DCIT, Mohali V. M/s Beckons Industries Ltd., Mohali

ITA 993/CHANDI/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5451 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: N P SINGH
• Keywords: Commercial expediency

Judgement Text

D.C.I.T. C-6(1), MOHALI V. BECKONS INDUSTRIES LTD 993/CHANDI/2010 2 IN THE INCOME TAX APPELLATE TRIBUNAL: B BENCH: CH ANDIGARH BEFORE SHRI D K SRIVASTAVA, AM AND MS. SUSHMA CHOWL A, JM ITA NO. 993/CHANDI/2010 ASSESSMENT YEAR: 2006-07 D.C.I.T. C-6(1), MOHALI V. M/S BECKONS INDUSTRIES LTD D-118, INDUSTRIAL AREA, PHASE 7 MOHALI PAN: AABCA 2425 K (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. JAISHREE SHARMA RESPONDENT BY: SHRI N.P. SINGH ORDER D K SRIVASTAVA: THE APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 30.4.2010, ON THE FOLLOWING GROUNDS: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 13,61,450/- M ADE BY THE AO FOR NOT CHARGING OF INTEREST ON LOANS AND ADVANCES GIVEN TO DIRECTORS AND SUBSIDIARIES. 3 IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO MAY BE RESTORED. 4 THE APPELLANT CRAVES LEAVE TO ADD OR AMEND AND G ROUND OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OFF. 2. THE ASSESSEE IS A PRIVATE LTD CO. ENGAGED IN THE BUSINESS OF MANUFACTURING OF COMPUTER STATIONARY. RETURN OF INCOME WAS E-FILED ON 29.11.2006 RETURNING TOTAL INCOME AT RS. 11,03,064/-. THE RETURN WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF SCRUTINY, THE ASSESSEE WAS FOUND TO HAVE GIVEN LOANS AND ADVANCES AMOUNTING RS. 3,11,22,866/- TO ITS DIRECTORS, RELATIVES OF DIREC TORS AND SISTER CONCERNS IN WHICH THE DIRECTORS HAD SUBSTANTIAL INTEREST WITHOUT CHARGING ANY INTEREST ON THEM WHILE THE ASSESSEE-COMPANY WAS PAYING INTEREST ON LOANS TAKEN FROM BANKS AND OTHER FINANCIAL INSTITUTIONS. THE AO CONSIDERED THE AFORESAID ADVAN CES GIVEN TO THE DIRECTORS, RELATIVES OF DIRECTORS AND THE SISTER CONCERNS AS DIVERSION O F FUNDS BY THE ASSESSEE AND D.C.I.T. C-6(1), MOHALI V. BECKONS INDUSTRIES LTD 993/CHANDI/2010 3 THEREFORE, DISALLOWED A SUM OF RS. 13,61,450/- BEIN G INTEREST PAID ON LOAN TAKEN ON PRO RATA BASIS. THE FINDING RECORDED BY THE AO IN THIS BEHALF READS AS UNDER:- THE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACT URING OF COMPUTER STATIONARY. DURING THE COURSE OF THE ASSESSMENT PRO CEEDINGS, IT WAS NOTICED THAT AN AMOUNT OF RS. 3,11,22,866/- HAS BEEN GIVEN AS ADVANCE TO DIRECTORS, RELATIVES OF DIRECTORS AND TO COMPANIES IN WHICH DI RECTORS HAVE SUBSTANTIAL INTEREST AND NO INTEREST HAS BEEN CHARGED IN SPITE OF THE FACTS THAT THE COMPANY IS PAYING INTEREST ON LOANS TAKEN FROM BANK S AND OTHER FINANCIAL INSTITUTIONS. THE INTEREST SO PAID HAS BEEN CLAIME D AS EXPENSES BY THE ASSESSEE. THE INTEREST PAID ON SUCH LOANS AMOUNTIN G TO RS. 13,61,450/- IS DISALLOWED ON PRO-RATE BASIS. THUS ADDITION TO THE TUNE OF RS. 13,61,450/- IS BEING MADE TO THE TAXABLE INCOME OF THE ASSESSEE. PENALTY PROCEEDING U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS/CON CEALMENT OF THE INCOME ARE BEING INITIATED SEPARATELY ON THIS ISSUE. 3. AGGRIEVED BY THE ORDER PASSED BY THE AO, THE ASS ESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HOWEVER DELETED THE IMP UGNED DISALLOWANCES WITH THE FOLLOWING OBSERVATIONS: 9 AFTER CONSIDERING RIVAL CONTENTIONS AND PERUSING MATERIAL ON RECORD, I FIND THAT THE FOLLOWING EXPENSES HAVE BEEN CLAIMED UNDER THE HEAD FINANCIAL EXPENSES BANK CHARGES: 61,324/- INTEREST ON WORKING CAPITAL: 13,26,005/- INTEREST ON TERM LOAN: 18,800/- INTEREST OTHERS: 18,645/- INTEREST ON HIRE PURCHASE CAR LOAN: 46,329/- INTEREST ON UNSECURED LOAN: NIL TOTAL 14,69,103/- 10 THE AO HAS NOWHERE IN HIS ORDER ESTABLISHED THAT THE APPELLANT COMPANY HAD RAISED INTEREST BEARING LOAN AND DIVERT ED THEM TO PARTNERS/PARTIES WITHOUT CHARGING INTEREST. 11 I FURTHER FIND THAT RS. 3,11,22,866/- WAS FINANC ED BY THE COMPANY FROM SELF SOURCES WITHOUT ANY COST I.E. RS. 90,50,000/- WERE RAISED THROUGH UNSECURED LOANS DURING THE YEAR, SHARE CAPITAL OF R S. 5,11,56,000/- RESERVE D.C.I.T. C-6(1), MOHALI V. BECKONS INDUSTRIES LTD 993/CHANDI/2010 4 AND SURPLUSES OF RS. 1,10,13,825/- TOTALING TO RS. 7,12,19,825/-. COMPANY STILL HAD A ZERO COST SURPLUS FUND OF RS. 4,00,96,959/- ( RS. 7,12,19,825 RS. 3,11,22,866/-) AS ON 31.3.2006. 12 IT IS EVIDENT FROM RECORD THAT THE AMOUNT OF RS. 3,11,22,866/- INCLUDES SUNDRY DEBTORS OF RS. 42,01,115/- DULY ACCOUNTED IN THE SUNDRY DEBTORS OF RS. 2,53,03,064/- AND RS. 49,38,930/- IS RECOVERABLE AG AINST SALE OF LAND AND BUILDING FROM SHRI A.S. BHATIA. THE MAJOR COMPONEN T OF RS. 2,19,82,821/- IS AN ADVANCE FOR SETTING UP BIOTECHNOLOGY PLANT AT DE RA BASSI TO SUBSIDIARY COMPANY. 4. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A) THE DEPARTMENT IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD. DR INVITED OUR ATTENTION TO PARAGRAPH 4 OF THE AUDITORS REPORT (PAGE 22 OF THE 14 TH ANNUAL REPORT FOR 2005-06) TO THE MEMBERS OF THE ASSESSEE-COMPANY FOR THE YEAR UN DER APPEAL AND SUBMITTED THE AUDITORS HAVE THEMSELVES STATED IN THE SAID PARAGRA PH THAT THE ASSESSEE-COMPANY HAS GIVEN UNSECURED LOANS AMOUNTING TO RS. 3,11,22,866/ - TO FOUR PARTIES WITHOUT ANY STIPULATION REGARDING REPAYMENT OF PRINCIPAL AMOUNT OF LOAN AND INTEREST AND THAT THE AFORESAID LOANS AND ADVANCES WERE THEREFORE PREJUDI CIAL TO THE INTEREST OF THE ASSESSEE-COMPANY. INVITING OUR ATTENTION TO THE DET AILS OF UNSECURED LOANS AS GIVEN IN THE BALANCE SHEETS, THE LD. DR SUBMITTED THAT A SUM OF RS. 49,38,930/- WAS GIVEN AS INTEREST-FREE LOAN TO SHRI A.S. BHATIA, MATERNAL UN CLE OF MANAGING DIRECTOR OF THE ASSESSEE-COMPANY AND A SUM OF RS. 2,19,82,821/- WAS GIVEN AS UNSECURED LOAN TO PUNJAB BIOTECHNOLOGY PLANT LTD., A SISTER CONCERN O F ASSESSEE-COMPANY. SHE FURTHER SUBMITTED THAT THE AFORESAID ADVANCE WERE CLEARLY I N THE NATURE OF DIVERSION OF INTEREST BEARING FUNDS. ACCORDING TO HER, IF THE A FORESAID INTEREST-FREE ADVANCE HAD NOT BEEN GIVEN TO THE RELATIVES OF THE DIRECTORS OF THE ASSESSEE-COMPANY AND SISTER CONCERNS THEN THEY WOULD HAVE BEEN AVAILABLE WITH T HE ASSESSEE-COMPANY AND THE ASSESSEE-COMPANY IN THAT CASE WOULD NOT HAVE BEEN B URDENED WITH THE LIABILITY TO BORROW AND PAY INTEREST THEREON. RELYING UPON THE JUDGMENT RENDERED IN CIT V. ABHISHEK INDUSTRIES, 286 ITR 1 (P & H), SHE SUBMITT ED THAT IT WAS IRRELEVANT WHETHER THE LOANS WERE GIVEN OUT OF BORROWED FUNDS OR OWN F UNDS AS ALL THE FUNDS WERE PART OF COMMON KITTY AS HELD IN ABHISHEK INDUSTRIES LTD. S HE SUBMITTED THAT THE ACTION OF THE AO IN DISALLOWING THE IMPUGNED INTEREST WAS FULLY I N CONFORMITY WITH THE PRINCIPLES LAID BY THE HON'BLE JURISDICTIONAL HIGH COURT IN ABHISHE K INDUSTRIES LTD (SUPRA). 5. IN REPLY, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). HE SUBMITTED THAT A SUM O F RS. 49,38,930/- STANDING IN THE NAME OF SHRI A.S. BHATIA REPRESENTED THE AMOUNT WHI CH WAS RECOVERABLE FROM HIM D.C.I.T. C-6(1), MOHALI V. BECKONS INDUSTRIES LTD 993/CHANDI/2010 5 AGAINST SALE OF LAND AND BUILDING BY THE ASSESSEE-C OMPANY AND THEREFORE, IT WAS NOT IN THE NATURE OF LOAN OR ADVANCE BY THE ASSESSEE TO HIM. HE FURTHER SUBMITTED THAT A SUM OF RS. 2,19,82,821/- STANDING IN THE NAME OF PU NJAB BIOTEHNOLOGY PARK LTD., A SUBSIDIARY COMPANY OF THE ASSESSEE, REPRESENTED THE FUNDS GIVEN BY THE ASSESSEE- COMPANY OUT OF BUSINESS EXPEDIENCY. ACCORDING TO H IM PUNJAB BIOTEHNOLOGY PARK LTD. WAS SET UP IN PURSUANCE OF A JOINT COLLABORATION AG REEMENT DATED 25.9.2004 BETWEEN THE ASSESSEE-COMPANY AND PUNJAB STATE COUNCIL FOR S CIENCE & TECHNOLOGY, A GOVT OF PUNJAB UNDERTAKING. IT WAS SUBMITTED THAT THE SAID SUBSIDIARY COMPANY WAS SET UP TO DEVELOP BIO-TECHNOLOGY PARK IN WHICH THE ASSESSEE-C OMPANY WAS ALSO INTERESTED AND THEREFORE THE LOAN WAS GIVEN TO PUNJAB BIO-TEHNOLOG Y PARK LTD. OUT OF COMMERCIAL EXPEDIENCY. HIS NEXT SUBMISSION WAS THAT INTEREST- BEARING LOANS WERE TAKEN BY THE ASSESSEE-COMPANY FROM THE BANKS/FINANCIAL INSTITUTI ONS FOR MEETING WORKING CAPITAL REQUIREMENT AND THEREFORE THE LOANS TAKEN FROM THE BANK AND OTHER INSTITUTIONS WERE FULLY UTILISED FOR THE PURPOSE FOR WHICH THEY WERE TAKEN AND THEREFORE THEY WERE NOT AVAILABLE FOR DIVERSION. ACCORDING TO HIM, THE AO WAS NOT JUSTIFIED IN DISALLOWING THE SAID AMOUNT OF INTEREST. IT WAS ALSO SUBMITTED THA T THE IMPUGNED LOANS AND ADVANCE WERE GIVEN OUT OF INTEREST-FREE FUNDS INTERNALLY AV AILABLE WITH THE ASSESSEE. 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. PERUSAL OF BALANCE SHEET TOGETHER WITH ITS SCHEDULE APPENDED THERETO SHOWS THAT A SUM OF RS. 49,38,930/- HAS BEEN TREATED BY THE ASSE SSEE-COMPANY ITSELF AS LOAN AND ADVANCE GIVEN TO SHRI A.S. BHATIA, MATERNAL UNCLE O F MANAGING DIRECTOR OF THE ASSESSEE-COMPANY AND THAT A FURTHER SUM OF RS. 2,19 ,82,821/- HAS BEEN SHOWN AS UNSECURED LOAN RECOVERED FROM PUNJAB BIOTEHNOLOGY P ARK, A SUBSIDIARY COMPANY OF THE ASSESSEE. 7. IN PARA 4 OF THEIR REPORT, THE AUDITORS HAVE COM MENTED UPON THE AFORESAID LOANS AND ADVANCES AS UNDER: THE COMPANY HAS GIVEN UNSECURED LOAN TO FIRMS OR O THER PARTIES LISTED IN REGISTER MAINTAINED U/S 301 OF THE COMPANIES ACT, 1 956. NO OF PARTIES 4 (FOUR) AMOUNT RS. 311.23 LACS OUT OF THIS RS. 219.83 (159. 18) HAS BEING TO SUBSIDIARY COMPANY. THE LOANS ARE WITHOUT ANY STIPULATION REG ARDING REPAYMENT OF PRINCIPAL AMOUNT OF LOAN AND INTEREST. WHERE LOAN OUTSTANDING AMOUNT IS MORE THAN RS. ONE LACS THE COMPANY NEEDS TO TAKE STEPS T O RECOVER THE AMOUNT. THE LOANS ARE PRIMA FACIE PREJUDICIAL TO THE INTERE ST OF COMPANY AS NO INTEREST IS BEING CHARGED. 8. IT IS QUITE OBVIOUS THAT THE AFORESAID LOANS AND ADVANCES HAVE BEEN TREATED AS UNSECURED LOANS GIVEN BY THE ASSESSEE WITHOUT ANY S TIPULATION REGARDING THEIR RE- D.C.I.T. C-6(1), MOHALI V. BECKONS INDUSTRIES LTD 993/CHANDI/2010 6 PAYMENT AND INTEREST. IT IS ALSO CLEAR THAT THE AU DITORS OF THE ASSESSEE-COMPANY HAVE CONSIDERED THE AFORESAID LOANS AS PREJUDICIAL TO TH E INTEREST OF THE ASSESSEE-COMPANY AS NO INTEREST IS BEING CHARGED ON THEM. THE STATU TORY REPORT GIVEN BY THE AUDITORS CARRIES HIGH EVIDENTIARY VALUE AS REGARDS THE NATUR E OF TRANSACTION RECORDED BY THE ASSESSEE-COMPANY IN ITS BOOKS AND ITS EFFECT ON THE FINANCIAL HEALTH OF THE ASSESSEE- COMPANY. 9. AS REGARDS THE AMOUNT SHOWN AS UNSECURED LOAN IN THE NAME OF SHRI A.S. BHATIA, THE ADMITTED POSITION IS THAT SHRI A.S. BHA TIA IS MATERNAL UNCLE OF THE MANAGING DIRECTOR OF THE ASSESSEE-COMPANY. THE ASS ESSEE-COMPANY ITSELF HAS TREATED THE AMOUNT STANDING IN HIS NAME AS LOAN GIV EN BY THE ASSESSEE TO HIM. THE AUDITORS OF THE ASSESSEE-COMPANY ARE WELL-VERSED IN THESE MATTERS. THEY HAVE ALSO TREATED THE AFORESAID LOAN. AS PREJUDICIAL TO THE I NTEREST OF THE ASSESSEE. IN OTHER WORDS, THEY WERE OF THE OPINION THAT THE ACTION OF ASSESSEE IN GIVING INTEREST-FREE LOANS TO SHRI A.S. BHATIA WAS NOT GUIDED BY ANY BUS INESS CONSIDERATION. THE SUBMISSION OF THE ASSESSEE THAT THE AMOUNT STANDING IN THE NAME OF SHRI A.S. BHATIA REPRESENTS THE RECOVERABLE AMOUNT ON SALE OF PROPER TY BY THE ASSESSEE, DOES NOT MAKE ANY DIFFERENCE. THE AMOUNT RECOVERABLE FROM SH RI A.S. BHATIA ON SALE OF PROPERTY WAS NOT RECOVERED. A CONSCIOUS DECISION W AS TAKEN BY THE ASSESSEE TO TREAT THE SAME AS LOAN GIVEN TO HIM. INSTEAD OF RECOVE RING THE AFORESAID AMOUNT FROM SHRI A.S. BHATIA, THE ASSESSEE HAS ALLOWED THE AMOU NT OF SALE PROCEEDS TO BE RETAINED BY HIM AS LOAN FROM THE ASSESSEE-COMPANY W ITHOUT CHARGING ANY INTEREST AND WITHOUT ANY STIPULATION AS TO REPAYMENT OF THE SAID AMOUNT. IN OUR VIEW THE AFORESAID SEQUENCE OF EVENTS FIRMLY ESTABLISH THE FACT THAT THE FUNDS, WHICH SHOULD HAVE BEEN AVAILABLE WITH THE ASSESSEE-COMPANY, WERE ALLOWED T O BE DIVERTED OR RETAINED BY SHRI A.S. BHATIA OUT OF NON BUSINESS CONSIDERATION AND N OT OUT OF BUSINESS EXPEDIENCY. WE, THEREFORE, HOLD THAT THE AMOUNT STANDING IN THE NAME OF SHRI A.S. BHATIA IS IN THE NATURE OF LOAN ADVANCED BY THE ASSESSEE TO HIM WITH OUT ANY COMMERCIAL EXPEDIENCY. 10. IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE AFORESAID AMOUNT WOULD BE FULLY COVERED BY INTERNAL ACCRUALS AND INTEREST-FRE E FUNDS AVAILABLE WITH THE ASSESSEE. SIMILAR ARGUMENT WAS MADE BEFORE AND REJECTED BY TH E HON'BLE JURISDICTIONAL HIGH COURT IN CIT V. ABHISHEK INDUSTRIES LTD, 261 ITR 1 (PH). RELEVANT OBSERVATIONS MADE BY THE HON'BLE HIGH COURT READ AS UNDER:- THE ENTIRE MONEY IN A BUSINESS ENTITY COMES IN A C OMMON KITTY. THE MONIES RECEIVED AS SHARE CAPITAL, AS TERM LOANS, AS WORKIN G CAPITAL LOAN, AS SALE PROCEEDS ETC. DO NOT HAVE ANY DIFFERENT COLOUR. WH ATEVER ARE THE RECEIPTS IN THE BUSINESS THEY HAVE THE COLOUR OF BUSINESS RECEI PTS AND HAVE NO SEPARATE D.C.I.T. C-6(1), MOHALI V. BECKONS INDUSTRIES LTD 993/CHANDI/2010 7 IDENTIFICATION. SOURCES HAVE NO CONCERN WHATSOEVER . THE ONLY THING SUFFICIENT TO DISALLOW THE INTEREST PAID ON THE BORROWINGS TO THE EXTENT THE AMOUNT IS LENT TO A SISTER CONCERN WITHOUT CARRYING ANY INTEREST F OR NON-BUSINESS PURPOSES WOULD BE THAT THE ASSESSEE HAS SOME LOANS OR OTHER INTEREST BEARING DEBTS TO BE REPAID. IN CASE THE ASSESSEE HAD SOME SURPLUS A MOUNT WHICH ACCORDING TO IT COULD NOT BE REPAID. IN CASE THE ASSESSEE HAS S OME SURPLUS AMOUNT WHICH ACCORDING TO IT, COULD NOT BE REPAID PREMATURELY TO ANY FINANCIAL INSTITUTION, STILL THE SAME IS EITHER REQUIRED TO BE CIRCULATED AND UT ILISED FOR THE PURPOSE OF BUSINESS OR TO BE INVESTED IN A MANNER IN WHICH IT GENERATES INCOME AND NOT THAT IT IS DIVERTED TOWARDS SISTER CONCERNS FREE 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 SIS TER CONCERN WOULD BE ENJOYING THE BENEFITS THEREOF. IT CANNOT POSSIBLY BE HELD THAT THE FUNDS TO THE EXTENT DIVERTED TO SISTER CONCERNS OR OTHER PERSONS FREE OF INTEREST WERE REQUIRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUS INESS AND LOANS TO THAT EXTENT WERE REQUIRED TO BE RAISED. WE DO NOT SUBSC RIBE TO THE THEORY OF DIRECT NEXUIS OF THE FUNDS BETWEEN BORROWINGS OF THE FUNDS AND DIVERSION THEREOF FOR NON-BUSINESS PURPOSES.. 11. IF THE ASSESSEE HAD NOT DIVERTED THE FUNDS TO S HRI A.S. BHATIA FOR NON-BUSINESS CONSIDERATION, THEY WOULD HAVE BEEN AVAILABLE WITH THE ASSESSEE-COMPANY FOR ITS BUSINESS PURPOSES AND TO THAT EXTENT IT MAY NOT HAV E BEEN NECESSARY TO BORROW FROM THE BANKS AND PAY INTEREST THEREON. IN CIT V. H.R. SUGAR FACTORY PVT LTD, 187 ITR 363, 370-371. WHICH HAS BEEN CITED WITH APPROVAL IN ABHISHEK INDUSTRIES (SUPRA), THE HON'BLE ALLAHABAD HIGH COURT HAS HELD AS UNDER :- MAY BE THAT THE COMPANY BORROWS LARGE AMOUNTS FOR THE PURPOSE OF ITS BUSINESS EVERY DAY, BUT THAT DOES NOT EXPLAIN THE H UGE ADVANCES TO THE DIRECTIONS/SHAREHOLDERS. HAD THIS MONEY BEEN NOT AD VANCED TO THE DIRECTORS, IT WOULD HAVE BEEN AVAILABLE TO THE ASSESSEE FOR ITS B USINESS PURPOSES AND TO THAT EXTENT IT MAY NOT HAVE BEEN NECESSARY TO BORRO W FROM THE BANKS. 12. IN VIEW OF THE FOREGOING, THE FACT THAT THE FUN DS TO THE EXTENT OF DIVERSION FOR NON-BUSINESS EXPEDIENCY WERE INTERNALLY AVAILABLE W ITH THE ASSESSEE-COMPANY, WOULD MAKE NO DIFFERENCE. THE INTEREST ATTRIBUTABLE TO A SUM OF RS. 49,38,930/- BEING THE AMOUNT OF DIVERTED BY THE ASSESSEE-COMPANY FOR THE PERSONAL BENEFIT OF SHRI A.S. BHATIA IS THEREFORE LEVIABLE TO BE DISALLOWED. THE AO IS DIRECTED TO RE-COMPUTE THE DISALLOWANCE ACCORDINGLY. D.C.I.T. C-6(1), MOHALI V. BECKONS INDUSTRIES LTD 993/CHANDI/2010 8 13. AS REGARDS THE AMOUNT OUTSTANDING IN THE NAME O F PUNJAB BIOTEHNOLOGY PARK, THE FACTS AS AVAILABLE ON RECORD INDICATE THAT THE SAID SUM OF MONEY WAS GIVEN BY THE ASSESSEE-COMPANY OUT OF BUSINESS EXPEDIENCY. PUNJA B BIOTEHNOLOGY PARK, A SUBSIDIARY OF THE ASSESSEE-COMPANY AND THEREFORE, T HE ASSESSEE IS DEEPLY INTERESTED IN THE WORKING OF THE SAID COMPANY. BESIDES, THE S UBSIDIARY COMPANY HAS BEEN SET IN PURSUANCE OF JOINT COLLABORATION AGREEMENT TO WHICH THE ASSESSEE IS A PARTY FOR THE DEVELOPMENT OF BIOTECHNOLOGY PARK. THE SUBSIDIARY COMPANY IS REQUIRED TO ACT AS A FACILITATOR FOR DEVELOPMENT OF THE BIOTECHNOLOGY PA RK IN WHICH THE ASSESSEE IS ALSO INTERESTED. ON THE FACTS OF THE CASE, WE ARE SATIS FIED THAT THE LOAN STANDING IN THE NAME OF PUNJAB BIO-TEHNOLOGY PARK IS GUIDED BY BUSI NESS EXPEDIENCY. THE AO IS DIRECTED NOT TO DISALLOW ANY INTEREST ATTRIBUTABLE TO THE LOANS GIVEN BY THE ASSESSEE- COMPANY TO THE SAID SUBSIDIARY COMPANY. 14. APPEAL FILED BY THE DEPARTMENT IS PARTLY ALLOWE D. ORDER PRONOUNCED ON 13TH MAY 2011 SD/- SD/- (SUSHMA CHOWLA) (D K SRIVA STAVA) JUDICIAL MEMBER ACCOUNTANT MEM BER CHANDIGARH: THE 13 TH MAY 2011 SURESH COPY TO: 1. THE APPELLANT, D.C.I.T. C-6(1), MOHALI 2. THE RESPONDENT, M/S BECKONS INDUSTRIES LTD. MO HALI 3. THE CIT(A), CHANDIGARH 4. THE LD. CIT, CHANDIGARH 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH