M/s. Everest Infra Energy Ltd, Naharlagun V. Deputy Commissioner of Income Tax Circle-Tezpur, Tezpur

ITA 99/GTY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6430 (ITAT-GUWAHATI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 22-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K BHARDWAJ
• Keywords: Capital asset; Earning of tax free income; Proportionate interest; Commercial expediency; TDS
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI BENCH, GUWAHATI BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 98 & 99 / GAU / 2018 ASSESSMENT YEARS :2013-14 & 2014-15 M/S EVEREST INFRA ENERGY LTD. A-SECTOR, C/O EVEREST ENGINEERING HOUSE, NAHARLAGUN-ARUNACHALA PRADESH-791110 [ PAN NO. AAECE 7178 B ] V/S . DCIT, CIRCLE-TEZPUR, AAYAKAR BHAWAN, EX POLICE LINE, TEZPUR, ASSAM-784001 /APPELLANT .. / RESPONDENT /BY ASSESSEE NONE /BY RESPONDENT SHRI A.K. BHARDWAJ, ADDL. CIT-DR /DATE OF HEARING 10-07-2019 /DATE OF PRONOUNCEMENT 31-07-2019 / O R D E R PER BENCH:- THESE TWO ASSESSEES APPEALS FOR ASSESSMENT YEARS 2013-14 & 2014- 15 ARISE AGAINST THE COMMISSIONER OF INCOME TAX (AP PEALS)-GUWAHATI-1S COMMON ORDER DATED 31.03.2018 PASSED IN CASE NO.S 957567521190216,223025301290616, INVOLVING PROCEEDI NGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. CASES CALLED TWICE. NONE APPEARS AT ASSESSEES BEHE ST. THE REGISTRY HAS ALREADY SENT RPAD NOTICE DATED 12.06.2019 FOR T ODAYS HEARING. IT IS ACCORDINGLY PROCEEDED EX PARTE . CASES ARE NOW TAKEN UP FOR ADJUDICATION. 2. THE ASSESSEES SOLE IDENTICAL GRIEVANCE IN BOTH THESE ASSESSMENT YEARS CHALLENGE CORRECTNESS OF THE LOWER AUTHORITIE S ACTION INVOKING SEC. ITA NO.98-99/GAU/2018 A.YS. 13-14 & 14- 15 M/S EVEREST INFRA ENERGY LTD. VS. DCIT, CIR- TEZPUR PAGE 2 36(1)(III) OF THE ACT INTEREST DISALLOWANCE OF RS.9 5,68,560/- IN FORMER APPEAL AND RS.91,69,461/- IN LATTER ASSESSMENT YEAR; RESPE CTIVELY. THE CIT(A)S IDENTICAL LOWER APPELLATE DISCUSSION AFFIRMING THE ASSESSING OFFICERS DISALLOWANCE READS AS UNDER:- III. GROUND NO.2 THIS GROUND IS RELATED TO THE ADDITION OF RS.95,68, 560/- ON ACCOUNT OF DISALLOWANCE OF PROPORTIONATE INTEREST RELATED TO THE BORROWED F UNDS GIVEN AS INTERST FREE LOANS TO RELATED PARTIES. IN RESPECT OF THIS GROUND, THE RELEVANT PARAGRAPHS OF THE ASSESSMENT ORDER OF THE LEARNED AO ARE REPRODUCED HEREUNDER FOR REFERENCE: 2. INTEREST ON BORROWED FUND NOT UTILIZED FOR BUS INESS PURPOSE: IN THE PROFIT & LOSS ACCOUNT THE ASSESSEE HAS DEBI TED RS.12,34,02,090.89/- ON ACCOUNT OF FINANCED COST FOR THE YEAR. THE FINAN CE COST INCLUDES PAYMENTS MADE TO BANK AGAINST THE WORKING CAPITAL LOANS FOR AN AMOUNT OF RS.7,10,56,311.00. ON PERUSAL OF THE ASSET SIDE OF THE BALANCE SHEET, IT IS OBSERVED THAT THE TOTAL OTHER CURRENT ASSETS OF RS.13,25,74,658.00 INCLUDES . RS.8,74,81,079.00 TOWARDS LOANS AND ADVANCES GIVEN TO RELATED PARTIES AS PER THE AUDITED BALANCE SHEET FROM WHOM NO INTEREST IS CHARGED. THE A/R OF THE ASSESSEE WAS ASKED TO EXPLAIN WHY TH E INTEREST ON BORROWED CAPITAL SHOULD NOT BE DISALLOWED PROPORTIONATELY TO THE EXTENT OF BORROWED CAPITAL USED TO FUND THE INTEREST FREE LOANS AND AD VANCES TO VARIOUS RELATED PARTIES. --------------- I HAVE CAREFULLY CONSIDERED THE ASSESSEE\S SUB M ISSION. IT HAS BEEN CLAIMED BY THE ASSESSEES AR THAT THE COMPANY MADE AN ADVAN CE OF RS.4,87,36,847/- TO GOVINDA EASTERN DEVELOPERS PVT. LTD., WITH A VIEW TO ACQUIRE A PLOT OF LAND. IT IS ALSO SUBMITTED THAT T HE COMPANY HAD ALREADY ACQUIRED THE LAND, BUT THE SALE DEED IS YET TO BE E XECUTED DUE TO SOME LEGAL INTRICACIES. HOWEVER, THE A/R HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE IN SUPPORTS OF THIS CLAIM. HENCE, IN ABSENCE OF ANY SU PPORTING EVIDENCE, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED AS CORRECT . FURTHER WITH RESPECT TO THE ADVANCES GIVEN TO M/S S IGMA STEEL ENGINEERS PVT. LTD AND M/S HORIZON HITECH ENGICOM LIMITED, THE AO STAT ED AS FOLLOWS: THE A/R HAS, HOWEVER NOT GIVEN ANY DETAILS OF THE WORKS DONE BY THE COMPANY FOR THESE PARTIES. THE A/R HAS ALSO NOT FUR NISHED ANY EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE COMPANY HAD EXECUTED ANY WORKS FOR THE ABOVE COMPANIES. SO FAR THE ADVANCES GIVEN TO OTHER TWO RELATED PART IES NAMELY MODULAER BUILDERS (P) LTD. AND ANKARPALI HOTEL (P) LTD., THE A/R CLAIMS THAT THE COMPANY HAD INCURRED CERTAIN EXPENSE ON BEHALF OF T HE TWO RELATED PARTIES. THE A/R HAS HOWEVER NOT GIVEN ANY DETAILS WHICH CON STRUES THE EXPENSE TO BE FOR THE PURPOSE OF BUSINESS. IN VIEW OF ASSESSEES FAILURE TO FURNISH ANY DOCUME NTARY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE AMOUNT OUTSTANDING FROM THE A BOVE FOUR PARTIES AS DISCUSSED ABOVE, THE OUTSTANDING BILLS RECEIVABLE F ROM THEM CANNOT BE ACCEPTED AS TRUE. FURTHER AS ALREADY DISCUSSED, THE CLAIM OF THE A/R THAT ITA NO.98-99/GAU/2018 A.YS. 13-14 & 14- 15 M/S EVEREST INFRA ENERGY LTD. VS. DCIT, CIR- TEZPUR PAGE 3 RS.4,87,36,847/- WAS GIVEN TO GOVINDA EASTERN DEVEL OPERS PVT. LTD., AS ADVANCE AGAINST PURCHASE OF LAND CANNOT BE ACCEPTED AS TRUE. FOR THE REASONS DISCUSSED ABOVE, THE AMOUNT ADVANC ED BY THE COMPANY TO THE RELATED PARTIES CANNOT BE CONSIDERED TO BE ADVANCES GIVEN FOR ANY BUSINESS PURPOSES. AS ALREADY DISCUSS ED THE ADVANCES HAVE BEEN GIVEN BY THE COMPANY WITHOUT CHARGING ANY INTEREST. IT IS ALSO EVIDENT THAT THE ADVANCES WERE GIVEN FROM OUT OF BORROWED FUNDS ON WHICH THE ASSESSEE COMPANY HAD PAID INTEREST DUR ING THE YEAR. SINCE THE BORROWED FUND OF RS.8,42,64,017/- WAS NOT USED BY THE ASSESSEE FOR ITS BUSINESS PURPOSES, NO INTERESTS ON THE SAME IS ADMISSIBLE. THUS, PROPORTIONATE INTERST OF RS.95,68,560 RELATAB LE TO THE BORROWED FUNDS GIVEN BY THE ASSESSEE AS ADVANCE TO ITS RELAT ED PARTIES IS DISALLOWED. ON THE OTHER HAND, THE APPELLANT COMPANY SUBMITTED THAT ADVANCES TO RELATED PARTIES WERE MADE IN EARLIER YEARS AND SMALL AMOUNT IN CURRENT YEAR AND HAD NO DIRECT NEXUS WITH THE BORROWED FUNDS IN THE FORM OF CASH CREDIT LIMITS OF THE COMPANY WHICH WAS TAKEN MAINLY FOR MEETING WORKING CAPITAL REQUIREMENTS AND IS COVERED BY CHARGE OVER CURRENT ASSETS OF THE COMPANY DECISION I HAVE PERUSED THE ASSESSMENT ORDER AND HAVE ALSO C ONSIDERED THE APPELLANT COMPANYS SUBMISSIONS AND OTHER DETAILS ON RECORD. THE RELEVANT PARAGRAPH OF THE SUBMISSIONS OF THE AP PELLANT IS REPRODUCED HERE:. THE AMOUNT OF ADVANCES PROVIDED TO VARIOUS PARTIES ARE FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. THE DETAILS OF ALL THE AD VANCES GIVEN TO RELATED PARTIES ARE AS FOLLOWS: GOVINDA EASTERN DEVELOPERS (P) LTD. RS.4,87,36,847. 00 WE MADE AN ADVANCE TO THIS COMPANY FOR RS.4,87,36,8 47/- WITH A VIEW TO ACQUIRE THE LAND OF THE COMPANY LOCATED AT RAJARHAT, KOLKATA. W E HAVE TAKEN POSSESSION OF THE LAND. HOWEVER, DUE TO SOME LEGAL INTRICACIES, WE AR E UNABLE TO EXECUTE AND REGISTER THE SALE DEED AS SUCH THE SAID ADVANCE COULD NOT BE ADJUSTED. SIGMA STEEL & ENGINEERS PVT LTD. RS.1,95,63,286.00 ]THE COMPANY SIGMA STEEL ENGINEERS PVT. LTD., IS IN THE BUSINESS OF MANUFACTURING OF SOLAR PANELS, SOLAR LIGHTING & OTHER SOLAR ENERG Y PRODUCT. AS OUR COMPANY IS ALSO IN POWER SECTOR WE HAVE MADE AN AGREEMENT TO DO BUSINE SS TOGETHER AND WE HAVE RAISED CERTAIN BILLS ON THEM. WE HAVE ALSO RECEIVED SOME PAYMENTS AGAINST ABOVE BILLS. HOWEVER, RS.1,95,63,286/- REMAINS OUTSTANDIN G AS ON 31/03/2013.OUR COMPANY HAS ALSO TAKEN EQUITY STAKE-IN SIGMA STEEL AND ENGI NEERS AS EVIDENT FORM NOTE NO.11 OF THE BALANCE SHEET AMOUNTING RS.1500000 (CO PY OF AUDITED BALANCE SHEET FOR FINANCIAL YEAR 2012-13 ATTACHED FOR YOUR RECORD S.) HORIZON HI TECH ENGICON LTD. RS.1,59,38,884.00 HORIZON HITECH ENGICON IS IN ELECTRICAL CONTRACT BU SINESS & IN SAME LINE OF ACTIVITY AS OUR COMPANY. WE HAVE DONE CERTAIN WORKS AND RAISED INVOICES. WE RECEIVED PAYMENTS FROM TIME TO TIME AND AMOUNT OF RS.1,59,38 ,884.00 IS DUE AGAINST SALE BILLS RAISED ON 31/03/2013. THE AMOUNT IS CLASSIFIED AS D UE FROM RELATED PARTIES AS ONE OF THE DIRECTOR OF OUR COMPANY IS ALSO A DIRECTOR OF HORIZON ENGICON. THIS AMOUNT IS NOTHING BUT RECEIVABLE AND IS A REGULAR BUSINESS TR ANSACTION. MODULAR BUILDERS PVT. LTD., RS.10,00.00 ITA NO.98-99/GAU/2018 A.YS. 13-14 & 14- 15 M/S EVEREST INFRA ENERGY LTD. VS. DCIT, CIR- TEZPUR PAGE 4 MODULAR BUILDERS IS IN SAME LINE OF ACTIVITY AS OUR COMPANY. WE HAVE DONE CERTAIN WORKS AND EXPENSES ON BEHALF OF THE COMPANY. THE TO TAL AMOUNT OUTSTANDING IS RS.10,00/- AS ON 31/03/2013. ANKAR PALI HOTELS PVT. LTD. RS.15,00,00 ANKAR PALI HOTELS IS IN SAME LINE OF ACTIVITY AS OU R COMPANY. WE HAVE DONE CERTAIN WORKS AND EXPENSES ON BEHALF OF THE COMPANY. THE TO TAL AMOUNT OUTSTANDING IS RS.15,000/- AS ON 31/03/2013. PLASTO SHEETS MFG PVT. LTD. RS.32,,17,062.00 PLASATO SHEETS MFG IS A PRIVATE LIMITED COMPANY FRO M WHOM THE COMPANY HAS TAKEN THE OFFICE SITE AT GN-10, SECTOR-V, SALT LAKE, KOLK ATA-700 091 ON RENT. DURING THE FINANCIAL YEAR 2012-13, THE AMOUNT OF RS.32,17,062. 00 IS ADVANCED AS SECURITY DEPOSIT AND OTHER EXPENSES INCURRED ON BEHALF OF TH E LANDLORD FOR TAKING RENTAL POSSESSION OF THE OFFICE SITE. THE TOTAL AMOUNT OF SECURITY DEPOSIT IS RS.32,17,062/- AS ON 31/03/2013. THE APPELLANT STATED THAT THE AMOUNT OF ADVANCE PRO VIDED TO VARIOUS RELATED PARTIES ARE FOR THE PURPOSE OF THE BUSINESS OF THE APPELLAN T AND THERE WAS NO CORRELATION VIS- -VIS THE INTERST-BEARING LOANS AND INTERST-FREE AD VANCES GIVEN TO THE RELATED PARTIES. THE APPELLANT FURTHER STATED THAT THE APPELLANT COM PANYS SURPLUS FUND IS UTILIZED FOR VARIOUS PURPOSES IN CONNECTION WITH THE OBJECTS OF THE COMPANY. THE APPELLANT SUBMITTED THAT THE OPENING SHARE CAPITAL AS ON 01/0 4/2012 WAS RS.14.40 CRORES AS EVIDENT FROM THE AUDITED BALANCE SHEET WHEREAS THE AVERAGE ADVANCES GIVEN TO RELATED PARTIES THROUGHOUT THE YEAR WAS MORE OR LES S RS.8.75 CRORES ONLY. SINCE THE SURPLUS FUND LYING IN OUR HAND WAS GIVEN AS ADVANCE TO THE RELATED PARTIES AND SO THERE WAS NO DIRECTS CORRELATION BETWEEN THE ADVANCE GIVEN AND BORROWED FUNDS VIS--VIS OWN FUND. THE APPELLANT FURTHER SUBMITTED THAT AS PER SECTION 14A NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE A SSESSEE IN RE3LATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, IT WAS STATED THAT HOWEVER, CONSIDERING THE OUTSTANDING IN THE ABOVEME NTIONED ENTITY IT CAN BE SAID THAT THE APPELLANT HAVE OUTSTANDING BALANCE IN THE ABOVE MENTIONED ENTITY OUT OF APPELLANTS OWN FUNDS AS SUCH THERE IS NO DISALLOWA NCE IN RESPECT OF INTERST ON BORROWED FUNDS UNDER SECTION 14A. THE APPELLANT FURTHER CONTENDED AS FOLLOWS AND RELI ED ON THE FOLLOWING JUDGMENTS: 1. AS PER SEC. 36(1)(III), DEDUCTION SHALL BE ALLOW ED FOR THE AMOUNT OF INTEREST PAID IN RESPECTS OF CAPITAL BORROWED FOR THE PURPOS ES OF BUSINESS OR PROFESSION . FOR THIS, THE ASSESSEE MUST HAVES PAID INTERST I N RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSIONS . THE MEANING OF PURPOSE OF BUSINESS OR PROFESSION CAN BE UNDERSTOOD W.R.T. TO THE LANDMARK JUDGEMEN T IN THE CASE OF S.A. BUILDERS LTD. VS. COMMISSIONER OF INCOME TAX (APPEALS) [(2007) (SC) CASE NO.5811 OF 2002] : FACTS: THE ASSESSEE COMPANY ADVANCES THE MONEY BOR ROWED TO SISTE4SR CONCERNS AS INTEREST FREE LOANS AND CLAIM DEDUCTION OF INTEREST ON MONEY BORROWED. HELD BY THE SUPREME COURT: THAT INTEREST DEDUCTION CAN BE CLAIMED EVEN WHEN THE MONIES BORROWED HAS BEEN GIVEN TO ITS SISTER CONCERN AS AN INTEREST FREE LOANS IF IT WAS COMMERCIALLY EXPEDIEN T TO DO SO. THAT THE EXPRESSION COMMERCIAL EXPEDIENCY IS AN EXPRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS OF PROFESSION. IT HAS BEEN REPEATEDLY H ELD BY THE APEX COURT THAT ITA NO.98-99/GAU/2018 A.YS. 13-14 & 14- 15 M/S EVEREST INFRA ENERGY LTD. VS. DCIT, CIR- TEZPUR PAGE 5 THE EXPRESSION FOR THE PURPOSE OF BUSINESS IS WIDER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING PROFITS. 2. THE LEARNED DCIT HAD NOT DISCUSSED ABOUT AN IMPO RTANT ISSUE, NAMELY, AS TO WHETHER THERE WAS ANY CO-RELATION BETWEEN THE INTER EST-BEARING LOANS AND INTEREST-FREE ADVANCES GIVEN BY THE ASSESSEE. IN VA RIOUS DECISIONS, IT HAS BEEN REPEATEDLY HELD THAT, FOR SUCH DISALLOWANCE, THERE SHOULD EXIST SOME NEXUS BETWEEN INTERST-BEARING LOANS AND INTERST-FREE ADVA NCES TO DISALLOW INTEREST IN SUCH CASE. WE RELY ON FOLLOWING JUDGEMENTS ON THIS ISSUE: A. THAT, THE HONBLE HIGH COURT IN THE CASE OF CIT VS. MAX INDIA LIMITED [(2007) 80 TAXMANN.COM 98 (PUNJAB & HARYANA)] HAS HELD THAT THE BORROWED FUNDS HAD NO NEXUS WITH INTEREST FREE ADVANCES GIVEN TO T HE SUBSIDIARY COMPANIES IN EARLIER YEARS (ON ACCOUNT OF NO DISALLOWANCE HA VING BEEN MADE IN THE ASSESSMENT OF EARLIER YEARS) AND DURING THE RELEVAN T ASSESSMENT YEAR (ON ACCOUNT OF POSITIVE OVERALL CASH FLOW STATEMENT OF THE RELEVANT YEAR), IT IS NOT NECESSARY TO GO INTO THE ISSUE WHETHER INTEREST FRE E ADVANCES GIVEN BY THE ASSESSEE COMPANY TO THE SUBSIDIARY COMPANIES WAS ON ACCOUNT OF COMMERCIAL EXPEDIENCY OR NOT. WE ARE NOT IN AGREEMENT WITH THE OBSERVATIONS OF TH E LEARNED CIT(A) THAT IN ALL CASES, IT IS REQUIRED TO BE SEEN WHETHER LOAN W AS GIVEN FOR THE BUSINESS PURPOSES OR NOT AND NOT THE SOURCE FROM WHICH THE L OANS IS GIVEN. IN VIEW OF THE AFORESAID DISCUSSIONS, THE DISALLOWANCE OF INTE REST EXPENDITURE MADE UNDER SECTION 36(1)(III) OF THE ACT IS DIRECTED TO BE DELETED AND THIS GROUND OF THE ASSESSEE IS ALLOWED. B. THAT, THE HONBLE HIGH COURT IN CASE OF CIT VS. SEVEN HILLS HOSPITALS [(2004) 54 TAXMANN.COM 326 (ANDHRA PRADESH)] HELD THAT IN THE ABSENCE OF ANY FINDING TO EFFECT THAT AMOUNT BORROWED BY ASSESSEE FROM FINANCIAL INSTITUTIONS WAS STRAIGHT AWAY PASSED ON TO SISTER CONCERN WITHO UT LEVYING INTERST, INTEREST ON BORROWED AMOUNT COULD NOT BE DISALLOWED. C. THAT, THE HONBLE ITAT IN THE CASE OF HERALD ADV ERTISING AGENCY VS. ITO [(1990) 39 TTJ (DELHI) 34] HAS HELD THAT THE FINDI NG THAT THE ADVANCE WAS MADE OUT OF THE BORROWED FUNDS HAD NO BASIS AND WAS NOT SUPPORTED BY ANY EVIDENCE. THERE WAS NO MATERIAL TO SHOW THAT THERE WAS ANY NEXUS BETWEEN THE ADVANCE AND THE BORROWED FUNDS OF THE ASSESSEE ON WHICH INTEREST WAS PAYABLE. THEREFORE, THE DISALLOWANCE OF INTEREST WA S NOT JUSTIFIED. D. IN THE CASE OF CIT VS. CORRTECH ENERGY (P) LTDS. [(2015) 372 IOTR 97/(2004) 45 TAXMANN.COM 116/223 TAXMANN 130], THE HONBLE GU JARAT HIGH COURT HELD THAT THE ASSESSEE HAD INTEREST FREE FUNDS IN THE FO RM OF SHARE CAPITAL, SHARE APPLICATION MONEY AND RESERVES AND SURPLUS WHICH EX CEEDED THE AMOUNT INVESTED BY THE ASSESSEE. HENCE THE QUESTION OF DIS ALLOWANCE OF ANY EXPENDITURE INCURRED TO EARN EXEMPT INCOME DURING T HE ASST. YEAR IN QUESTION DID NOT ARISE. E. CHEMINVEST LTD. VS. CIT [(2015) 378 ITR 33/234 T AXMANN 761/61 TAXMANN.COM 118 (DEL)] F. CIT VS. WINSOME TEXTILE INDUSTRIES LTD. [(2009) 319 ITR 203] G. CIT VS. HERO CYCLES LTD. [323 ITR 518] ITA NO.98-99/GAU/2018 A.YS. 13-14 & 14- 15 M/S EVEREST INFRA ENERGY LTD. VS. DCIT, CIR- TEZPUR PAGE 6 IT WAS CONTENDED THAT IN THE ABOVE CASE, IT WAS HEL D THAT SECTION 14A WOULD NOT APPLY IF THE ASSESSEE DOES NOT EARN ANY EXEMPT INCO ME IN THE YEAR UNDER CONSIDERATION. IT WAS STATED THAT IN THESE CASES IT WAS FURTHER THAT WHERE THE ASSESSEE HAD MADE INVESTMENTS OUT OF ITS OWN FUNDS, NO DISALLOWANCE OF INTERS COULD BE MADE UNDER SECTION 14A MERELY BECAUSE ASSE SSEE HAD ALSO TAKEN LOANS ON WHICH INTEREST WAS PAID. DECISION I HAVE GONE THROUGH THE ABOVE SUBMISSIONS OF THE AP PELLANT AND HAVES CONSIDERED THE FACTS AND EVIDENCES ON RECORD WITH R EGARD TO THE DISALLOWANCE OF PROPORTIONATE INTEREST OF RS.95,,68,560/- ON LOANS & ADVANCES, GIVEN INTEREST FREE TO SISTERS CONCERNS BY THE APPELLANT. I WOULD LIKE TO STATE THAT THE ACT PERMITS DEDUCTION OF INTERST ON THE LOANS BORROWED BY AN AS SESSEE PROVIDED THE AMOUNT IS BORROWED FOR THE PURPOSE OF BUSINESS. THUS, IF T HE AMOUNT IS BORROWED FOR ANY PURPOSE OTHER THAN THE BUSINESS, THE DEDUCTION OF I NTERST IS NOT ALLOWED. IN THE PRESENT CASE, THE APPELLANT HAD BORROWED FUNDS FROM BANK AND PAID INTERST ON THE SAME. THE LD ASSESSING OFFICER DID NOT DISPUTE THE FACTUM OF BORROWING OF LOAN OR THE LIABILITY TO PAY INTEREST. HOWEVER, HE REFUSED TO ALLOW DEDUCTION ON THE GROUND THAT THE APPELLANT HAD ADVANCED SUBSTANTIAL AMOUNT TO RELATED PARTIES WITHOUT LEVYING INTERST. FROM THAT FACT, THE ASSESS ING OFFICER INFERRED THAT THE AMOUNT FROM THE FINANCIAL INSTITUTION WAS NOT BORRO WED BY THE APPELLANT FOR ITS BUSINESS AND ON THE OTHER HAND, THE REAL BENEFICIAR Y WERE THE RELATED PARTIES. I FIND THAT THE ASSESSING OFFICER'S CONTENTION THAT ADVANCE WAS MADE OUT OF THE BORROWED FUNDS HAS CREDIBLE BASIS AND THE LD AO HAD DRAWN UP A DETAILED CHART SHOWING THE UTILIZATION OF THE FUNDS OF THE APPELLA NT AS WELL AS AVAILABILITY OF INTEREST FREE FUNDS WITH THE APPELLANT AND THUS, TH E LD. AO HAD BROUGHT OUT IN DETAIL, A CLEAR-CUT NEXUS BETWEEN THE BORROWED FUND S AND THE FUNDS ADVANCED. THE AO ALSO DULY RECORDED A FINDING THAT INTEREST F REE ADVANCES WERE GIVEN TO THE SISTER CONCERNS FOR NON-BUSINESS PURPOSE. IT WOULD BE PERTINENT TO HERE JUDGMENT RENDERED IN THE CASE OF S.A. B BUILDERS LTD. VS. CI T(APPEALS) [(2007) (SC) OF 2006] WHEREIN THE HONBLE SUPREME COURT HAS HELD AS FOLLOWS: INTEREST DEDUCTION CAN BE CLAIMED EVEN WHEN THE MON IES BORROWED HAS BEEN GIVEN TO ITS SISTER CONCERN ON INTEREST FREE LOAN I F IT WAS COMMERCIALLY EXPEDIENT TO DO SO. THAT THE EXPRESSION COMMERCIAL EXPEDIENCY IS AN EXPRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPENDI TURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS OF P ROFESSION. IT HAS BEEN REPEATEDLY HELD BY THE APEX COURT THAT THE EXPRESSI ON FOR THE PURPOSE OF BUSINESS IS WIDER IN SCOPE THAN THE EXPRESSION FOR THE PU RPOSE OF EARNING PROFITS. I FURTHER FIND THAT THE APPELLANT HAD NOT BEEN ABLE TO PROVE AS TO WHAT WAS THE COMMERCIALLY EXPEDIENCY FOR GIVING INTEREST FREE AD VANCES TO ITS SUBSIDIARY AND SISTER CONCERNS. IT IS NOT CLEARLY ESTABLISHED BY T HE APPELLANT AS TO WHETHER INTEREST FREE ADVANCES WERE BEING MADE SOLELY TO TH E RELATED PARTIES OR SISTER CONCERNS OR ALSO TO OTHER UNRELATED PARTIES OR OTHE R SUCH CONCERNS. FROM THE ABOVE FACTUAL POSITION BASED ON THE SUBMIS SION OF THE APPELLANT, IT IS NOTED THAT THE APPELLANT HAD GRANTED INTERST FREE A DVANCES TO M/S GOVINDA EASTERN DEVELOPERS PVT. LTD WHOSE CLOSING BALANCE A S ON 31/03/2013 WAS RS.4,87,36,847/-. IT IS WORTH MENTIONING THAT THE O UTSTANDING BALANCE OF THE SAID PARTY AS ON 31/03/2012 WAS ALSO THE SAME AMOUNT OF RS.4,87,36,847/-. IT IS ALSO ITA NO.98-99/GAU/2018 A.YS. 13-14 & 14- 15 M/S EVEREST INFRA ENERGY LTD. VS. DCIT, CIR- TEZPUR PAGE 7 NOTED THAT THE APPELLANT HAD EXTENDED ADVANCE TO TH E SAID CONCERN SO IN ORDER TO ACQUIRE THE LAND OF THE COMPANY LOCATED AT RAJARHAT , KOLKATA AND THAT THE APPELLANT HAD TAKEN POSSESSION OF THE SAID LAND. TH E APPELLANT HAD IN ITS SUBMISSIONS CONTENDED THAT IT HAD MADE AN ADVANCE T O THIS COMPANY FOR RS.4,87,36,847/- WITH A VIEW TO ACQUIRE THE LAND OF THE COMPANY LOCATED AT RAJARHAT, KOLKATA. THE APPELLANT HAD FURTHER CONTEN DED THAT IT HAD TAKEN POSSESSION OF THE LAND, HOWEVER, DUE TO SOME LEGAL INTRICACIES, THE APPELLANT WAS UNABLE TO EXECUTE AND REGISTER THE SALE DEED AS SUC H THE SAID ADVANCE COULD NOT BE ADJUSTED. WHILE IT IS NOT JUST APPRECIABLE AS TO WHAT WAS THE LEGAL INTRICACY OWING TO WHICH THE APPELLANT COULD NOT GET THE PURPORTED LAND REGI STERED IN ITS OWN NAME, MORE- SO, WHEN THE SAID LAND, WAS BEING HELD BY NONE OTHE R THAN THE SISTER CONCERN OF THE APPELLANT. THUS, THE CONTENTION OF THE APPELLAN T HAS NO FACTUAL LEGS. EVEN PRESUMING THERE IS SOME MERIT IN THE CONTENTION OF THE APPELLANT, IT IS CLEAR FROM OWN VERSION OF THE APPELLANT THAT THE ADVANCE WAS M ADE FOR THE PURPOSE OF PURCHASE OF LAND AND THUS, CLEARLY INTEREST PAID W. R.T. ACQUISITION OF A CAPITAL ASSET PRIOR TO THE SAID CAPITAL ASSET BEING PUT TO USE HA S BEEN CLAIMED AS DEDUCTION IN COMPLETE CONTRADICTION TO THE PROVISIONS CONTAINED UNDER EXPLANATION TO SECTION 36(1)(III) OF THE ACT. THUS, THE INTEREST PAID FOR THE PURPOSE OF ACQUISITION OF CAPITAL ASSET I.E. LAND IN THIS CASE, IT LIABLE TO BE DISAL LOWED BY THE LD. AO. I FURTHER NOTE THAT THE APPELLANT HAD ALSO GRANTED SUBSTANTIAL INTEREST FREE LOANS TO TWO OTHER PARTIES NAMELY, M/S SIGMA STEEL ENGINEERS PVT. LTD AND M/S HORIZON HITECH ENGICON LTD. THE RESPECTIVE POSITION OF THE AMOUNTS RECOVERABLE BY THE APPELLANT FROM THESE PARTIES ARE AS UNDER: SIGMO STEEL ENGINEERS A PVCTR. LTD. 1,97,63,286/- 1 ,95,63,286/- HORIZON HITECH ENGICON LTD. 1,13,28,764/- 1,59,38,8 84/- IT IS THUS SEEN THAT WHILE THE APPELLANT IS CONTEND ING THAT THE ABOVE PAYMENTS ARE ON ACCOUNT OF SUMS DUE FROM THESE PARTIES AND THAT THE APPELLANT HAD RECEIVED CERTAIN PAYMENT FROM THESE PARTIES, IT DEVOID OF AN Y FACTUAL REALITY. IT IS NOTED THAT, THE APPELLANT HAS NOT BEEN ABLE TO PROVE ON RECORDS , CONCLUSIVELY THE COMMERCIAL EXPEDIENCY OF EXTENDING LONG CREDIT PERIODS TO SIST ER CONCERNS MORE-SO, WHEN AS PER A COMPREHENSIVE FUND UTILIZATION CHART PROVIDED BY THE LD AO, THE OWNERS EQUITY OF THE APPELLANT IS ALREADY BLOCKED IN THE F IXED ASSETS. THE APPELLANT HAD EXCEPT FOR CONTENDING THAT THE AMOUNTS WERE OUTSTAN DING AGAINST THE BILL RAISED FOR THE WORK EXECUTED FOR THE SIGMA STEEL ENGINEERS PVT. LTD HAD NOT PLACED ON RECORDS ANY EVIDENCE OR DOCUMENTS SO AS TO PUT FORT H ITS CONTENTIONS. EVEN PRESUMING ANY SUCH BILLS, WERE THERE, IT IS NOT CLE ARLY BROUGHT OUT FROM THE ABOVE NARRATION AS TO WHAT WAS THE PURPORTED WORK WHICH W AS CARRIED OUT BY THE SAID SISTER CONCERNS FOR M/S SIGMA STEEL ENGINEERS PVT. LTD. WHAT WAS THE BUSINESS PURPOSE OF GETTING THE SAID WORK EXECUTED FOR M/S S IGMA STEEL ENGINEERS PVT. LTD. ETC. EVEN PRESUMING THAT THE AMOUNTS OUTSTANDI NG FROM THESE PARTIES ARE ON ACCOUNT OF TRANSACTIONS ENTERED INTO DURING FY 2011 -12, IT IS NOT PROVED BY THE APPELLANT AS TO WHETHER PERMITTING OF SUCH A HUGE C REDIT PERIOD WAS ENVISAGED AT THE TIME OF EXTENDING THE CREDIT OR THAT THE PROFIT FORM, THESE SISTER CONCERNS WAS ITA NO.98-99/GAU/2018 A.YS. 13-14 & 14- 15 M/S EVEREST INFRA ENERGY LTD. VS. DCIT, CIR- TEZPUR PAGE 8 SO ABNORMAL AS WOULD HAVES EMBODIED THEREIN THE ELE MENT OF PURPORTED INTEREST COST ON ACCOUNT OF SUCH EXTENDED CREDIT PERIOD. THE ONUS LAY HEAVILY ON THE APPELLANT EITHER TO HAVE PROVED SUCH ASSERTIONS OR TO HAVE PROVED SUCH CREDIT PERIOD SPANNING ACROSS YEARS TO OTHER INDEPENDENT P ARTIES ALSO. ACCORDINGLY, IT IS HELD THAT THE RATIO OF DECISIONS RELIED UPON BY THE APPELLANT ARE NOT APPLICABLE TO ITS CASE AND THAT THE APPELLANT H AD FAILED TO PROVE THE COMMERCIAL EXPEDIENCY OF THE ADVANCES MADE, FREE OF INTEREST, TO ITS SISTER CONCERNS. AS SUCH, THE IMPUGNED DISALLOWANCE OF RS. 95,,68,560/- MADE BY THE LD AO IS, HEREBY, CONFIRMED AND THIS GROUND OF APPE AL OF THE APP IS, ACCORDINGLY, DISMISSED . THE ABOVE EXTRACTED LOWER APPELLATE DISCUSSION HOLD S THAT ASSESSEE HAS NEITHER PROVED ANY BUSINESS EXPEDIENCY IN MAKING IN TEREST FREE ADVANCES TO THE PART(IES) CONCERNED NOR THERE IS ANY DETAILED E VIDENCE AS TO WHETHER INTEREST FREE FUNDS EXCEEDED THE INTEREST FREE TREN DS IN ISSUE. WE THEREFORE AFFIRM THE CIT(A)S ACTION OF IMPUGNED DISALLOWANCE S MADE IN BOTH ASSESSMENT YEARS. 3. THESE TWO APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 31/ 07/2019 SD/- SD/- ( ) (&' ) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) GUWAHATI, *DKP (- 31 / 07 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S EVEREST INFRA ENERGY LTD. A-SECTOR, C /O EVEREST ENGINEERING HOUSE, NAHARLAGUN ARUNACHAL PRADESH-791110 2. /REVENUE-DCIT, CIR-TEZPUR, AAYAKAR BHAWAN, EX POLIC E LINE, TEZPUR ASSAM-784001 3. 3 4 9 / CONCERNED CIT GUWAHATI 4. 4- / CIT (A) GUWAHATI 5. < ''3, 3, 9 / DR, ITAT, GUWAHATI 6. B / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY (ON TOUR) 3,