2012 (3) TMI 740

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....its subsidiary company. As per the Revenue, ld. CIT(Appeals) placed reliance on the decision of co-ordinate Bench of this Tribunal in the case of ACIT v. W.S. Industries (India) Limited (128 ITD 98), and this view has not been accepted by the Revenue. 2. Short facts apropos are that assessee engaged in processing, trading and service business, had various divisions which included a division called "Agro Products Division" dealing with agricultural products. Assessee hived off this said agricultural products division to a separate 100% subsidiary called "PL Agro Technologies Ltd. (PLAT)". For its working capital requirement, M/s PLAT approached M/s Nedungadi Bank Ltd., which required a corporate guarantee from the assessee being the holdi....

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....t year as well. 3. Before the ld. CIT(Appeals), argument of the assessee was that assessee-company was having various divisions like Cashews, Coffee curing, Shipping, Fertilizers, Industrial Products, Agricultural Products, etc., Agricultural Products division was hived off to a subsidiary called M/s PLAT being a 100% subsidiary. Its business interest was to be safeguarded by the assessee and corporate guarantee was given for facilitating working capital loans for M/s PLAT and this was done only as a measure of commercial expediency. Again as per the assessee, giving corporate guarantee was part of its business, since such an object was clearly mentioned by it in its Memorandum of Association. Assessee also brought to the notice of ld. C....

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....ng its working capital requirements. However, corporate guarantee given by the assessee could not be considered on the same footing and the outgo arising out of settlement could only be considered in the capital field. Therefore, according to learned D.R., ld. CIT(Appeals) fell in error in deleting the disallowance. 6. Per contra, learned A.R. supported the order of ld. CIT(Appeals). 7. We have perused the orders and heard the rival submissions. There is no dispute that assessee had given corporate guarantee for the loans taken by its 100% subsidiary company. There is also no dispute that the said subsidiary had raised such loans to meet its working capital requirements and not for financing any fixed assets. It is also an accepted fa....