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TMI Blog2013 (2) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal before the appeal is heard or is disposed off ." 3. Ground Nos. 1, 3 & 4 are general in nature and need no separate adjudication. 4. In Ground No.2, the Revenue contended that the CIT(A) erred in deleting the addition of Rs.20,21,752/- made on account of disallowance of interest and addition of Rs.2,73,360/- made u/s 40(a) (ia) of the Act. 5. In the course of present appellate proceedings, it was stated by the ld. 'AR' that as far as addition of Rs.20,21,752/- is concerned, the same is covered in favour of the assessee and against the revenue in view of the decision of the ITAT Chandigarh in ITA No.993/Chd/2010 assessment year 2006-06, dated 13.05.2011 in assessee's own case, as incorporated at page 41-47, particularly para 13 of the said order. A perusal of the said order dated 13.05.2011 reveals that the issue is covered by para 13 of the said order in favour of the assessee. The relevant part of the decision is reproduced hereunder : "13. As regards the amount outstanding in the name of Punjab Biotehnology park, the facts as available on record indicate that the said sum of money was given by the assessee-company out of business expediency. Punjab Biotehnology park, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid treating the amount paid to Shri A.S.Bhatia to be an alleged interest free advance without commercial expediency which is arbitrary and unjustified. 2. That the ld. CIT(A) has failed to appreciate the fact that the assessee company had entered into a lease agreement with landlord Shri A.S.Bhatia on which a building was constructed by the assessee company and it was only when the assessee company shifted to its own premises, the amount spent on construction was to be returned by Shri A.S.Bhatia. Thus, without considering the factual matrix, the impugned order has been passed which is arbitrary and unjustified. 3. That the ld. CIT(A) has further erred in upholding the addition of Rs.97293/- on account of payments made towards freight and Rs.21191/- made on account of sales commission applying the provisions of Section 40(a) (ia) which is arbitrary and unjustified. 4. That the order of the ld. CIT(A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable." 12. In Ground No. 1 & 2, the ld. 'AR', while pleading the case contended, that the issue raised is covered against the assessee and in favour of the Revenue. He referred to para 12 of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee to him. The auditors of the assessee-company are well-versed in these matters. They have also treated the aforesaid loan. As prejudicial to the interest of the assessee. In other words, they were of the opinion that the action of assessee in giving interest-free loans to Shri A.S. Bhatia was not guided by any business consideration. The submission of the assessee that the amount standing in the name of Shri A.S. Bhatia represents the recoverable amount on sale of property by the assessee, does not make any difference. The amount recoverable from Shri A.S. Bhatia on sale of property was not recovered. A conscious decision was taken by the assessee to treat the same as loan given to him. Instead of recovering the aforesaid amount from Shri A.S. Bhatia, the assessee has allowed the amount of sale proceeds to be retained by him as loan from the assessee-company without charging any interest and without any stipulation as to repayment of the said amount. In our view the aforesaid sequence of events firmly establish the fact that the funds, which should have been available with the assessee company, were allowed to be diverted or retained by Shri A.S. Bhatia out of non-bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the assessee-company for its business purposes and to that extent it may not have been necessary to borrow from the Banks and pay interest thereon. In CIT v. H.R. Sugar Factory Pvt Ltd, 187 ITR 363, 370-371. which has been cited with approval in Abhishek Industries (supra), the Hon'ble Allahabad High Court has held as under :- "May be that the company borrows large amounts for the purpose of its business every day, but that does not explain the huge advances to the directions/shareholders. Had this money been not advanced to the directors, it would have been available to the assessee for its business purposes and to that extent it may not have been necessary to borrow from the banks." 12. In view of the foregoing, the fact that the funds to the extent of diversion for non-business expediency were internally available with the assessee-company, would make no difference. The interest attributable to a sum of Rs. 49,38,930/- being the amount of diverted by the assessee-company for the personal benefit of Shri A.S. Bhatia is therefore liable to be disallowed. The AO is directed to re-compute the disallowance accordingly." 14. Respectfully following the order of the ITAT in asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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