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2014 (7) TMI 388 - AT - Income TaxInterest free advances to M/s. Nitya Laboratories Ltd. – Held that:- M/s. Nitya Laboratories Ltd. has entered into an exclusive arrangement with the assessee and has been carrying out job work of the assessee-company - the assessee has given interest free advanced from time to time to M/s. Nitya Laboratories Ltd. to take care of the working capital requirements since the entire manufacturing facility of M/s. Nitya Laboratories Ltd. is used by the assessee – Relying upon M/s. SA Builders Ltd. vs. CIT & Anr. [2006 (12) TMI 82 - SUPREME COURT] - in order to decide whether interest on funds borrowed by the assessee to give an interest free loan to a sister concern should be allowed as a deduction u/s 36(1)(iii) of the Act. The assessee's total sales during the year is ₹ 167.34 crores which consists of goods manufactured by the assessee-company and sales of ₹ 120.47 crores and goods manufactured by M/s. Nitya Laboratories Ltd. on job work basis, which in turn sold by the assessee at ₹ 46.87 crores - the assessee is having accumulated profits in "reserves and surplus" and at the opening of the year it is at ₹ 23.67 crores and at the year ending it is at ₹ 43.37 crores and the aggregate amount of equity and reserves at the year ending is ₹ 51.63 crores - The sale value of the products exclusively manufactured by M/s. Nitya Laboratories Ltd. for the assessee-company constitutes 38% of the total sales of the assessee company - for the sake of commercial expediency and out of business prudence the assessee has advanced these amounts to M/s. Nitya Laboratories Ltd. - Decided in favour of Assessee.
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