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TMI Blog2011 (2) TMI 1385X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. 2. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had given interest free advances amounting to ₹ 94.34 crores to its subsidiary companies. The Assessing Officer, therefore, proposed to disallow interest attributable to these advances. In reply the assessee filed written submissions in this behalf in which following submissions were made: You have proposed to disallow proportionate interest on amount of interest free advance of rupees 94.34 lacs to subsidiary company, in this regard it is respectfully submitted that our company is engaged in the business of manufacturing and selling of denim fabric and garments in the domestic and overseas market. The demand for the denim ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the Commissioner of Income-tax (A) the Department is now in appeal before this Tribunal. In support of appeal it was submitted that the learned Commissioner of Income-tax (A) has not recorded any finding as to whether any business purpose was actually served by giving interest-free advances to the sister concerns. 6. In reply, the learned authorized representative for the assessee supported the order passed by the Commissioner of Income-tax (A). He submitted that the assessee had explained before the Assessing Officer the business purpose which was served by giving the impugned interest free advances to the subsidiary companies and that the Assessing Officer has not rebutted the submissions made by the assessee before him in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the provisions of section 40A(2) could not be applicable to its case. The Assessing Officer, however, noted that the assessee has purchased 38,685 kgs of cotton from the said sister concern for a sum of ₹ 13,68,150/- at average rate of ₹ 35.37 per kg. He further found that purchases of 27,380 were made from outside parties at an average rate of ₹ 33.63 per kg. The Assessing Officer, therefore, inferred that the purchases were made at higher rates from M/s Malwa Cotton Spinning Mills Ltd. In this view of the matter, the Assessing Officer disallowed 10% of the purchases made from M/s Malwa Cotton Spinning Mills Ltd. under section 40A(2)(b) of the Act. 10. Aggrieved by the order passed by the Assessing Officer the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken out, the average rate of purchases of comber waste made from the said sister concern comes to ₹ 34,17 per kg. I agree with the learned counsel that this is quite comparable with the average rate of purchase of similar material i.e. comber waste etc. made from outside parties at ₹ 33.63 per kg. Even otherwise from these details it becomes quite clear that the rates varied from day to day. The purchases made from the sister concern cannot be said to be at rates higher than those at which purchases are made from outside parties if these rates are compared keeping in view the relevant dates or nearby dates. It is further seen that for making this disallowance the A.O. has just considered the average purchase rate for purchases o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax (A) has relied upon his own order for assessment year 2005-06 in which similar addition made by the Assessing Officer was deleted by him and his order, on appeal, was confirmed by this Tribunal. The Department has not been able to rebut the findings recorded by the learned Commissioner of Income-tax (A) for deleting the impugned addition. In this view of the matter his order in this behalf is confirmed. Ground No.2 is dismissed. 15. Ground No.3 reads as under: 3. On the facts and in the circumstances of the case, the Ld. CIT (A)- II. Ludhiana has erred in deleting the addition of ₹ 16,99,133/- made by the AO u/s 37 (1) being expenditure of capital nature shown under the head Bank Charges . 16. During the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by the Hon'ble ITAT. Keeping in view the above decision of the Hon'ble Jurisdictional Bench of ITAT the disallowance of ₹ 16,99,133/- is deleted and this ground of appeal is, therefore, allowed. 18. Aggrieved by the order passed by the Commissioner of Income-tax (A) the Department is now in appeal before this Tribunal. 19. In support of the appeal the learned D.R. relied upon the order passed by the Assessing Officer. 20. In reply the ld. authorized representative for the assessee relied upon the order passed by the Commissioner of Income-tax (A). 21 We have heard both the parties. The learned Commissioner of Income-tax (A) has given cogent reasons for deleting the impugned addition. He has followed his own o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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