TMI Blog2016 (7) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income Tax (Appeals) has erred in confirming the action of the A.O. in disallowing proportionate interest amounting to ₹ 3,71,68,025/- u/s 36(1)(iii) of the Income Tax Act in respect of investment standing as share application money in various related concerns amounting to ₹ 1,49,36,11,300/- as on 31.03.2011, by treating the same as amount used for non- business purpose. 2. That the ld. CIT(A) has erred in not considering that the investment in share application money was made from interest free funds in the shape of capital reserve and surplus and no borrowed funds have been utilized. 3. That the ld. CIT(A) has erred in not considering that the order of the Hon ble Punjab Haryana High Court in the case of CIT vs. Abhishek Industries Ltd. (2006) 286 ITR 1 is not applicable in this case. 2. The facts of the case are that the assessee company is engaged in the business activity of publication of children books and as printers at its plants situated at Sahibabad in Uttar Pradesh and Jalandhar. As per audited profit and loss account filed and computation of total income, the assessee had declared gross profit @ 28.17% on the gross turnover of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sister concerns which did not serve any business purpose for the appellant company. The judicial pronouncement relied upon by the AR during the appellate proceedings do not address this basic salient feature of funds position and usage thereof. The direct link between the non business interest free investment and raising of interest bearing funds has been clearly ^established by the analysis of two separate account maintained bv the appellant. In the circumstances the judgment of Hon'ble Jurisdiction 'High Court in the case of Abhishek Industries is squarely applicable. The Assessing Officer has further highlighted that disallowance interest on similar facts in the case of assessee's sister concern M Bright Enterprises Pvt. Ltd. for the assessment year 2005-06 had be upheld by the Hon'ble ITAT, Amritsar Bench vide their order dated 07/08/2012. In the circumstances, the disallowance made by the AO is therefore, confirmed. 4. The ld. counsel for the assessee submitted that this is an appeal filed by the assessee and the only ground in the assessee s appeal is against the disallowance of interest u/s 36(1)(iii) made by the Assessing Officer and which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 3. Ltd. Alchemie (P) MBD Ltd. 10,00,000/- 10,00,000/- 12 Total 1493611300 848575000 12 ii). Our following contentions in this regard may be considered:- a) Firstly, the assessee had business dealings with the sister concernsto whom the advances have been made, which is evident from Annexure D of Tax Audit report, where the amount of business transactions have been reflected with the concerns and in the case of MBD Alchemie (P) Ltd., particularly, the business transactions are to the tune of ₹ 3,97,98,492/- and the amount, which is outstanding towards the MBD Alchemie (P) Ltd. just ₹ 10 lacs. b) Similarly, with MBD Printographics Pvt. Ltd., the transactions run more than ₹ 14 crores. Thus, the amount is out of business expediency and no part of the interest is disallowable. c) All the advances, which have been given are to the same group of companies having common directors/shareholders and in order to strength ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the CIT (A) are not proper, because of the following facts:- a. We had much more interest free funds available with us as stated above in para-4(ii)(e) above. b. The advances are to the group concerns as per page 12 of the paper book and there are common directors/shareholders and, as such, the advances were given for strengthening the capital balance of sister concern, which can be termed as commercial expediency. c. The huge interest income on FDRs has been disclosed as per page 13 of the paper book as stated in para 5(ii)(g) above and, as such, disallowance was not called for. 4.4. The ld. counsel contended that the reliance by the CIT (A) on the judgment of Bright Enterprises (P) Ltd. of the Amritsar Bench of ITAT is again not proper, since that judgment has been reversed by the Hon ble Jurisdictional. Punjab Haryana High Court, copy of the judgment is placed at pages 35 to 41 of the judgment set and which has been reported in 381 ITR 107. After considering the various judgments, the Hon ble Punjab Haryana High Court has revered the judgment of Hon ble ITAT and has held as under:- 17. The Assessing Officer s view that the advance was not for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n para 18 of the judgment has deleted the disallowance u/s 36(1 )(iii) by following the judgment of Bright Enterprises and Reliance Utilities. 4.9. Similarly, the reliance is also being placed on the judgment of Madras High Court, in which, no disallowance u/s 36(1)(iii) is called for. Copy of the judgment is placed at pages 74 to 77 of the Judgment Set. 4.10. In view of the above submissions, the ld. counsel for the assessee submitted that no disallowance u/s 36(1)(iii) in any manner is called for. 5. The ld. DR, on the other hand, relied upon the orders of both the Authorities below. 6. We have heard the rival contentions and have perused the material available on record. It is seen that the reliance placed by the ld. CIT(A) on the judgment of Bright Enterprises (P) Ltd. of the ITAT, Amritsar Bench, is not proper, since that judgment has been reversed by the Hon ble Jurisdictional High Court vide order dated 26.07.2015, reported in 381ITR107 (copy placed at APB 100 to 106), holding as under: 17. The Assessing Officer s view that the advance was not for business purposes as the appellant had no business dealings with the sister company is erroneous. Commercial e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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