TMI Blog2013 (2) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... nterested – Therefore loan standing in the name of Punjab Biotehnology park is guided by business expediency - The AO is directed not to disallow any interest attributable to the loans given by the assessee- company to the said subsidiary company – Against the revenue. Interest free advance without commercial expediency - A sum of Rs. 49,38,930/- has been treated by the assessee-company itself as loan and advance given to Shri A.S. Bhatia, maternal uncle of Managing Director – Held that:- loans and advances have been treated as unsecured loans given by the assessee without any stipulation regarding their re-payment and interest - Auditors have considered the aforesaid loans as prejudicial to the interest of the assessee-company as no interest is being charged on them – Therefore amount standing in the name of Shri A.S. Bhatia is in the nature of loan advanced by the assessee to him without any commercial expediency - 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 liable to be disallowed. The AO is directed to re-compute the disallowance accordingly – Against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2006-06, dated 13.05.2011 in assessee's own case, as incorporated at page 41-47, particularly para 13 of the said order. A perusal of the said order dated 13.05.2011 reveals that the issue is covered by para 13 of the said order in favour of the assessee. The relevant part of the decision is reproduced hereunder : 13. As regards the amount outstanding in the name of 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. Punjab Biotehnology park, a subsidiary of the assessee-company and therefore, the assessee is deeply interested in the working of the said company. Besides, the subsidiary 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 park in which the assessee is also interested. On the facts of the case, we are satisfied that the loan standing in the name of Punjab Biotehnology park is guided by business expediency. The AO is directed not to disallow any interest attributab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied. 3. That the ld. CIT(A) has further erred in upholding the addition of Rs.97293/- on account of payments made towards freight and Rs.21191/- made on account of sales commission applying the provisions of Section 40(a) (ia) which is arbitrary and unjustified. 4. That the order of the ld. CIT(A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable. 12. In Ground No. 1 2, the ld. 'AR', while pleading the case contended, that the issue raised is covered against the assessee and in favour of the Revenue. He referred to para 12 of the order of the ITAT, Chandigarh in ITA No.993/Chd/2010, assessment year 2006-07. 13. We have carefully perused the issues, facts in the assessee's appeal before the Tribunal in ITA No.993/Chd/2010 (supra) and found that the issue is squarely covered in favour of the Revenue and against the assessee. The relevant part of the impugned order is reproduced hereunder : 6. We have heard both the parties and carefully considered 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 assessee-company itself as loan and advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not recovered. A conscious decision was taken by the assessee to treat the same as loan given to him. Instead of recovering the aforesaid amount from Shri A.S. Bhatia, the assessee has allowed the amount of sale proceeds to be retained by him as loan from the assessee-company without 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 to be diverted or retained by Shri A.S. Bhatia out of non-business consideration and not 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 without 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-free funds available with the assessee. Similar argument was made before and rejected by the 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:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purposes and to that extent it may not have been necessary to borrow from the banks. 12. In view of the foregoing, the fact that the funds to the extent of diversion for non-business expediency were internally available with 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 liable to be disallowed. The AO is directed to re-compute the disallowance accordingly. 14. Respectfully following the order of the ITAT in assessee's own case, the issue raised in the present appeal is decided accordingly and the grounds raised by the assessee are dismissed. 15. In Ground No.3, the ld. 'AR' contended that the ld. CIT(A) erred in upholding the addition of Rs.97,293/- on account of payments made towards freight which is covered by the decision of the jurisdictional High Court in the case of CIT V Bhagwati Steels, 326 ITR 108 (P H) . The head notes of the same are reproduced hereunder : Deduction of tax at source-Freight charges-No material to show payments made in pursuance of a contract for transportation of goods for a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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