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TMI Blog2016 (11) TMI 1599X X X X Extracts X X X X X X X X Extracts X X X X ..... ong reliance on the impugned order. We have heard both the parties on this issue and have perused the material on record with regard thereto. The AO found that the assessee had given interest free loans/advances to his family members, namely, Shri Deepak Budhiraja, Smt. Dalbir Kaur and to sister companies, M/s Roger International Pvt. Ltd., M/s Roger Construction Pvt. Ltd., and M/s Euro Safety Footwear Pvt. Ltd., on which, no interest had been charged, whereas at the same time, the assessee, in order to meet his business expenses, had taken loan from bank, on which, he had made payment of interest. The AO asked the assessee to explain the business purpose of loans/advances and as to why, otherwise, the loans/advances be not disallowed. The assessee stated that he had also received interest free unsecured loan of Rs. 46,64,290/- from Smt. Stella Budhiraja and that against this interest free loan, he had given interest free advances of Rs. 34,81,347.67/-, i.e., Rs. 25,44,951.69/- to Shri Deepak Budhiraja and Rs. 9,36,395.98/- to Smt. Dalbir Kaur; that the advances to M/s Roger International Pvt. Ltd., M/s Roger Construction Pvt. Ltd., and M/s Euro Safety Footwear Pvt. Ltd., had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of M/s Roger Exports. On 16.08.2007, during the year under consideration, the assessee converted this concern into a partnership firm. This partnership firm remained inexistence upto 6.11.2007, where-after it was converted into a company. The AO passed the assessment order in the individual capacity of the assessee for the period from 01.04.2007 to 15.08.2007 and in the capacity of firm, M/s Roger Exports, from the period from 16.08.2007 to 6.11.2007. The ld.CIT(A) observed that in the assessment order of the firm M/s Roger Exports, like in the case of assessee, the AO had disallowed interest u/s 36(1)(iii) amounting to Rs. 162094/- on account of loans/advances, given to M/s Roger International Pvt. Ltd., M/s Roger Construction Pvt. Ltd., Smt. Dalbir Kaur and Shri Deepak Budhiraja. Vide order dated 21.2.2013, passed in the appeal of M/s Roger Exports, the nature of the loans and advances given by the assessee to his family members and sister concerns stood examined by the ld. CIT(A). In that case, the ld. CIT(A) has affirmed that the loans and advances to M/s Roger International Pvt. Ltd. and M/s Roger Construction Pvt. Ltd, were related to the business of the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he had received a letter dated 30.11.2010 from Dy. CIT-4(1), Agra, informing that in the course of assessment proceeding in the case of M/s Roger Industries Ltd., for A.Y. 2008-09 it was learnt that the assessee company had received an amount of Rs. 1 crore from its sister concern, M/s Euro Safety Footwear Pvt. Ltd.; that the sister concern, i.e., M/s Euro Safety Footwear Pvt. Ltd had opening reserves and surplus "Nil" as on 31.03.2007 and had reserves and surplus of Rs. 69,91,127/- as on 13.12.2007; that the said company was a company where the public was not substantially interested and, therefore, the provisions of section 2(22)(e) had been invoked in the case of M/s Roger Industries Ltd. and in the assessment, the amount of Rs. 69,91,127/- had been added, on a substantive basis; that the assessee was shareholder to the extent of 71.87% in M/s Roger Industries Ltd; and that as such, the provisions of section 2(22)(e) be invoked in the case of the assesee, Shri Kulbir Singh on a protective basis. On the receipt of this information, the AO issued a show cause to the assessee as to why the amount of Rs. 69,91,127/- received from M/s Euro Safety Footwear Pvt. Ltd. as loan in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kulbir Singh assessee. So far as regards the transaction between M/s Roger Industries Ltd. and M/s Euro Safety Footwear Pvt. Ltd., the AO stated that the transaction of previous year did not have any relevance, since each year is an independent year. Concerning the receipt of Rs. 1 crore by M/s Roger Industries Ltd. on 13.12.2007, the AO stated that no purchases or sale had been made by the company, which made it a clear-cut case of loan and advance from sister concern, because the amount was repaid on subsequent dates. Apropos the utilization of the amount of Rs. 1 crore, the AO stated that on the date on which the amount had been received, certain payments were made by the assessee company and that all these payments had been made to cater to the need of the assessee company, for purchase of goods. The AO concluded by stating that it was thus clear that M/s Roger Industries Ltd, was in the need of money, which was given to it by its sister concern, M/s Euro Safety Footwear Pvt. Ltd, which was not a commercial transaction and the provisions of section 2(22)(e) of the Act might be involved. 18. The assessee, in his rejoinder to the remand report, stated, inter alia, that while ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial interest in both the companies; that M/s Euro Safety Footwear had given advance to M/s Roger Industries Ltd. against the purchases of shoes; that the provisions of section 2(22)(e) are not applicable in respect of advance received from M/s Euro Safety Footwear Pvt. Ltd., as the same was on account of commercial transaction between the two companies; that M/s Euro Safety Footwear Pvt. Ltd. had given an advance of Rs. 1 crore on 13.12.2007 to M/s Roger Industries Ltd. as mobilization advance against purchase of shoes; that however, the same was refunded, as the deal could not materialize; that there are regular business transactions between both the companies; that a copy of the accounts of M/s Euro Safety Footwear Pvt. Ltd., as appearing in the books of account of M/s Roger Industries Ltd., for both the years, stood already submitted; that there-from, it was evident that the transactions between both the concerns were entered into in the regular course of business, falling outside the ambit of section 2(22)(e) of the Act. 19. All the above facts were duly taken into account by the ld. CIT(A) while deleting the addition made by the AO. Now, it remains undisputed, as correctly t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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