TMI Blog2016 (5) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 200/Chd/1999, ITA No.603/Chd/2003 - - - Dated:- 4-4-2016 - Shri H. L. Karwa, Vice President And Ms. Rano Jain, Accountant Member For the Appellant : Shri Manoj Mishra, DR For the Respondent : None ORDER Per Rano Jain, A. M. This bunch of five appeals filed by the Revenue are directed against the separate orders of the learned Commissioner of Income Tax (Appeals), Patiala dated 13.8.1997, 24.10.1997, 9.1.1998, 16,12,1998 and 7.8.2003 , relating to assessment years 1992-93, 1993-94, 1994-95, 1995-96 and 1996-97 respectively. 2. In all the appeals, the issue is common and, therefore, these appeals were heard together and are being disposed off by this common order for the sake of convenience. 3. Since issue is same in all the appeals, we will refer the appeal of the Revenue in ITA No.1031/Chd/1997 and the decision given in this appeal shall apply to other cases mutatis mutandis. ITA No.1031/Chd/1997 4. Briefly, the facts of the case are that the Assessing Officer made addition of an amount of ₹ 51,23,000/-, amongst other additions and disallowances on account of interest on borrowed funds lent to Swaraj Mazda Limited ( in short 'SML ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, who filed its objections against the same, vide letter dated 6.10.2009, whereby a para-wise reply to the issues raised by the Assessing Officer in Remand Report, was provided. A para-wise counter reply to these submissions of the assessee was later on given by the Assessing Officer to the I.T.A.T., vide his letter dated 25.7.2012, whereby he again prayed for confirmation of addition made under section 36(1)(iii) of the Act. 5. In these circumstances, the appeal was posted before us for hearing. On the date of hearing, none appeared on behalf of the assessee. The learned D.R. vehemently argued and made submissions on the basis of two Remand Reports filed by the Assessing Officer before the I.T.A.T. 6. We have heard the learned D.R., perused the findings of the authorities below and have taken into consideration all material available on record. The only issue to be adjudicated before us is that whether the amount lent to SML by the assessee was on account of some business expediency, so as to come under the ambit of interest allowance under section 36(1)(iii) of the Act. 7. In the remand proceedings, the assessee filed detailed submissions before the Assessing Officer v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking, which was not readily available, it was stated that the Auditors' report for financial year 1991-92 at page No.24 clearly mention about this fact. Ledger account of SML to show the sales to SML was filed. The prospectus issued at the time of Public issue of SML was filed to show that the PTL is holding 29% of shares. The Assessing Officer was also invited to visit the plant of the assessee to see the 'single piece production' concept. A comparative chart of the WIP and the related production level for the concerned years was also filed. Further, it was stated that the assessee was a government company during the relevant assessment year and the Secretary, Industry to Government of Punjab was the Ex-officio Chairman of the company. 8. Considering all the abovesaid submissions and evidences, the Assessing Officer in his Remand Report dated 24.9.2009, filed before the I.T.A.T., opined that there was no business expediency with the sister concern in lending interest free advances in the light of parameters laid down by the Hon'ble Supreme Court in the case of S.A. Builders Pvt. Ltd. (supra). 9. On perusal of the said Remand Report, we see that this opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the borrowed funds advanced to a third party should be for commercial expediency if it is sought to be allowed under section 36(1)(iii) of the Act. Reference to another case of Atherton Vs. British Insulated Helsby Cables Ltd. (1925) 10 TC 155, was also made for the proposition that in order to claim deduction, it is enough to show that money is expended, not out of necessity and with a view to direct and immediate benefit, but voluntarily and on grounds of commercial expediency and in order to indirectly facilitate the carrying on the business. Reference was also made to many other judgments of Hon'ble Apex Court as well as of various High Courts. After this and also considering the submission made by the learned D.R., the Hon'ble Court held as under : 32. We wish to make it clear that it is not our opinion that in every case interest on borrowed loan has to be allowed if the assessee advances it to a sister-concern. It all depends on the facts and circumstances of the respective case. For instance, if the directors of the sister-concern utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.A. Builders (supra), even only if it is proved that the assessee has given the sister concern financial assistance in its phase of poor financial health, that would serve the purpose for allowing deduction under section 36(1)(iii) of the Act. The assessee in his reply has stated that Auditors' Report for financial year 1990-91 at page 24 clearly mentions this fact. We have perused the Auditors' Report of the assessee company for financial year ending 31.3.1991. At Point No.3, it states as under : 3. (a) Undertakings have been given to All India Financial Institutions and/or Banks to procure funds for Swaraj Mazda Limited and Swaraj Engines Ltd. to meet the shortfall, if any, in financing the capital cost of the respective projects and/or working capital. (b) In accordance with the undertakings given to All India Financial Institutions and/or Banks in connection with Rupee Loans sanctioned to Swaraj Mazda Limited and Swaraj Engines Limited, the Company has agreed not to dispose off its shareholding in the said Companies. 16. Further, perusal of the directors' report of SML, for financial year 1990-91, under the heading 'Finance', it is stated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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