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TMI Blog2013 (10) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... B' (in short, "the Tribunal") passed in ITA No.366/CHANDI/2007, for the assessment year 2003-04, claiming following substantial questions of law:- "1. Whether, on the facts and in the circumstances of the case, Singh Gurbax the Tribunal was right in relying upon section 36(1)(iii) in 2014.01.08 13:47 I attest to the accuracy and integrity of this document High Court Chandigarh isolation without considering the fact that the assessee has not only borrowed money but also has advanced money from which the assessee was liable to receive interest income? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the advances made to 'Hindustan Max G. B were actually for commercial expediency particularly since the advances pertained to the earlier years and whether the commercial expediency can be said to have existed over a prolonged period of a number of years when no such transaction has taken place in the succeeding years?" 3. Briefly, the facts necessary for adjudication of the controversy involved, as narrated in the appeal, may be noticed. The assessee company is engaged in the business of manufacturing of bulk drugs and inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng interest free loan to M/s HMGB so as to decide with regard to the deduction under section 36(1) (iii) of the Act. It was argued that even the Assessing Officer had not controverted that commercial expediency existed while framing assessment relating to assessment year 2004-05. Support was drawn from judgments in CIT v. Panipat Woollen and General Mills Co. Limited, (1976) 103 ITR 66 (SC), Singh Gurbax 2014.01.08 13:47 I attest to the accuracy and integrity of this document High Court Chandigarh S.A.Builders's case (supra), Marudhar Chemicals and Pharmaceuticals P. Limited, (2009) 319 ITR 75 (P&H), CIT v. Bharti Televenture Limited, (2011) 331 ITR 502 (Delhi), CIT v. Reliance Communication Infrastructure, (2013) 260 CTR 159 (Bom), CIT v. Malayalam Plantations Limited, 53 ITR 140 (SC) and Madhav Prasad Jatia v. CIT, (1979) 118 ITR 200 (SC). There was commercial expediency as recorded by the CIT(A) and the tribunal and therefore, the same being finding of fact, is not liable to be interfered with in view of judgments in Deputy Commissioner of Income Tax v. Core Health Limited, (2008) 298 ITR 194 (SC) and CIT v. Monnet Industries Limited, (2012) 350 ITR 304 (SC). 6. After heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee explained that the average cost of interest bearing funds is only 2-3% whereas Singh Gurbax the amount was advanced to HMGB @ 16.50% and earned 2014.01.08 13:47 I attest to the accuracy and integrity of this document High Court Chandigarh an interest of ` 2,63,93,820/- during the previous year 2003-04. (B) The advances were made to a joint venture company to secure assessee's own business. (C) It was explained that HMGB was providing a high quality and most reliable source of supply and it gave assured supply of key raw material. (D) HMGB provided raw material at less than the market rate. (E) The assessee has given a chart where the average cost of material was compared with other persons. As per figures given by the assessee which have been placed at Annexure 2, the cost from joint venture company is lower than the cost from other concerns where the quantity is comparable. (F) The assessee has written off the amount being irrecoverable as the company filed an application before BIFR on 18.2.2002. (G) The amount of advances and also the amounts of purchases during the year are also comparable. 8. After going through the complete reply which has been reproduced above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso not in dispute that the assessee had raised interest free loan of Rs. 95 crores from its parent company in the past which too has been put to use by the assessee in its business and it has been claim of the assessee before the lower authorities that the amount advances to HMGB is out of such amount. There is no finding in the assessment order that the advances made to HMGB in the past years, which Singh Gurbax are outstanding during the year, have been made out of the 2014.01.08 13:47 I attest to the accuracy and integrity of this document High Court Chandigarh interest bearing loan from the parent company. In any case we are not going into this aspect. In our view, there is sufficient material to show that the relationship of the assessee with its subsidiary, HMGB was based on commercial expediency and the advancing of the amount was for business purpose. In this regard, we may make a reference to the order of the CIT(A) for assessment year 2004-05 which is also subject mater of appeal before us. The CIT(A) has tabulated the price advantage to the assessee on purchases made from HMGB, an uncontroverted fact, which clearly indicates commercial prudence apart from ensuring conti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw material; (iii) the assessee had taken loan by paying interest at the rate of 2-3% whereas the amount was advanced to HMGB at the rate of 16.50% and earned interest of `2,63,93,820/- during the assessment year 2004-05. (iv) further, the average cost of material which was paid by the assessee to the joint venture was lower than the Singh Gurbax 2014.01.08 13:47 I attest to the accuracy and integrity of this document High Court Chandigarh cost from other concerns where the quantity was comparable. The aforesaid findings of CIT(A) and the Tribunal have not been shown to be erroneous or perverse in any manner. 12. In all fairness to learned counsel for the revenue, adverting to the judgments relied upon by her, in view of the findings of fact recorded by CIT(A) and the Tribunal that there existed commercial expediency in giving interest free loan to HMGB, which findings are not shown to be against the record, no advantage can be derived by the revenue from the pronouncement reported in Abhishek Industries Limited's case (supra). In so far as Motor General Finance Limited and Indian Shavings Products Limited's cases (supra) are concerned, these pronouncements were prior ..... 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