. HE FINALLY CONCLUDED THAT ASSESSEES EXP LANATION IS NOT ACCEPTABLE IN VIEW OF THE FOLLOWING REASONS :- I) THE ASSESSEE COULD NOT PROVE THE BUSINESS EXPEDI ENCY OF GIVING ADVANCES TO ITS GROUP COMPANIES. II) THE REQUIREMENT OF THE GROUP COMPANIES FOR TAKI NG ADVANCES FROM THE ASSESSEE COMPANY WAS FOR THEIR OWN BUSINESS AND THA T THE FUNDS WERE NOT UTILIZED BY THE ASSESSEE COMPANY FOR ITS B USINESS PURPOSES. 9 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. III) IF AT ALL THERE WAS ANY BUSINESS REQUIREMENT F OR THE GROUP COMPANIES, IT COULD BORROW DIRECTLY FROM THE FINANCIAL MARKET BUT IT IS A DUBIOUS METHODOLOGY TO AVOID OR REDUCE TAXABILITY ON ITS IN COME THAT THE ASSESSEE COMPANY HAS ADOPTED BY WAY OF DIVERTING IT S SURPLUS FUNDS TOWARDS THE GROUP COMPANIES FOR THEIR BUSINESS REQU IREMENTS. IV) WITHOUT ADMITTING BUT FOR THE SAKE OF ARGUMENTS , IF IT MAY BE ASSUMED THAT THERE WAS ANY SUCH REQUIREMENT TO LEND SUCH A HUGE SUM TO THE GROUP COMPANIES FOR THEIR BUSINESS REQUIREMENTS, TH E ASSESSEE COMPANY COULD HAVE CHARGED INTEREST ON IT. V) FROM THE PERUSAL OF DETAILS FILED OF INTEREST FR EE ADVANCES IT IS SEEN THAT NET ADVANCE OF RS. 4,27,769/- AND OF RS. 4,90, 279 TO M/S. GOLCHA BUILDTECH (P) LTD. AND M/S. GOLCHA PLASTOCHEM (P) L TD. WAS GIVEN BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE AND BY FOLLOWING THE OBSERVATI ONS OF HONBLE HIGH COURTS AS MENTIONED ABOVE, THE AO DISALLOWED A SUM OF RS. 4,8 1,558/- (GOLCHA BUILDTECH P. LTD. RS. 2,51,602/- + GOLCHA PLASTOCHEM P. LTD. RS. 2,29 ,956/-) AT 12% PER ANNUM ON THE ADVANCED INTEREST FREE LOANS MADE DURING THE YEAR U NDER CONSIDERATION ON DAY TO DAY BASIS, AND THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 9.3. SIMILAR IS THE POSITION IN RESPECT OF A.Y. 201 0-11. THE LD. A/R OF THE ASSESSEE SUBMITTED THAT THE INTEREST FREE ADVANCES WERE MADE BY THE ASSESSEE TO THE SISTER CONCERNS OUT OF RESERVE FUNDS TO THE TUNE OF RS. 20 ,14,16,736/-. THE ASSESSEE WAS ALSO HAVING ACCUMULATED PROFIT TO THE TUNE OF RS. 2 ,22,90,000/- AND THE INTEREST TO THE BANK NAMELY IDBI & KOTAK MAHINDRA BANK LTD. FOR PUR CHASE OF MACHINERIES WERE PAID OUT OF THE BORROWED FUNDS AND THERE ARE NO NEXUS BE TWEEN BORROWINGS FROM ABOVE BANKS AND GRANT OF ABOVE ADVANCES TO THE SISTER CON CERNS. THE LD. A/R ALSO EXPLAINED 10 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. THAT THE ASSESSEE HAS NOT MADE ANY ADVANCE DURING T HE YEAR UNDER CONSIDERATION AND HENCE NO DISALLOWANCE CAN BE MADE. 9.4. AFTER GOING THROUGH THE DETAILS FILED OF INTER EST FREE ADVANCES, THE AO HELD THAT OPENING AND CLOSING BALANCE OF THE FOLLOWING GROUP COMPANIES OF THE ASSESSEE REMAINED SAME OR THERE WAS NO TRANSACTION IN THESE ACCOUNTS DURING THE YEAR, NAME OF THE COMPANIES AND BALANCE REMAINED WITH AS INTEREST FREE ADVANCE IS AS UNDER :- M/S. GOLCHA BUILDTECH PVT. LTD. RS. 93,96,507/ - M/S. PRERNA GRANITES PVT. LTD. RS. 58,52,300/- M/S.KRISHNA LEELA ESTATE PVT. LTD. RS. 3,00,00,00 0/- M/S. TRIVENI SANGAM ESTATE P. LTD. RS. 50,00,00 0/- ------------------------ RS. 5,02,48,807/- ACCORDINGLY, THE AO DISALLOWED THE INTEREST OF RS. 60,29,856/- FOR THE A.Y. 2010-11 CALCULATING THE INTEREST @ 12% ON RS. 5,02,48,807/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 10. BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSE E CARRIED THE MATTER BEFORE LD. CIT (A) WHO ALLOWED THE APPEAL OF THE ASSESSEE BY O BSERVING AS UNDER :- 6. I HAVE CONSIDERED FACTS OF THE CASE. IT IS SEE N THAT THE DISALLOWANCE HAS BEEN MADE BY THE AO ON THE GROUND THAT THE APPE LLANT COULD NOT ESTABLISH BUSINESS EXPEDIENCY OF GIVING ADVANCES TO ITS GROUP COMPANIES. THE ADVANCE WAS GIVEN FOR THE BENEFIT OF THE GROUP COMPANIES AND NOT FOR THE BUSINESS PURPOSES OF THE ASSESSEE COMPANY. THE AO HAS FURTHER OBSERVED THAT EVEN IF THERE WAS A NEED TO LEND THE HUGE AMOUNT OF RS. 5.02 CRORES TO THE SISTER CONCERNS THE APPELLANT CO ULD HAVE CHARGE INTEREST THEREON. SINCE THE APPELLANT COMPANY HAD NOT DERIVE D ANY BENEFIT FROM THESE ADVANCES, THE AO DISALLOWED THE INTEREST ON R S. 5,02,48,807/- AT THE RATE OF 12% PER ANNUM AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 6.1. IT IS, HOWEVER, NOTED THAT THE APPELLANT COMPA NY HAD A RESERVE TO THE TUNE OF RS. 20.14 CRORES AND THE INTEREST FREE ADVANCES AMOUNTED TO ONLY RS. 5.02 CRORES. THIS SHOWS THAT THE APPELLANT HAD SUFFICIENT FUNDS OF ITS OWN. IT IS, THEREFORE, NOT POSSIBLE TO SAY THAT THE INTEREST FREE ADVANCES HAVE BEEN GIVEN OUT OF INTEREST BEARING FUNDS OF TH E APPELLANT. THE 11 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. APPELLANTS CASE IS ALSO SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF M/S. S.A. BUILDERS (281 ITR 1) (SUPRA). IT IS FURTHER NOTED THAT THE AO HAS NOT BEEN ABLE T O SHOW THAT INTEREST BEARING LOANS HAVE NOT BEEN UTILIZED FOR P URCHASE OF PLANT & MACHINERY AS CLAIMED BY THE APPELLANT AND INSTEAD, HAVE BEEN UTILIZED FOR GIVING INTEREST FREE LOANS. NEXUS BETWEEN THE INTER EST BEARING FUNDS BORROWED BY THE APPELLANT AND INTEREST FREE ADVANCE S GIVEN BY IT HAS NOT BEEN ESTABLISHED. IT IS ALSO NOTED THAT SIMILAR TYP E OF DISALLOWANCE WAS DELETED IN THE EARLIER YEAR. THE DISALLOWANCE MADE BY THE AO, THEREFORE, APPEARS TO BE UNCALLED FOR AND IS, ACCORDINGLY, DEL ETED. 11. NOW THE REVENUE IS BEFORE US. THE LD. D/R VEHE MENTLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND ARGUED THAT THE ASSESSEE H AD NOT BEEN ABLE TO JUSTIFY THE COMMERCIAL EXPEDIENCY OF INTEREST FREE LOANS GIVEN TO SISTER CONCERNS. THE LD. D/R RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF S.A. BUILDERS LTD. VS. CIT, 288 ITR 1 (SC). 12. AT THE OUTSET, THE LD. A/R SUPPORTED THE ORDER OF THE LD. CIT (A) AND ARGUED THAT THE ASSESSEE COMPANY WAS HAVING ITS OWN RESERV E FUNDS TO THE TUNE OF RS. 20,14,16,736/- AND THESE INTEREST FREE ADVANCES IN CURRENT ACCOUNT HAVE BEEN GRANTED TO ITS SISTER CONCERNS OUT OF OWN FUNDS AND NOT OUT OF ANY FUNDS BORROWED ON INTEREST FROM BANKS ETC. FURTHER, HE RELIED ON THE DECISION OF ITAT DELHI BENCH B IN THE CASE OF ITO VS. M/S. UDAIPUR MINERAL SYNDICATE (P) LTD. FOR THE ASSESSMENT YEARS 1952-53 TO 1966-67 IN ASSESSEES OWN CASE DATED 30.09.1976 WHE REIN THE BENCH HAD APPLIED THE OVER ALL METHOD FOR DISALLOWING INTEREST U/S 36(1 )(III) OF THE ACT AND CLAIMED THAT AS PER THIS METHOD NO PART OF INTEREST CAN BE DISALLOWED. FURTHER IT WAS ARGUED THAT THE ASSESSEE HAD ALSO RECEIVED INTEREST FREE LOANS FROM THE BANKS, INCOME TAX DEPARTMENT AND OTHERS. THE ASSESSEE COMPANY IS ALSO GIVING AND ACCEPTING INTEREST FREE LOANS FROM 12 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. THE SISTER CONCERNS ON CURRENT ACCOUNT AS A TEMPORA RY FINANCIAL ACCOMMODATION AND NO INTEREST IS CHARGED ON DEBIT OR ON CREDIT BALANCES GRANTED OR RECEIVED BY THE ASSESSEE COMPANY. 13. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD NOT CHARGED ANY INTEREST ON INTEREST FREE LOANS GIVEN TO ITS SISTER CONCERNS AN D IT HAS SHARE CAPITAL RESERVES AND INTEREST FREE LOANS FROM SISTER CONCERNS. THE ASSE SSEE COMPANY IS ACCEPTING INTERST FREE LOANS FROM THE SISTER CONCERNS AND ADVANCING I NTEREST FREE LOANS TO ITS SISTER CONCERNS WHEN THE SISTER CONCERNS REQUIRE THE FUNDS . THE LD. A/R HAS NOT BEEN ABLE TO PROVE THE BUSINESS EXPEDIENCY AS HELD BY THE HONBL E APEX COURT IN THE CASE OF S.A. BUILDERS VS. CIT (SUPRA). NO DIRECT NEXUS HAD BEEN ESTABLISHED BY THE ASSESSEE COMPANY THAT THESE INTEREST FREE ADVANCES MADE TO S ISTER CONCERN WERE OUT OF INTEREST FREE FUNDS. THEREFORE, IN THE INTEREST OF JUSTICE, THIS ISSUE IS SET ASIDE TO THE FILE OF THE AO TO DECIDE THIS ISSUE DENOVO BY PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 14. IN THE RESULT, APPEALS OF THE REVENUE ARE PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/09/201 5. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24/09/2015 DAS/ 13 ITA NOS. 913 & 914/JP/2013 A.Y. 2009-10 & 10-11 ACIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE-2, JAIPUR 2. IZR;FKHZ @ THE RESPONDENT-M/S. UDAIPUR MINERAL DEVELOPMENT SYN DICATE PVT. LTD., JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.913 & 914/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR