TMI Blog2012 (11) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and no part of the said expenditure could be held to be attributable to the Baddi unit, even to the extent of its turnover to the total turnover. The direct expenses of other units, in no manner can be attributed to Baddi unit. Similarly the selling and distribution expenses are not to be considered as Baddi unit is computing its income by reflecting sales of its manufactured items at predetermined price and transferring part of its margin of profits to the head office and retail units, which at the end of year had declared profits, which are assessable in the hands of assessee itself. In case these margin of profits are excluded from head office and included in the hands of Baddi unit, the resultant figure after debiting even the allocated expenditure on selling and distribution, would be eligible for the benefits of deduction u/s 80IC - direct the AO to recompute the disallowance u/s 80IC by excluding 2.54% of the total expenditure of Directors' salary, Directors' traveling & conveyance expenses, legal & professional expenses and Auditors remuneration being attributable to Baddi unit - partly in favour of assessee. Disallowance & capitalizing interest - Held that:- The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Capital - Held that:- As decided in Brook Bond India Ltd. Vs. CIT [1997 (2) TMI 11 - SUPREME COURT] though the increase in the capital results in expansion of the capital base of the company and incidentally that would help in the business of the company and may also help in the profit-making, the expenses incurred in that connection still retain the character of a capital expenditure - against assessee. Disallowance under section 14A r.w.r. 8D - Held that:- As held in Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT) that the provisions of Rule 8D will be held to be prospective applicable from assessment year 2008- 09 onwards no merit in the orders of the authorities in applying the provisions of Rule 8D for computing the disallowance under section 14A of the Act in the hands of the assessee relating to assessment year 2007- 08 - no merit in invoking the provisions of section 14A of the Act in assessment year 2008 - 09 where the income from the said investment in SBI Mutual Funds has been offered to tax. no merit in invoking the provisions of section 14A of the Act in assessment year 2008 - 09 where the income from the said investment in SBI Mutual Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears 2006- 07 and 2007- 08 against the order passed under section 143(3) of the Income Tax Act, 1961 2. The assessee is in appeal against the order of Commissioner of Income Tax (Appeals), Chandigarh dated 3.10.2011 relating to assessment year 2008- 09 against the order passed under section 143(3) of the Income Tax Act, 1961 (in short 'the Act'). 3. All the five appeals relating to the same assessee on similar issues were heard together and are being disposed off by this consolidated order for the sake of convenience. ITA No.1056/Chd/2010 :: Assessee's Appeal :: Assessment Year 2006-07 : 4. The learned A.R. for the assessee pointed out that ground Nos.1,2,5 and 6 are general in nature and hence the same are dismissed. The only effective grounds of appeal raised by the assessee in this appeal are as under: 3. That the Ld. CIT (A), Chandigarh is not justified in not considering the correct legal position and submissions by the appellant's counsel and resultantly erroneously concurring with the orders passed by the A.O., u/s 143(3) of the Income Tax Act, 1961 and thereby confirming the action of Ld. A.O. in upholding an addition amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee pointed out that the issue stands covered by the order of the Hon'ble Punjab Haryana High Court in CIT Vs. M/s Nuchem Ltd. in ITA No.323 of 2009 - date of decision 2.2.2010. 9. The learned D.R. for the Revenue placed reliance on the order of the Assessing Officer. 10. We have heard the rival contentions and perused the record. The issue in the present case is squarely covered by the ratio laid down by the Jurisdictional High Court in CIT Vs. Nuchem Ltd. (supra) under which it is provided that where the employees' share of contribution to ESI or PF is made before the due date of filing the return of income, no disallowance is warranted on this account. Similar is the case in respect of employers share of contribution to PF and ESI. The assessee in the present case had deposited the said amount of employees share of PF and ESI admittedly before the due date of filing the return of income and in majority of the months even within the grace period allowed under the respective Acts. Only in respect of the month of June, 2005, the said amount was paid on 21.7.2005 one day later than the grace period but before the due date of filing the return of income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the head office and were distributed to various retail outlets of the company through central warehouse at Panchkula. The assessee also explained that the capital required for establishing the unit was invested by the head office. It was also brought on record that there were no debtors in the unit. The Assessing Officer vide order-sheet entry dated 8.12.2008 gave final opportunity to the assessee to furnish distribution and common expenses incurred by the company from its head office at Chandigarh so that actual profits of Baddi unit could be worked out. In response thereto the assessee furnished working which is annexed as Annexure A-3 to the assessment order. The total of the expenses debited to the head office of ₹ 9,29,04,720/- were considered for allocation between Baddi unit and the remaining business of the assessee. It was also pointed out by the assessee that the net sales of Baddi unit were 2.58% of the total sales of the company. The Assessing Officer vide para 8.2 observed as under: 8.2. Replies of the assessee have duly been considered. From the details furnished by the assessee following points emerge: (i) Assessee has not maintained separate acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the Assessing Officer, had to be taken into account for the purposes of allocation of expenses relating to selling of the goods of the eligible unit. Thus all the expenses in table-2 i.e. column-A were to be considered for the purposes of allocating of expenses to Baddi unit. The Assessing Officer accepted the pela of the assessee with regard to exclusion of sale tax of ₹ 2.27 crores. The total expenses as per table-2 for allocation were thus tabulated at ₹ 10,23,54,135/-. b) The total purchase expenses debited to head office amounting to ₹ 97,50,89,394/-, as per the Assessing Officer, included direct expenses relating to purchases which were to the tune of ₹ 2.14 crores. As the purchases were being made by the head office, the said expenses, as per the Assessing Officer, were not transferred to Baddi unit during the stock transfer and hence the same were also to be included for allocation purposes. c) The Assessing Officer also included the expenditure tabulated under table-1 on account of Directors salary and other expenses i.e. insurance, legal and professional expenses, financial expenses and depreciation totaling ₹ 4,24,05,263/- for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m this profit, the expenses of Head Office and retail outlets are being met. Even after meeting these expenses, there were surplus in the accounts of Head office and retail outlets. So the Baddi unit was already working as a separate profit center and a separate source of income and this financial methodology of the assessee was in accordance with provisions of Section 80-IA(5) of the Act. The learned A.R. for the assessee drew our attention to page 38 of the Paper Book and pointed out that the goods were transferred from head office to retail counters. Our attention was further drawn to item No.13 which was priced at ₹ 195/-. The learned A.R. for the assessee pointed out that the said item was transferred from Badi unit to head office at the price of 150/- as is evident from the goods received note issued by the Panchkula office to Baddi unit enclosed at pages 41 and 42 of the Paper Book. The learned A.R. for the assessee further drew our attention to similar transfer of goods i.e. item No.27 at page 38 of the Paper Book and item No.20 at page 42 of the Paper Book. The explanation of the assessee in this regard was that the goods manufactured at Baddi unit were transferred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee stressed that the assessee did not agree to any addition at the stage of assessment proceedings. The learned A.R. for the assessee further referred to the list of expenses tabulated in table-I and 2 and pointed out as under: a) That the unit at Baddi unit was established in the second year of operation and no borrowed funds were utilized for establishing the unit; b) The Baddi unit had no debtors whatsoever; c) That the expenses tabulated at page 25 of the assessment order in table 2 were so tabulated at the instance of the Assessing Officer and the said tabulation was not on account of any admission made by the assessee for apportionment of any part of the said expenses of Head office to Baddi unit; d) In the alternative, in case any apportionment of expenses was to be made then profit which had been transferred to the Head office should also be considered in the hands of Baddi unit for computing the profits of eligible business. 20. The learned A.R. for the assessee placed reliance on the ratio laid down by Mumbai Bench of the Tribunal in the case of Echjay Industries Ltd. Vs. DCIT (2004) 88 TTJ (MUM) 1089. 21. The learned D.R. for the Revenue in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the reasons elaborated upon by the CIT (Appeals), the said financial statement in respect of Baddi unit, as per the CIT (Appeals), could not be relied upon. The learned D.R. for the Revenue has not controverted the findings of the CIT (Appeals) in this regard. Accordingly, the conclusion of the Assessing Officer that the assessee was not maintaining separate books of account was incorrect. The assessee having prepared separate profitability statement in respect of its profits of Baddi unit could not be denied the said deduction on mere surmises. 25. The modus operandi adopted by the assessee for carrying on its business was that all the purchases were being centrally made at Panchkula and the stock of raw material was transferred to the respective units. Baddi unit was manufacturing products like shirts and trousers and finished articles were transferred to Panchkula warehouse at a notional inter-unit transfer price. The assessee in the books of Baddi unit treated the said transfer price as it sale price for computing eligible profits of the business. The manufactured items received from all units by Panchkula controlling office were transferred to various retail outlets situ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into account for determining profits of the Baddi unit. The basis of profit margin has not been disclosed by the assessee. It is not known as to at what rate such items are finally sold in the market through retail outlets. Nothing has been brought on record by the assessee to show that the transaction between eligible unit and Head office are at arms length. (iv) The source of entire capital used for Baddi unit was the head office and all financial expenses were debited to the books of Head office and no such expense was taken into consideration for working profits of the Baddi unit. (v) No administrative expenses relating to the management administrations of affairs of the company were taken into consideration for working the profits of the eligible unit. (vi) Assessee has admitted that expenses to the extent of ₹ 23,96,941/- (being 2.5% of ₹ 9,29,04,720/-) debited to Head office should have been allocated to Baddi unit and to that extent profits of the Baddi unit had been overstated. This also implies that assessee has admitted that to the extent of ₹ 23,96,941/ the claim of deduction u/s 80IC was excessive. 27. Further in para 8.3 of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1386170 Only expenses of head office at Chandigarh taken in (A) Telephone 2093351 1381822 Only expenses of head office at Chandigarh taken Travelling 2093767 1319750 Only expenses of head office at Chandigarh taken in (A) Rates Taxes fees 36014370 990893 Sales tax and rent of outlets excluded in (B) Total 12,51,22,698 5,03,25,811 *Total expenses of company minus that shown for Baddi unit. 29. The claim of the assessee was that out of the total expenditure of 12.51 crores debited to the Profit Loss Account of the head office only ₹ 5.03 crores, if necessary, should be considered for allocation to the Baddi unit. The above said chart though was prepared by the assessee but was at the instance of the Assessing Officer. The Assessing Officer, however, rejected the bifurcation proposed by the assessee and recomputed total expenditure debited to the Profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the goods are sold in the market or not. The said goods were reflected as sold at a predetermined price in the Baddi unit and the balance profits were accounted for in the books of account of the head office. The Baddi unit was no sundry Debtors. It is to be kept in mind that the consolidated profits of the company are assessed to tax in the hands of the assessee and only in respect of part of the turnover of Baddi unit, the assessee had claimed deduction under section 80IC of the Act on the net profits of the said unit. In the entiret y of the above said facts and circumstances of the case where the assessee has computed the profits of its business units not on the sale price of the goods manufactured by the unit, but at a predetermined price on which the goods are transferred to its head office, without accounting for the margin of profits, which are being reflected in the hands of the head office and retail counters, which in turn accounts for the expenses of the Head Officer Retail Outlets, there is no merit for allocation of expenses of the head office to the Baddi unit from Table 2, especially because the head office had shown profits at the close of the year. 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses could not be apportioned between the head office and Baddi unit to compute the profits of Baddi unit. We find merit in the plea of the assessee that where no part of the borrowed funds were utilized for setting up of Baddi unit, the said financial expenditure could not be attributed to the running of Baddi unit. The Assessing Officer has failed to bring on record any evidence to the contrary. Similarly, depreciation claimed on assets which are installed at different units of the assessee and their user could not be attributed to the Baddi unit. The only expenses to be considered for allocation are Directors ' salary, Directors' traveling conveyance, legal professional expenses and Auditors remuneration. In view of the orders of the authorities below in accepting the contention of the assessee that the turnover of Baddi unit was 2.54% of the total turnover, we direct the Assessing Officer to recompute the disallowance under section 80IC of the Act by excluding 2.54% of the total expenditure of Directors' salary, Directors' traveling conveyance expenses, legal professional expenses and Auditors remuneration being attributable to Baddi unit. The balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 2 noted that the assessee had made advance payment for purchase of land. The assessee was asked to explain as to whether the interest paid up to the date when the said assets were put to use had been capitalized or not. In reply, the assessee submitted that the fixed assets were purchased in connection with the existing business and were by way of expansion. Further it was explained by the assessee that the reserve and surplus of the assessee company had increased from ₹ 4.82 crores to ₹ 8.39 crores and also the assessee had sold commercial site for ₹ 6 crores and money was utilisied for purchase of fixed assets. The Assessing Officer observed that as the assessee had made advance payment for purchase of land but since the land was not put to use during the year under consideration, the proportionate interest was required to be capitalized. The Assessing Officer accordingly disallowed sum of ₹ 6,50,911/- under section 36(1)(iii) of the Act. 36. The CIT (Appeals) deleted the addition made by the Assessing Officer in the absence of any nexus being established between the payment made for purchase of land having direct bearing with the secured or unsecu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id assets. The assessee claims to have sold one commercial site in Sector 43B, Chandigarh for ₹ 6 crores during the year under consideration and the said money was said to be utilized for purchase of the fixed assets. The total investment in the land reflected by the assessee was at ₹ 2.12 crores. In addition , during the year under consideration the reserve surplus of assessee company had increased from ₹ 4.81 crores to ₹ 8. 39 crores implying there by generation of funds by the assessee company itself out of its business activities. The Assessing Officer has failed to bring on record any evidence to justify the disallowance under the proviso to section 36(1)(iii) of the Act. The Assessing Officer has failed to refer to any borrowed funds utilized for the purposes of investment in the said fixed asset and in the absence of the same and in view of the facts of the present case where the assessee had sufficient self generated funds, we find no merit in ground No.1 raised by the Revenue and the same is dismissed. 42. The issue in ground No.2 raised by the Revenue has been adjudicated by us alongwith ground No.3 raised by the assessee in ITA No.1956/Chd/2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deduct tax at source. In case of non-deduction of tax at source, in view of the provisions of section 40(a)(ia) of the Act, such amount on which the assessee was liable to deduct tax at source and the same having not been deducted by the assessee, such amount is disallowable in the hands of the assessee. However, where the cumulative payment made to a particular person during the ye a r under consideration is less than ₹ 50,000/-, no disallowance is warranted for non deduction of tax at source. In the facts of the present case before us the assessee claimed that it has not violated provisions of section 194C of the Act because the total payments during the year to the individual truck owner was less than ₹ 50,000/-. We also find that in relation to the disallowance under section 40(a)(ia) of the Act, the Special Bench of Vishakhapatnam reported in ACIT Vs. Merilyn Shipping Transports [140 TTJ 1(SB)(Vishakhapatnam)] has laid down the proposition that where the amount payable to the payee has been paid during the year under consideration itself and no amount is payable at the close of the year, no disallowance is warranted under section 40(a)(ia) of the Act for non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es below and have not been considered by them. Though the plea of the assessee before the authorities below was that the advances made to the said parties were not loan accounts and the assessee was having purchase/sale transactions with these concerns during the year under consideration, the CIT (Appeals) had allowed the claim of the assessee both on account of availability of funds with the assessee and also the non-consideration of the entries debited to the account of M/s Shivam Industries. We are of the view that the issue raised by the assessee needs to be relooked by the Assessing Officer by considering the plea of the assessee and in view of the ratio laid down by the Hon'ble Supreme Court in S.A. Builders Vs. CIT (supra) that in case the advances between the assessee company and two concerns were on account of business transactions, no disallowance was warranted under section 36(1)(iii) of the Act. We remit the issue back to the file of the Assessing Officer to decide the same in accordance with law after affording reasonable opportunity of hearing to the assessee. The Assessing Officer shall also consider the plea of the assessee in respect of the entries in the respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT Chandigarh, before or at the time of hearing/final disposal of the appeal. 6. That the appellant craves to submit any additional facts/evidences in support of their grounds of appeals with the permission of the Hon'ble ITAT Chandigarh, before or at the time of hearing/final disposal of the appeal. 54. Ground No.1 raised by the Revenue is against the addition on account of expenditure incurred for the increase of various capital of the assessee company. The learned A. R. for the assessee fairly admitted that the issue is covered against the assessee by the ratio laid down in Brook Bond India Ltd. Vs. CIT [225 ITR 798 (SC)]. In view thereof, ground No.1 raised by the assessee is dismissed. 55. The alternate plea of the assessee for considering the said expenditure under section 35D of the Act is also dismissed. 56. The issue raised by the assessee vide ground No.2 is against the application of provisions of section 14A of the Act. 57. The brief facts relating to the issue are that during the course of assessment proceedings the Assessing Officer noted from the Balance Sheet that the assessee had made investment of ₹ 8,01,50,000/- as on 31.3.2007 in shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D(2)(iii) for computing the amount disallowable on account of administrative and other expenses, in both the years i. e. assessment years 2007-08 and 2008-09. The investment was made by the assessee on 30.3.2007 and was held on 1.4.2007 and consequently the said allowance was worked out under section 14A of the Act for both the assessment years 2007- 08 and 2008- 09. The learned A.R. for the assessee at the outset pointed out that first of all in assessment year 2007-08 the provisions of Rule 8D could be applied for computing the said disallowance under section 14A of the Act in view of the ratio laid down in Godrej Boyce Mfg. Co. Ltd. Vs. DCIT [234 CTR (Bom)1]. 61. The second plea of the learned A.R. for the assessee was that there was no question of invoking provisions of section 14A of the Act as the income was offered to tax. Reliance was placed in the case of CIT Vs. Kings Exports [318 ITR 100 (P H)] and in the case of ACIT Vs. The Punjab State Cooperative Agriculture Development Bank Ltd. (ITA No.742/Chd/2011) order dated 19.9.2011. The next plank of argument of the learned A.R. for the assessee was that the disallowance under section 14A of the Act cannot exceed the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer in assessment year 2008 - 09 in this regard by applying provisions of Rule 8D and section 14A of the Act. Though the provisions of Rule 8D are applicable w. e. f. assessment year 2008 - 09, there is no merit in invoking the provisions of section 14A of the Act in assessment year 2008 - 09 where the income from the said investment in SBI Mutual Funds has been offered to tax. The assessee had made the investment on 30.3.2007, which was encashed on 3.4.2007 and income of ₹ 1,18,508/- was offered to tax. The provisions of section 14A of the Act are to be invoked where the assessee had earned exempt income from its investment. The assessee has not earned any exempt income from the said asset by holding it for a total of about four days and encashed the same during the assessment year 2008 - 09 and offered the income to tax. Following the ratio laid down by the Hon'ble Punjab Haryana High Court in CIT Vs. Kings Exports (supra), we hold that there is no merit in invoking the provisions of section 14A of the Act in assessment year 2008-09. We are not addressing the alternate pleas raised by the learned A.R. for the assessee in this regard in view of our holding so. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furniture, fixtures, fittings, etc. out of the total expenditure, the assessee had failed to furnish the bills or vouchers totaling ₹ 14,56,000/-, which was disallowed under section 37(1) of the Act and the balance expenditure was allowed by the Assessing Officer. Further the expenditure on salary and wages totaling ₹ 20,50,000/- debited under the head 'revenue expenditure' by the Assessing Officer. Thus after allowing depreciation on the various assets capitalized, the total disallowance was worked out to ₹ 1,32,02,180/- by the Assessing Officer. 68. The CIT (Appeals) upheld the order of the Assessing Officer on all the accounts totaling ₹ 1,32,02,190/-. 69. The assessee is in appeal against the order of the CIT (Appeals). The learned A.R. for the assessee pointed out that in respect of the expenditure of ₹ 1,07,49,523/-, the assessee had taken on lease plot of land for a period of 12 years from its Managing Director and had spent the aforesaid amount in the renovation of the lease hold property. In respect of electric equipment totaling ₹ 19,99,620/- the learned A.R. for the assessee pointed out that it had more than 100 retail c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the CIT (Appeals). 74. The first item of expenditure is the renovation expenditure incurred by the assessee. The assessee had taken on lease plot No.365, Industrial Area, Phase-I, Panchkula from its Managing Director Shri Arun Grover on nominal rent b y p a yi n g h i m R s . 7 5 l a c s and had constructed the building on the said land for its centralized controlling office. The explanation of the assessee both before the Assessing Officer and the CIT (Appeals) was as under: During the F. Y 2003-04, the Company had taken land -- Plot No. 365, Industrial Area, Phase-I, Panchkula, on lease from Sh. Arun Grover, Managing Director of the Company on nominal Rent by paying him ₹ 75.00 lacs as interest free deposit. As the Company was expanding at a rapid pace, it was decided to establish a centralized controlling office (Head Office) Building on the leased premises. During the year under consideration, an amount of ₹ 1,07,49,523/- has been spent on construction. The assessee has put up construction of building on leasehold land and no building has been taken on lease. The assessee has not acquired any Capital Asset viz land but put up a building for bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee had furnished the details of the respective expenditure under various sub-heads at pages 53 to 59 of the Paper Book. The first expenditure is on electrical equipment placed at pages 54 and 55 of the Paper Book. The assessee had purchased 80 fans for 60,000 on 12.5.2006. Further there are other bills raised for ceiling fans for different offices as find mention in the ledger account palced at pages 54 and 55 of the Paper Book. The assessee had also spent ₹ 1,54,441/- on 15.1.2007 for electric installation at Faridabad. In the totality of the nature of the expenditure incurred by the assessee we find no merit in the claim of the assessee vis- -vis electric equipment totaling ₹ 8,43,022/-. The second item of expenditure is the office equipment totaling ₹ 76,191/-, break up of which is placed at page 56 of the Paper Book which is the expenditure on water dispenser, water cooler, water filter, etc. which are items of fittings and are in the nature of capital expenditure. The detail of expenditure on electric installation of ₹ 2,30,028/- is placed at page 58 of the Paper Book and perusal of the same reflects the purchase of exhaust fans, electric good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case and in law, Ld. CIT(A) has gravely erred in deleting the addition made by the A.O. on the issue of applying the provisions of section 14A of the income tax Act, 1961 on investment of ₹ 8,00,00,000/- in S.B.I. Mutual Fund and disallowing proportionate interest and administrative expenses amounting to ₹ 23,50,478/- by the applying rule 8D. 4. The appellant craves to add or amend any ground any grounds of appeal before the appeal is heard or disposed off. 5. It is prayed that the order of the Ld. CIT(A) be cancelled and that of the assessing officer may be restored. 83. Ground No.3 raised by the Revenue has been decided by us along with ground No. 2 raised by the assessee in assessment year 2007-08 and following our decision in paras hereinabove ground No.3 raised by the Revenue is thus dismissed. 84. The issue in ground No.1 raised by the Revenue is against the deletion of addition on account of interest relatable to capital work in progress. The assessee had reflected capital work in progress at ₹ 1.79 crores as on 31.3.2007, as against opening capital work in progress amounting to ₹ 5.90 crores. The Assessing Officer was of the view that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in the paras hereinabove we confirm the order of the CIT (Appeals) in respect of the deletion of addition of ₹ 2,33,038/-. 89. The next item of disallowance of ₹ 1,25,087/- is in respect of imprest account of the Directors of the assessee company and certain advances made to other concerns. The CIT (Appeals) allowed the claim of the assessee in respect of advance made to M/s Shivam Industries being identical to the preceding year. In respect of the interest free advance made to sister concern, the CIT (Appeals) held the assessee to have sufficient funds for making the said advance. We find no merit in the said order of the CIT (Appeals) vis- -vis interest free advances made to sister concern and to the Directors of the assessee company. Following the ratio laid down by the Hon'ble Punjab Haryana High Court in Abhishekh Industries Vs. CIT [286 ITR 1(P H)] we confirm the disallowance of ₹ 1,25,087/-. Ground No.2 raised by the Revenue is thus partly allowed. ITA No.1116/Chd/2011 (Assessee's Appeal): (Assessment Year 2008-09) 90. The assessee has raised following grounds of appeal: 1. On the facts and in the circumstances of the case and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Further claim of the assessee was that the interest paid on the funds borrowed for investment in land for business purposes was an allowable business expenditure notwithstanding the facts that the assessee had capitalized the interest on capital borrowed to the land account, the same was allowable as an expenditure in the hands of the assessee, despite entries in the books of account. The Assessing Officer has given a finding that the loan raised form M/s India Bulls Housing Finance Ltd. was utilized for the purchase of land and consequently the nature of interest payment amounting to ₹ 78,97,238/- was capital in nature as the funds raised were utilized for creation of fixed asset. The CIT (Appeals) upheld the order of the Assessing Officer. 93. The assessee is in appeal against the aforesaid addition of ₹ 78,97,238/-. The learned A.R. for the assessee pointed out that the basis of the order of the Assessing Officer that the loan raised from M/s India Bulls Housing Finance Ltd. has been utilized for purchase of land is incorrect. The loan was taken against security of capital asset but was not utilized for the purchase of land. The learned A.R. for the assessee ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n raised by the assessee company. The finding of the Assessing Officer in this regard that the amount has been invested in the land account, does not come out from the documents filed by the learned A.R. for the assessee. In the interest of justice and in order to decide the issue we deem it fit to restore this issue back to the file of the Assessing Officer to decide the same de - novo after taking into consideration the various documents filed by the assessee before us and also plea of the assessee in establishing its case of expanding the same amount for the purposes of business activities of the assessee company. Reasonable opportunity of hearing shall be afforded to the assessee by the Assessing Officer. Ground No.2 raised by the assessee is allowed for statistical purposes. 97. Ground No.3 raised by the assessee is identical to ground No.2 raised by the assessee in ITA No.693/Chd/2011 and our decision in ground No.2 raised by the assessee in ITA No.693/Chd/2011 shall apply mutatis to ground No.3 raised by the assessee in ITA No.1116/Chd/2011. The Assessing Officer shall recomputed the deduction under section 80IC of the Act. 98. Ground No.4 raised by the assessee is ide ..... 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