TMI Blog2016 (11) TMI 950X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Bhawani Shankar, Departmental Representative ORDER T. S. Kapoor (Accountant Member) 1. These are two appeals filed by the assessee against the separate orders of the learned Commissioner of Income-tax (Appeals) dated January 15, 2015, and February 27, 2015, for the assessment years 2012-13 and 2010-11, respectively. Since the common issue is involved in both the appeals and these were heard together, therefore, for the sake of convenience a common and consolidated order is being passed. 2. In I. T. A. No. 125(Asr)/2015 for the assessment year 2012-13, the assessee has raised the following grounds of appeal : 1. That the worthy Commissioner of Income-tax (Appeals) has erred in confirming the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s advanced for business expediency and, as such, no disallowance should have been made. 4. The brief facts of the case are that the assessee-company is engaged in the business activity of publication and trading of educational books with sale depots/branches scattered all over India. The cases of the assessee were selected for scrutiny. During the assessment proceedings, the Assessing Officer observed that the assessee had made substantial investment as share application money/advances and had not recovered any interest on such investments. The Assessing Officer held that such investments were for non-business purposes and, therefore, he disallowed bank interest amounting to ₹ 91,50,928 and ₹ 54,10,225 found debited in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. Further, the advancing of interest-free funds in the garb of share application money by the appellant has been the basic reason for the appellant-company to continue to raise interest bearing funds. The advancing of interest- free amounts to sister concern have to be justified to be business necessity which has not been done by the appellant. In the circumstances, the judgment of the hon'ble Punjab and Haryana High Court in the case of CIT v. Abhishek Industries Ltd. [2006] 286 ITR 1 (P H) is clearly applicable. It is also important to appreciate that similar disallowance made in the case of the appellant's sister concern, i.e., M/s. Bright Enterprises for the assessment year 2005-06 had been upheld by the hon'ble Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en overruled by the hon'ble Punjab and Haryana High Court and similarly the judgment in the case of Abhishek Industries Ltd. (I. T. A. No. 414 (Asr)/ 2010) for the assessment year 2005-06 has been overruled by the decision of the hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. v. CIT [2015] 379 ITR 347 (SC). The learned authorised representative further submitted that the assessee was having sufficient own funds from where the investments were made and in this respect our attention was invited to (paper book page-1) where the charts showing interest-free fund as available with the firm as on March 31, 2012, as on March 31, 2010, were placed. The learned authorised representative further argued that since the sister concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was having current liabilities and profits to the tune of ₹ 17,41,39,750, therefore, the total of non-interest bearing funds available with the assessee were paid at ₹ 49,43,04,638. These figures are verifiable from the copies of the balance-sheet as placed in (paper book page 2). Out of total available funds on which no interest was paid by the assessee amounting to ₹ 49,43,04,638, the assessee had advanced to ₹ 20,32,60,000, therefore, one fact is clear that in I. T. A. No. 196(ASR)/2015, there was sufficient non-interest borrowing funds out of which the assessee had advanced/ invested in the sister concerns. 10. Similarly, we find that for the assessment year 2012-13 the capital of the firm as per the balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... memorandum of appeal, the assessee expressly stated that it had advanced the amount to its sister concern as a measure of commercial expediency for the purpose of business. This assertion was never denied. The assessee owned about 89 per cent. of the equity capital. When a holding company invested money for the purpose of the business of its subsidiary, it must necessarily be held to be an expense on account of commercial expediency. A financial benefit of any nature derived by the subsidiary on account of the amounts advanced to it by the holding company would not merely indirectly but directly benefit its holding company. There would be a direct benefit on account of advance made by the assessee to its sister company, if it improved the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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