TMI Blog2018 (12) TMI 1502X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure an assessee should incur and in what circumstances he should incur that expenditure”. As in the case of Hemraj Nebhomal V CIT [2005 (3) TMI 76 - MADHYA PRADESH HIGH COURT] held that “Once the conditions laid down in section 37(1) are found satisfied, it is not proper on the part of the taxing authorities to probe into the question as to whether the expenditure is legitimate or necessary etc. This type of inquiry is neither contemplated nor called for. It is only when the Assessing Officer finds that the claim made is bogus or false or not incurred as a fact, it can be disallowed, otherwise not valid" Thus we are of the considered view that the alleged revenue expenditure incurred needs to be allowed as business expenditure incurred for scientific research and development activity u/s 35(1)(iv) and we therefore set aside the finding of CIT(A) making an appropriation of the expenditure between commercial and agricultural activity completely ignoring the fact that separate details were maintained by the assessee including quantitative details of goods produced under both the activities, no major abnormality in the percentage of expenditure of the total agricultural proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted by Ld.CIT(A) and subsequently the revenue could not succeed before the Tribunal as the decision of the Ld.CIT(A) was upheld - no disallowance was called for u/s 36(1)(iii) r.w.s. 40A(2)(b) - Decided in favour of assessee. - ITA No.37/Ind/2013, ITA No.84/Ind/2013, ITA No.231/Ind/2013, ITA No.315/Ind/2013 - - - Dated:- 30-11-2018 - Shri Kul Bharat, Judicial Member And Shri Manish Borad, Accountant Member For the Assessee : Shri Prakash Jain Ms. Shreya Jain,CAs For the Revenue : Smt. Ashima Gupta, CIT ORDER PER MANISH BORAD, AM. The above captioned cross appeals filed at the instance of assessee and Revenue pertaining to Assessment Year 2008-09 2009-10 are directed against the orders of Ld. Commissioner of Income Tax (Appeals)-I (in short Ld.CIT(A) ], Indore dated 12.11.2012 and 20.02.2013 respectively which are arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the Act ) dated 20.12.2010 28.12.2011 framed by DCIT-1(1) ACIT, Range-1, Indore. 2. As the issues raised in these cross appeals are mostly common relating to the same assessee, these were heard together and are being disposed off by this common order for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties carried out by the assessee in the Research and Development field. Detailed submissions were given with stage-wise activities for R D and at some places in the assessment order the Ld.A.O got convinced by the R D activities carried out, but at some places he is not able to accept that why the need of new R D building arised even when the assessee owned and possessed R D building. Ld.A.O also raised doubt on the clarification given by the Auditor in Column 15(b) of Form 3CD required to be given in the audit report u/s 44AB of the Act wherein it was mentioned that scientific research assets expenditure u/s 35(1)(iv) of the Act not debited to the Profit Loss Account at ₹ 2,88,51,028/-. Ld.A.O accordingly came to the conclusion that the alleged capital expenditure for Research and Development building and machinery at ₹ 2,88,51,028/- needs to be disallowed. Doubt was also raised by the Ld.A.O that the alleged capital expenditure is also attributable to the agricultural operation of which the assessee is showing exempt income. 6. Ld.A.O also examined the research development expenditure of revenue in nature at ₹ 3,12,37,588/-. Ld.A.O after making discussions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Commissioner of Income Tax (Appeals)-I, is unjustified and is beyond the facts and circumstances of the case. 2. The learned Commissioner of Income Tax (Appeals)-I, has erred in passing an order under section 250 of the Income Tax Act, 1961, that the learned CIT(A)-I had disproportionately disallowed a sum of ₹ 1,03,70,466/- out of the Research Development Expenditure (Capital Revenue) incurred by the assessee during the previous year for which he a eligible for deduction u/ s 35(1)(iv) 37(1). 3. The learned Commissioner of Income Tax ( Appeals)-I, has erred in upholding the addition made by the AO of ₹ 10,48,112/- on account of disproportionate agriculture expenses. 4, The leaned Commissioner of Income Tax (Appeals-I, has erred in upholding the addition made by the AO of ₹ 20,84,530/ - under section 14A of I.T. Act. 5. The learned Commissioner of Income Tax (Appeals)-I, has erred in upholding the disallowance made by the AO of ₹ 5,32,892/- being expenditure incurred on account of discarding of land. 6. The learned Commissioner of Income Tax (Appeals)-I, has erred in upholding the disallowance made by the AO of ₹ 1,81,876/- bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure of Rs..40,42,117/- on scientific research and development expenses u/s 35(1)(iv) and restrict the Revenue expenditure amounting to ₹ 4,54,34,487/- to ₹ 1,83,70,760/- on prorate basis without appreciating the fact that the assessee had failed to discharge its onus that each and every expenditure was incurred wholly and exclusively on scientific research and development. On the facts and circumstances of the case the Ld. CIT(A) erred in deleting addition of ₹ 22,64,237/- made by the A.O u/s 36(1)(iii) r.w.s. 40A(2)(b) of I.T. Act (ii)(a) While holding so ld. CIT(A) failed to appreciate that there was nexus between interest bearing funds diverted to associate concern on no interest basis backed by judicial pronouncements as relied upon by A.O 15. At the outset Ld. Counsel for the assessee requested for not pressing Ground No.1, Ground No.3, 4, 5, 6 for Assessment Year 2008-09 and Ground No.1,3,4 and 5 for Assessment Year 2009-10. 16. As the request of Ld. Counsel for the assessee for not pressing the above grounds has not been opposed by the Departmental Representative, we dismiss the Ground No.1, 3,4,5,6 for Assessment Year 2008-09 and Ground N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has not raised any doubt on the genuineness of the alleged capital and revenue expenditure. Even otherwise the alleged revenue expenditure though claimed as research and development expenditure, would have been allowable u/s 37(1) of the Act as a revenue expenditure is incurred in the course of business. Written submissions were also been placed on record and the relevant extracts of the same is mentioned below; The learned Deputy Commissioner of Income tax-1(1) has erred in disallowing deduction u/s 35(1)(iv) being capital expenditure incurred on scientific research amounting to ₹ 2,88,51,028/- on following heads of assets:- Heads Amount (In Rs.) Research Lab Equipment 2414039/- Research BT Lab Equipment 845606/- Research Building 913063/- Research Ginning Project Building 14357753/- Research GaMs Deliniting Project Building 6192558/- Plant and achinery 476749/- Research Furniture Fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for removing lint from the Breeder Seeds, Foundation seeds and certified seeds. These machines are of advance technology used for improving the quality of hybrid cotton seeds supplied by the contract farmers. Final destination of any cotton product, is consumer via textile industries. When we take factory oriented research, we need to establish that individual variety/hybrid, the fibre quality is as per requirement/suitability of ginning, spinning weaving factories. Ginning mills requires that the cotton fibre should be maximally matured uniformed and also there should be good yield of lint. The other process which is required for spinning is strength of the cotton fibre that decides the speed which can be used in spinning mills. The last important thing in fibre is fineness which is required for the quality of textile. Therefore in breeding we need to have this parameter studied on cotton fibre. For the above purposes we need to have industrial research, which are inconsonance with factory requirement. Therefore R D wanted Ginning Machine to handle a small representative samples (about 50 kg) to permit to draw representative samples of 1-1/2 kg for analysis drawn th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be used in spinning mills. The last important thing in fibre quality is fineness which is required for the quality of textile. Therefore in breeding we need to have this parameter studied on cotton fibre. For the above purposes we need to have industrial research, which are inconsonance with factory requirement. Therefore R D wanted Ginning Machine to handle a small representative samples (about 50 Kg) to permit to draw representative samples of 1-1/2 kg for analysis drawn therefore this specialized Ginning unit was housed in R D . Research Furniture Fixture of ₹ 3,24,587/- During the year under appeal, assessee has purchased various furniture fixtures of ₹ 3,24,857/- to be used for R D Scientists, staffs and subordinates. These furniture fixtures are installed in the Research Laboratories, for the exclusive use of R D Scientists and their assistants. Research Office Equipments of ₹ 92,397/- During the year under appeal, assessee has purchased Fire Extinguisher of ₹ 66,595/- and Cyber Shot Camera of ₹ 13,702/-, one water dispenser ₹ 6100/- and an exhaust fan of ₹ 6000/-. All these machines are installed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mply mentioned (page 11) these appears no question of any aspect of research in the process of ginning. This is again a guess. 3. Even if it is held, for arguments sake that the only a part of building is used for R D even then the assessee is entitled to deduction u/s 35(1)(iv) of the Act in view of the decision of Hon ble Andhra Pradesh High Court in the case of Cit V Yamuna Digital 238 ITR 717 (A.P). 4. The Ld.A.O failed to appreciate that the appellant company is having a team of renowned scientists whose detailed bio-data and research work carried on are given on page No.344 to 376. The details of name and qualification of some of the scientists which are in employment of the company is as under; Name Educational Qualification Compilation Page Number Dr. Govind Krishna Garg B.Sc (Hons), M.Sc (Agri), Ph.D (Biochemistry) from IIsc, Bangalore, Post Doctoral (Biochemical Genetics) from University of Illinois, US 344 Dr.L.A. Deshpande Ph.D inPlant breeding from Marathwada Agricultural University, Parbhani (MS) 34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 3,12,37,588/- headwise details are as under is capital expenditure or bogus expenditure; S.No. Head of Expenses Amount Amount 1 Salaries Salaries 8,160,084 Bonus 960,150 Leave Encashment 67,723 Medical Exp Reimbursement 233,346 Leave Travel Allowance 122,994 E.S.I. Co s Contribution 529 Staff Welfare Exp. 97,172 Staff Entertainment 6,289 Staff Hospitality 469 9,648,756 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Establishment Exp 149,888 Printing Stationary 80,488 Computer Stationary 12,754 Postage Courier 13,748 Tel/Mobile/Fax Exp 203,998 Internet Expenses 7,329 News Paper Books Periodic 5,045 473,250 11 Security 408,293 12 Electricity Charges Electricity Charges 143,822 Generator Expenses 1,976 145,798 13 Staff Travelling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rep Maintenance (P M) 57,265 19 Repairs and Maintenance Rep Maintenance (Building) 9,036 Rep Maintenance (Other 144,110 Rep Maint. (Guest House) 600 153,746 20 Legal Expenses Legal Prof Exp 94,926 License Fees 4,500 Documentation Charges 200,075 119,501 21 Seminar Expenses Staff Conf/Seminar Exp. 2,500 Seminar Expenses 2,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Expenses 128,502 Donation Charity 2,467 Dr. Bal written off 35,523 Lug Lble Price Labl 1,993 Bank Comm/Charges 32,778 Int. on Cash Credit 131 Int Short Term Lo 1,478 Miscellaneous Income (131,591) Food Court Exp (24,325) Custom Duty Charges (146,455) 91,624 Total 31,237,588 2. Thus the above expenditure are business expenditure and as such being revenue expenses allowable as business expenditure u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Technology, New Delhi, a certificate of renewal bearing no. TI/IV/RD/2069/2007 dated 25th June, 2009 renewed up to 31st March ,2010 is issued to the company. 24. The main purpose of having an R D division within a seed company and committing significant expenditure is to add value to the current and future products by improving productivity , adding value through new characters, saving of cost of production of seeds grown in company s own filed as well as produced by farmers into their fields. 25. The company is actively involved in research, production, processing, packing and marketing of high quality seeds of cotton, cereals, pulses, oil seeds and vegetables. The appellant company is a pioneer in production of BT Cotton Seeds, the seeds produced by the company guarantees at least 200% production than the conventional cotton seeds used by the Indian Farmers, within a period of the 3 years you will surprise to note that more than 80% of the farmers are sowing BT cotton seeds. Assessee is also developing a number of BT/ GMO seeds. The company is first to apply for BT Brinjil, GMO Soyabean, approvals are pending under various offices of Government of India. 26. Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are available on paper book page-381 to 408. 30. We also find that the Ld.CIT(A) after thoroughly examining the business model of the assessee as well as its research and development activities came to the conclusion that undoubtedly the assessee is regularly carrying out Research and Development activities and the alleged capital expenditure incurred towards research and development activities have certainly been incurred. In coming to this conclusion Ld.CIT(A) observed as follows; 4.2.1 Before me, the detailed submissions on these issues were filed which find s place in para 3 of this order. From these submissions and the assessment order, it is noted that the assessee is a seed development company. It has two divisions - one agriculture division and the other commercial division. The company is also having in-house Scientific Research department for development of hybrid seeds. The income on production of seeds in its own agricultural land have been shown as agricultural income [ which is exempt from tax]; whereas the income on sale of seeds produced through contract farmers are shown as taxable income. It has been submitted that the assessee is one amongst the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on fixed assets for scientific research development, the AD had noted that the assessee possessed sufficient premises for its research work at the beginning of accounting period; and took the view that further addition totaling to ₹ 2,88,51,028/- ( during the year under consideration) was riot linked to any research activity for the business of the assessee [ indirectly meaning thereby to be linked with on agricultural operations and thus agricultural income]. He accordingly held that the such expenditure of capital nature [ used for scientific research development] was deductible from agricultural income only. Further while examining the issue from the point of use of those assets [ i.e whether for research or not] the AD took note of those assets (i.e. whether for research or not) the AO took note of the break up details of the addition 2,88,51,028/- [being the cost on account of Research Factory building at ₹ 2,05,50,312/- and one research building at ₹ 9,13,063/-; and the balance on account of expenditure on Plant machinery] and further break-up details of the said Research Factory building [being Research Ginning Project at ₹ 1,43,57,753/- and Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onto the nature of the expenses [refer par a 3.5]. In the facts of the case, it cannot be held that assessee had not done R D work and or not incurred any revenue expenditure on such R D work. 4.2.4 Thus on the subject issue, what I find that on the one side assessee has claimed the entire deduction [2,88,51,028 + 3,12,37,588] from its business income and thereby reduced its tax liability whereas the AO has attributed linked such expenditure with its agricultural income which is exempt from tax] and that resulted into higher taxable income. I have carefully considered the point of view the basis adopted by the AO as well as assessee both and find that both had taken the extreme approach whereas the actual state of affairs lies somewhere in between . 32. Moving further the activities of the assessee of developing the seeds at various stages i.e. Nucleus seeds, breeder seed, foundation seed and certified seeds and the activities being carried out by contract forming as well as the seeds grown and produced in the 109.5 acre land owned by the assessee company to various stages of the company s business model have been noted by the Ld.CIT(A) in the following manner; Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough contact forming only. (ix) In the contract forming, the assessee enters into the contract with formers [generally through growers organisers]. The company sells its seeds at predetermined prices and provides required know how. '!'he formers, after harvesting the crop, sales back the produce [ next stage of multiplied seeds] to the assessee. The seeds grown out of foundation seed are the final seed , which after required certification, are sold by its business division in the market, after packing and levelling. (x) The income of the agricultural division, being out of agricultura1 operations, are exempt from tax. Whereas the income arisen to the business division through the contract forming is shown as taxable income [ here agricultural operations are done by those formers on their land and thus income arising through contract forming becomes its ( i.e, assessee's) taxable income] (xi) The produce of its agricultural land [ i.e. the breeder seed foundation seed] also sold to the contract formers. The multiplied seeds produced by the contract formers, out of foundation seed of agricultural division is purchased back by its commercial division. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the building is used for ginning cotton. The assessee has expertise in BT cotton, its processed seeds are supplied to several cultivators with a contract that the cotton so produced would be sold to the assessee only. This cotton is grown in different areas in variable climates in the country. By processing ginning cotton, seeds and link are separated. Research is made on the fibre of lint to test its length and strength. It seems that the Ld.A.O has merely made a guess work mentioning that there appears no question of any aspect of research in the process of building. Even for sake of discussion it is presumed that some part of the research building is also used for the agricultural operations for earning exempt income but this fact cannot be denied that the alleged capital expenditure for the building, furniture Machinery have been used for Research and Development activity. 35. Section 35(1)(iv)of the Act provides that the deduction can be claimed in respect of any expenditure of capital nature on scientific research related to the business carried on by the assessee. Hon ble High Court of Andhra Pradesh in the case of CIT V Yamuna Digital Electronics(P) Ltd (1999) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning, before going to the point of R D carried by the assessee it is pertinent to know what is ginning industry. Ginning industry is an industry, where cotton is separated in two parts (Lint and Cotton seed) the main product is Lint and by product is Cotton seed (Sarki). Out of the cotton (present rate ₹ 6000 per Quintal) ginned, about 34% in quantity lint is produced (Present rate is ₹ 16500 per quintal or ₹ 58000 per Candy), and 65% cotton seed (having present market rate of ₹ 1250 per quintal). 37. By the application of research and development activity assessee is able to fetch much higher price for the cotton seeds prepared by it as against the cotton seeds sold by the ginning units. In our view for production of hybrid seeds research and development activity is must for which necessary infrastructure is required and the revenue authorities cannot enforce or direct the assessee or other concern running similar business to adopt a particular pattern of the research and development apparatus including building and machinery. It is the prerogative of the assessee to do the best in the interest of the business and if there is a need for strengthen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure on scientific research and development expenditure was fully justified and Ld.A.O erred in denying the same. We accordingly allow the claim of capital expenditure u/s 35(1)(iv) of the Act claimed by the assessee for assessment year 2008-09 and 2009-10 at ₹ 2,88,51,028/- and ₹ 40,42,117/- respectively. 41. Now coming to the issue of the revenue expenditure of ₹ 3,12,37,588/- and ₹ 4,54,34,487/- claimed as expenses for scientific and research development work, we have perused the details filed by the assessee, observation by both the lower authorities and find that genuineness of the alleged revenue expenditure has nowhere been doubted at any stage. Ld.A.O has tried to link the alleged revenue expenditure with the expenditure incurred in connection to agricultural proceeds which again has no basis because the turnover of agricultural receipts is rather less than the alleged revenue expenditure which proves that the observation of the Assessing Officer is merely based on surmises and conjunctions. Even Ld. CIT(A) has given a categorical finding observing that there is no doubt that the research and development expenses of both capital and revenue nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce amount of ₹ 43,55,068/- would be taken further as diverted into its business expenses and as such to that extent business income would be taken higher then shown by the assessee. The R D revenue expenses would then be taken at ₹ 2,58,34,408/- (i.e. 3,12,37,588 54,03,180/-) and the same would be considered for further allocation between agricultural income commercial income. It is further noted that the P L account reflects income at ₹ 11,07,40,723(after deduction of depreciation from its agricultural, commercial R D activities. The Income shown includes the agricultural income also. Thus the total income ( agriculture commercial 1 before the deduction of R D expenses would workout to be ₹ 7 8.29339/- [ i.e. 11,07,40,723/- + 3,12,37,588 + 2,88,51,028 }.The agriculture income has already been worked at ₹ 1,88,71,.968/- Accordingly 11 % of R D expenses need to be allocated towards agriculture income, The balance 89% will have to be allocated towards commercial activity. In other words, the ratio for allocation of R D expenses between ,exempted agricultural) taxable (commercial) income would be 11 : 89. Thus out of the R D expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e without any apportionment. We find support from following judgments dealt in forthcoming paragraph. 45. In the case of Rajasthan State Warehousing Corporation V/s CIT ( 2000) 242 ITR 0450 (SC). Hon ble Apex Court held as under:- 10. Mr. Shukla has fairly conceded that if the exempted income and the taxable income are earned from one and indivisible business then the apportionment of the expenditure cannot be sustained. But, submits the learned counsel, in this case the Tribunal did not record a finding that the business of the assessee is one indivisible, therefore, the apportionment of the expenditure is valid. We are afraid, we cannot accede to the contention of the learned counsel inasmuch as a plain reading of the question itself shows that it embodies- the business of the assessee being one and indivisible . This being the position, it is not open to the Revenue to contend that the business is not one and indivisible. In view of the fact that a perusal of the question itself discloses that income from various ventures is earned in the course of one and indivisible business, the impugned order upholding the apportionment of the expenditure and allowing deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The fact that the income arising from a part of that business is not eligible to tax under the Act is not a relevant circumstance. For the foregoing reasons we agree with the view taken by the High Court. 47. Hon ble Apex court In the case of CIT V/s Indian Bank Ltd (1965) 56 ITR 0077 (SC) the Hon ble Apex Court held as under :- In allowing a deduction which is permissible one need not look behind the expenditure and see whether it has the quality of directly or indirectly producing taxable income. This is for two reasons : First, Parliament has not directed this enquiry. There are no words in s. 10(2) of 1922 Act to that effect. On the other hand, indications are to the contrary. In s. 10(2)(xv), what Parliament requires to be ascertained is whether the expenditure has been laid out or expended wholly and exclusively for the purpose of the business. The legislature stops short at directing that it be ascertained what was the purpose of the expenditure. If the answer is that it is for the purpose of the business, Parliament is not concerned to find out whether the expenditure has produced or will produce taxable income. Secondly, the reason may well be that Parliament ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied, it is not proper on the part of the taxing authorities to probe into the question as to whether the expenditure is legitimate or necessary etc. This type of inquiry is neither contemplated nor called for. It is only when the Assessing Officer finds that the claim made is bogus or false or not incurred as a fact, it can be disallowed, otherwise not valid . 49. Respectfully following above judgments as well as in the given facts and circumstances of the case we are of the considered view that the alleged revenue expenditure incurred at ₹ 3,12,37,588/- and ₹ 4,54,34,487/- needs to be allowed as business expenditure incurred for scientific research and development activity u/s 35(1)(iv) of the Act and we therefore set aside the finding of Ld.CIT(A) making an appropriation of the expenditure between commercial and agricultural activity completely ignoring the fact that separate details were maintained by the assessee including quantitative details of goods produced under both the activities, no major abnormality in the percentage of expenditure of the total agricultural proceeds consistently shown in the preceding years and most importantly no material evidence has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reason for the decrease in the percentage in expenditure given by the assessee are general in nature and the submissions mainly included the reason for increase in revenue due to better selling price and use of varieties of hybrid seeds. Nothing concrete has been placed on record to show that why the expenses decreased during the year even when other expenditure on commercial activities have increased in comparison to preceding years. No plausible reason with documentary evidences were placed before us. We therefore find no reason to interfere in the finding of Ld.CIT(A) and therefore confirm the addition of ₹ 10,48,112/- made by the Ld.A.O on account of disproportionate agricultural expenses. Accordingly Ground No.3 of the assessee for Assessment Year 2008-09 is dismissed. 56. Now we are left with Ground No.2 of the revenue s appeal for Assessment Year 2009-10 relating to deletion of addition of ₹ 22,64,237/- by Ld.CIT(A) deleted the addition which was made by the Ld.A.O u/s 36(1)(iii) r.w.s. 40A(2)(b) of the Act. The brief facts relating to this ground are that the Ld.A.O during the course of assessment proceedings observed that certain loans and advances to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cycle for seed plantation and harvest generally ranges from 4-6 months and as stated by the Ld. Counsel for the assessee during the hearing before the lower authorities that the seed distributor has to give advance to seed cultivators/farmers before the plantation season and in turn the seed cultivator/farmer commits their oblige as proceeds of seed to the said distributor. Further for procuring the confirmed seed production sub distributor is required to finance the cultivation cycle and for this purpose it is required to give advance for seed purchase to the vendors which is a standard industry practice. The alleged subsidiary company have also indulged in the seed cultivators and have specialization in scientific research of specific seed variety and sourcing of seeds. Details were also paced before the lower authorities for the purchases made during the financial year 2009- 10 which were adjusted against the advances stood given as on 31.03.2009. These details clearly indicate that the alleged loans and advances are purely in the regular course of business with the intent of maximization of profit as well as the revenue. As regards diversion of borrowed fund to the sister ..... X X X X Extracts X X X X X X X X Extracts X X X X
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