TMI Blog2017 (3) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Gaurav Mahajan, learned Counsel for the appellant-department and Sri Ashish Bansal, learned Counsel for the assessee. This appeal under Section 260A of the Income Tax Act, 1961 arises out of the order of Income Tax Appellate Tribunal dated 18.11.2009 for the assessment year 2006-07. The questions of law sought to be answered is hereunder:- Whether the Income Tax Appellate Tribunal was justified in law in dismissing the appeal filed by the Revenue holding that loan given to M/s Calcutta Detergents Ltd. was a trade advance and that the Assessing Officer had not been able to establish that there was a direct nexus between borrowed funds and the advance given, ignoring the vital facts that as on 31.03.2005 the assessee was not having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Pvt. Ltd during the previous year relevant to assessment year 2006-07 whereby the total advance became ₹ 18,34,64,267/-. In view of the fact that M/s Calcutta Detergent Pvt. Ltd was a sister concern and no interest had been charged therefrom. A disallowance was made under Section 40A(2) (b) read with Section 36 of the Income Tax Act of interest paid on borrowed funds. On the contrary, the assessee's case was that M/s Calcutta Detergent Pvt. Ltd. was engaged in the activity of manufacturing branded detergent exclusively for the assessee. In view of the same the assessee claimed existence of commercial expediency for making advance to M/s Calcutta Detergent Pvt. Ltd. Being aggrieved by the assessment order the assessee carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olely in manufacturing the goods namely branded detergent for the exclusive use of the assessee. Thus, the existence of commercial expediency cannot be doubted. The findings recorded by both the appellate authorities are based on perusal of evidence and cannot be faulted for that reason. Sri Gaurav Mahajan, learned Counsel for the department has strenuously argued that the amount of advance made is disproportionate for the sale of goods of M/s Calcutta Detergent Pvt. Ltd. He submits that the disallowance was correctly made. We are unable to accept the contention of Sri Mahajan for the reason that the issue of commercial expediency had been established and accepted by both the appellate authorities. No further test is possible to be ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits. We find that in this case the appellate authorities have gone into the facts of the case and, thereafter, reached the conclusion of existence of commercial expediency. The findings recorded by both the authorities are correct and no infirmity has been shown. Therefore, the questions of law raised in the memo of appeal are answered infavour of the assessee and against the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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