TaxTMI 
TaxTMI 
2016 (6) TMI 559
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....s case laws. 3. That the ld. CIT(A) has erred in holding that the judgment of Hon'ble High Court in the case of M/s. Abhishek Industries, 286 ITR 1 is squarely applicable to the disallowance of interest expenditure of Rs. 1,22,51,965/-." 3. The Revenue has raised the following grounds of appeal: "1. "Whether the ld. CIT(A) was correct in law and facts in allowing deduction of profit u/s 80IC of the Act, ignoring the facts that the assessee didn't have sufficient infrastructure and main power to manufacture the entire products on its own in its exempt unit and got it done as job work from units outside specified areas, as is evident from the order of the A.O. as also from the seized material. 2. Whether the ld. CIT(A) was correct in law and facts in not treating the income from sale of paper as trading income and whether he was correct in not keeping the same outside the purview of section 80IC of the I.T. Act, 1961. 3. That the appellant craves leave to add or amend the grounds of appeal on or before is heard and disposed off." 4. The facts of the case are that the assessee company is engaged in the business activity of printing and publica....
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....nouncement relied upon by the AR during the appellate proceedings do not address this basic salient feature of funds position sage thereof. The direct link between the non business interest investment and raising of interest bearing funds has been clearly established by the analysis of two separate account maintained by the appellant. In the circumstances the judgment of Hon'ble Jurisdictional High Court in the case of Abhishek Industries is squarely applicable. The Assessing Officer has further highlighted that disallowance of interest on similar facts in the case of assessee's sister concern M/s Bright Enterprises Pvt. Ltd. for the assessment year 2005-06 had been upheld by the Hon'ble ITAT, Amritsar Bench vide their order dated 07/08/2012. In the circumstances the disallowance made by the Assessing Officer is therefore confirmed." 6. The ld. counsel for the assessee, Sh. Sudhir Sehgal submitted that 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 confirmed by the Ld.CIT (A), following the judgment in the case of Abhishek Industries reported in 286 ITR 1. 6.1. He fu....
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....6,41,911.99(page-4of P.B.) c. Share application received Rs.2,06,63,896.00(page-9of P.B.) as per balance sheet Total: Rs. 99,85,30,907.99 Thus, the total interest free funds available with the assessee are Rs. 99,85,30,907.99. Thus, against the advances of Rs. 23,23,31,000/- , there are own funds to the tune of Rs. 99,85,30,907.99 and thus, the disallowance of interest was not called for, specially when the amount to AKM was for purchase of shares. iii) Beside, that as per balance sheet at page 9 read with page 13 of the paper book, the various limits enjoyed by the company have been given, including 'term loan' and 'cash credits' and, whereas, the 'term loan' have been utilized only and exclusively for acquiring fixed assets and, whereas, the 'cash credit limit' have been utilized for the business and, thus, no part of the borrowed funds have been diverted to the sister concerns for alleged non business purpose. iv) The total interest as debited on account of interest of Rs. 1,22,51,9657- consists as under:- Cash credit interest 47,07,263/- Term Loan 75,44,702/- v. Thus, firstly, the Assessing Officer has ....
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....sister concern, which is for commercial expediency. iii. The disallowance of interest on 'term loan' is wholly uncalled for, since as per source and application chart at page 39, it is very clear that no presumption could be drawn that the borrowed funds had been, utilized for advancing to sister concerns. The detail of interest paid on 'term loan' and on 'cash credit limit' is at page 35 of the paper book, which is quite evident. iv). The huge interest income on FDRs has been disclosed as per page 15 & 26 of the paper book as stated in para 5(vii). 6.6. The ld. counsel further submitted that 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 100 to 111 of the paper book and which has been reported in 381 ITR 107. After considering the various judgments, the Hon'ble Punjab & Haryana High Court at pages 109 to 111 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 business....
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....g the judgment of Bright Enterprises and Reliance Utilities. 6.11. Thus, no disallowance u/s 36(1 )(iii) in any manner is called for. 7. The ld. DR, on the other hand, relied upon the orders of both the Authorities below. 8. 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 381 ITR 107 (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 expediency in advancing loans does not arise only on account of there being transactions directly between the holding company and the subsidiary company or between the group companies inter se. The two companies may even be in a different line of business. It would make no difference. It would still be commercially expedient for one group company to advance amounts ....
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....ly, we hold that the disallowance of interest u/s 36(1)(iii) pertaining to the sister concerns upheld by the ld. CIT(A) is not justified, hence, the same is deleted. Thus, the appeal of the assessee is allowed. 11. Now, we take up the appeal of the Revenue in ITA No.621(Asr)/2014, where the Revenue has contended that the ld. CIT(A) has erred in allowing deduction of profit u/s 80IC of the Act, ignoring the fact that the assessee did not have sufficient infrastructure and man power to manufacture the entire products on its own in its exempt unit and got it done as job work from units outside specified areas. 12. The AO noted in the assessment order that the assessee had shown income of Rs. 21,49,069/- on account of sale of paper which was in the nature of trading income and therefore, not eligible for deduction u/s 80IC. 13. The ld. CIT(A) deleted the disallowance by holding as under: "12. I have considered the facts of the case, the basis of addition made by the AO and the arguments of the AR on the issue during assessment as well as appellate proceedings. It is seen that the issue is squarely covered by the judgment of the Hon'ble ITAT Bench in the case of the as....
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....r Punjab School Education Board and the AO in his remand report dated 12.05.2009 which has been reproduced from pages 18 to 21 has not been able to make detailed submissions on the factual aspect of the case and rather at page 19 asked the ld. CIT(A) to verify the claim made by the assessee. Regarding electricity charges, which have been proved by the assessee beyond any doubt and how it can be assumed that electricity charges in H.P. are far less than electricity charges in Punjab and that finding has not been rebutted by the ld. CIT(A). 18.1. He invited our attention to the printing double colour which facilitate in their unit at Jalandhar, which is having an old machinery. The Ld. CIT(A) has dealt each and every aspect from page 7 to 11 of his order and we are in agreement with the same. After going through all the factual position as brought out on record by the ld. CIT(A0 we have no hesitation in holding that the ld. CIT(A) has rightly deleted the addition to which we find no infirmity. Needless to add here, the comparative chart as reproduced hereinabove in brief synopsis of the assessee, the Ld. DR has not rebutted the same. Therefore, the appeal in ITA No.27(Asr)/2....