TMI Blog2014 (2) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Shri Om Prakash Yadav, (DR) ORDER Per George George K. J.M. 1. These two appeals, instituted at the instance of the assessee, are directed against the orders of the CIT (A)-I, Bangalore, dated 31.7.2013 for the assessment years 2009-10 2010-11. 2. A common solitary issue raised by the assessee for both the assessment years is that, 'the CIT (A) was not justified in confirming the orders of the AO without appreciating the fact that the assessee advanced money only to its sister concerns/directors/relatives of its directors in the normal course of business and for the purposes of its business.' 2.1. For the assessment year 2010-11, yet another ground raised by the assessee is that 'the CIT (A) erred in upholding the disallowance u/s 14A of the Act.' However, on a perusal of the findings of the CIT (A) for the AY 2010-11 under dispute, it is noticed that the CIT (A) had, in fact, dealt with the issue elaborately and decided the issue in favour of the assessee. The relevant finding of the CIT (A) reads as follows: "4.4........there is merit in the appellant's subjection and the disallowance made u/s 14A of the Act read with rule 8D of the Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest as non-business purpose and, therefore, disallowance of interest of Rs.10,92,61,900/- for the assessment year under consideration is confirmed." 4.1. Likewise, for the AY 2010-11 too, the CIT (A), by citing the judgments of Hon'ble High Court of Kerala (supra) and for identical reasons recorded thereof, confirmed the disallowance of interest of Rs.16,42,32,367/-. 5 Aggrieved, the assessee has come up before us with the present appeals. During the course of hearing, the learned AR submitted that the appellate orders have been passed in haste without providing sufficient and reasonable opportunities of being heard and that the CIT (A) erred in confirming the stand of the AO without appreciating the fact that the assessee advanced monies only to its sister concerns, directors and their relatives in the normal course of its business and for the purpose of business only. It was, further, contended that the CIT (A) had failed to consider the various case laws relied on by the assessee which were squarely applicable to the facts of the assessee's case. It was also contended that the CIT (A) had failed to take cognizance of the findings of Hon'ble earlier Benches of this Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o illustrate further, the assessee had advanced monies to its sister concern - Bagmane Leasing Finance Pvt. Ltd [BLFPL] to purchase and provide fittings and office equipment to the premises of the assessee so as to let out the same to Motorola. On a perusal of the agreement entered into by the assessee with its sister concern, we have noticed that a clause contains that 'the assessee would advance funds to its sister concerns to meet the cost of acquisition of fittings and installation of the same, construction of buildings etc., Another salient feature which worth mentioning here is that while advancing monies to its sister-concerns, the assessee had invariably incorporated in the agreements the intention and the purposes for which such monies were given. On a careful scrutiny of the agreements entered into by the assessee with its sister-concerns, we have noticed that the purpose for which monies advanced, terms and conditions have been explicitly included therein. It is also apparent that the advances made were in the course of business and for the purposes of commercial expediency only. Moreover, it is noteworthy to mention here that as on 31.3.2009, the balance of BLFPL in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year relevant to the AY 2010-11, BCPL undertook the construction of 10 storeyed commercial complex at K.R. Puram Hobli and that the final occupancy certificate was issued by BBMP on 28.6.2010. It was, further, submitted by the learned AR that apart from the funding the construction of the said complex, the assessee also advanced money for development of SEZ Project on Outer Ring Road in terms of the aforesaid agreement. Thus, according to the learned AR, the above narration belies the CIT (A)'s observation that the agreement pertains to FY 2005-06 and was in general in nature. 6.6. With regard to the money advanced to Chandra Developers Pvt. Limited, [CDPL], our attention was drawn to the fact that CDPL was primarily established for the purpose of acquiring of lands by way of auctions and development of properties. In this connection, our reference was drawn to page 3 of the agreement dated 13.11.2002 entered into between CDPL and the assessee wherein it has been termed that "Whereas pursuant to the above, the first party [Chandra Developers] shall assemble the properties in the peripheries of Old Madras Road and other areas and construct commercial/residential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities concerned and carry out construction by utilising the funds advanced by the assessee. A sum of Rs.47.93 crores was advanced by the assessee to both the sister concerns so as to enable them to pay advances for acquiring the lands and for commencement of constructions. 6.11. At this juncture, we would like to refer to the findings of the earlier Benches of this Tribunal in the assessee's own case in (i) ITA Nos. 182, 183, 382 383/Bang/2010 dated 3.12.2010 for the A.Ys 2002-03 to 2005-06 and (ii) ITA NOs.346/Bang/2012 1126/Bang/2011 dated 7.11.2013 for the AYs 2007-08 2008-09 wherein an identical issue to that of the present one under consideration has been elaborately and exhaustively dealt with and came to a definite conclusion that 'the interest-free loans were given to its sister concerns and others as a measure of commercial expediency.' The above conclusion had been arrived at by the earlier Benches based on the judgment of the Hon'ble Supreme Court in the case of S.A. Builders v. CIT reported in 288 ITR 1 (SC). For appreciation of facts, we would like to reproduce the relevant portions of the judgment of the Hon'ble Court, verbatim, as under: "the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee's own case for the previous assessment years (supra), we have now been left with only to examine as to whether the fresh loans advanced by the assessee to its sister concerns/director(s) in the AYs under dispute were diverted for non-business purpose. As mentioned earlier, there were not much fresh advances to its sister concerns by the assessee during the AY's under consideration and on the contrary, there was a reduction in the balance loan amounts due to the assessee from its sister-concerns/directors. Even for those fresh advances in the current assessment years, in view of the discussions/reasoning recorded in the preceding paragraph, we hold that those advances to its sister-concerns/directors were on account of commercial expediency and for the purpose of its business only. 6.14. The following judicial pronouncements also affirm the above view: (i) D H Secheron Electrodes Pvt. Ltd v. CIT - (1983) 142 ITR 528 (MP) "Under s. 36(1)(iii), to sustain a claim for deduction of the amount of interest, all that is necessary is that the capital must have been borrowed by the assessee; secondly, it must have been borrowed for the purpose of the business or profession of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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