TaxTMI 
TaxTMI 
2016 (7) TMI 845
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....owed funds have been utilized. 3. That the ld. CIT(A) has erred in not considering that the order of the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Abhishek Industries Ltd. (2006) 286 ITR 1 is not applicable in this case." 2. The facts of the case are that the assessee company is engaged in the business activity of publication of children books and as printers at its plants situated at Sahibabad in Uttar Pradesh and Jalandhar. As per audited profit and loss account filed and computation of total income, the assessee had declared gross profit @ 28.17% on the gross turnover of Rs. 124,07,17,249/- against the G.P. rate of 26.70% on the turnover of Rs. 107,75,07,747/-. Therefore, both the sales and gross profit rate were progressive. The AO observed that perusal of the balance sheet and profit loss account of the assessee, shoed that the assessee had an amount of Rs. 149,36,11,300/- during the year standing as investments as 'Share Application Money' in various related concerns. It was also noticed that the assessee had not received any interest on account of such investments. Further, the AO observed that during the year assessee had claimed an expenditure of Bank I....
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....ghted that disallowance interest on similar facts in the case of assessee's sister concern M Bright Enterprises Pvt. Ltd. for the assessment year 2005-06 had be upheld by the Hon'ble ITAT, Amritsar Bench vide their order dated 07/08/2012. In the circumstances, the disallowance made by the AO is therefore, confirmed." 4. The ld. counsel for the assessee submitted that this is an appeal filed by the assessee and 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. He further stated that both the Assessing Officer and CIT (A) have held that since the assessee has debited an amount of Rs. 3,71,68,025/- as interest paid on CC/OD account which is evident from page 21 r.w. page 14 of the paper book and the case of the Assessing Officer is that the assessee had advanced the amount to the sister concerns without any business expediency and no interest has been charged from such advances ignoring the fact that the assessee had disclosed the interest income of Rs. 2,72,42,083/- on FDR....
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....p of companies having common directors/shareholders and in order to strengthen the financial health of the other companies and the fact that there are common shareholders/directors, is evident from page 17 to 18 of the paper book and also the nature of the business of the sister concerns is also same. d) The investments as made to the sister concerns are out of the assessee's own Sources and it cannot be presumed that the investments were out of the 'Borrowed funds' of the appellant. e) The assessee was having more than sufficient interest free funds available as on 31.03.2012, which is evident from the balance as under:- a. Share Capital Rs. 60,00,200 (page-2 of P.B.) b. Reserve & Surplus Rs. 27,96,61,215 (page-2 of P.B.) c. Share application received as per balance sheet Rs. 1,26,04,55,744 Total Rs. 1,54,61,17,159/- Thus, the total interest free funds available with the assessee are Rs. 1,54,61,17,159/ against the advances of Rs. 1,49,36,11,300/- and thus, the disallowance of interest was not called for, specially, when the assessee had business dealings with those concerns and the amount had been given to the sister concerns, which should be termed for busines....
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....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 to another group company, if, for instance, as a result thereof the former benefits. In the present case, as we have already demonstrated, there would be a direct benefit on account of the advance made by the appellant to its sister company if the same improves the financial health of the sister company and makes it a viable enterprise. We hasten to add that it is not necessary that the advance results in a positive tangible benefit. So long, as the amount is advanced with that view in mind or with any other commercially expedient view in mind that is sufficient. " 4.5. He further submitted that the judgment of Abhishek Industries have also been overruled by the Hon'ble Supreme Court in the case of Hero Cycles, for which, the copy is placed at pages 42 to 47, reported in 379 ITR 347. 4.6. The ld. counsel also pleaded that even on the judgment of ITAT, Chandigarh Bench in the case o....
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..... 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 to another group company, if, for instance, as a result thereof the former benefits. In the present case, as we have already demonstrated, there would be a direct benefit on account of the advance made by the appellant to its sister company if the same improves the financial health of the sister company and makes it a viable enterprise. We hasten to add that it is not necessary that the advance results in a positive tangible benefit. So long, as the amount is advanced with that view in mind or with any other commercially expedient view in mind that is sufficient. '' 7. Further, the judgment in the case of 'Abhishekh Industries' (supra) relied upon by both the Authorities below has also been overruled by the Hon'ble Supreme Court in the case of 'Hero Cycles vs. CIT', 379 ITR 347 (SC) (copy placed at APB 112 to 116), in favour of the assessee by holding as follows: "Company had reserve/surplus to the tune of almost 15 crores ad, therefore, assessee company could in any case, utilize those funds for giving ad....