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TMI Blog2015 (11) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... lt 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. Thus the question of law is answered in favour of the appellant and against the department. The order of the Tribunal is set aside. The appellant shall be entitled to the deduction under Section 36(1)(iii). - Decided in favour of assessee. - ITA No. 224 of 2013 (O&M) - - - Dated:- 24-7-2015 - S. J. Vazifdar, Acting Chief Justice And G. S. Sandhawalia, JJ. For the Petitioner : Mr. Pankaj Jain, Senior Advocate with Mr. Divya Suri and Mr. Sachin Bhardwaj, Advocates For the Respondent : Mr. Rajesh Katoch, Advocate ORDER S. J. Vazifdar, Acting Chief Justice This is an appeal against the order of the Income Tax Appellate Tribunal dated 07.08.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e advance to the appellant s sister concern does not appear to be for business purposes as the assesse-company has no business dealing with the company M/s Kolkata Hotel . The Assessing Officer observed that no interest was charged from M/s Kolkatta Hotels Private Limited on the advance of ₹ 10,29,17,301/- whereas the appellant had paid the interest amounting to ₹ 1,31,24,332/- on the loans taken from various banks. He observed that had the appellant not advanced the said sum to its sister concern without charging interest, it would have been left with sufficient funds to refund the bank loan and the appellant would not have had to pay interest to the bank. In arriving at this conclusion, the Assessing Officer relied upon the judgment of this Court in the case of Commissioner of Income Tax- I, Ludhiana vs. M/s Abhishek Industries, Ludhiana, [2006] 286 ITR 1 (P H). The Assessing Officer also initiated penalty proceedings under Section 271(1)(c). 5. The CIT (Appeals) allowed the appellant s appeal. The order records findings of fact which we find are established. They have not been shown to be incorrect. We have also held the inferences of fact and law to be well esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sister concern had been used as a measure of commercial expediency. In the facts and circumstances of the case, the ld. CIT(A) has wrongly interpreted and relied upon the decision of Hon ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT (supra), which in fact goes against the assessee. In the facts and circumstances, the order of the Ld. CIT(A) is reversed and that of the A.O. is restored. Thus, all the grounds of the Revenue are allowed. 7. With a view not to leave any room for doubt and to satisfy ourselves about the correctness of the appellant s claim, we directed Mr. Pankaj Jain, the learned senior counsel appearing on behalf of the appellant, to produce the agreement under which it purchased the shares of M/s Kolkatta Hotels Private Limited. Mr. Jain produced a share purchase agreement dated 08.07.2002 between the President of India, the appellant and Modern Publisher, who were referred to in the agreement as the purchaser and M/s Kolkatta Hotels Private Limited referred to in the agreement as the Company. The agreement stated that the government owned about 89.97% of the paid up equity share capital of M/s Kolkatta Hotels Private Limited, the Indian Hotels Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Crores Two Lakhs Thirty Two Thousand Only) by way of demand draft in favour of Airports Authority of India towards outstanding dues in respect of lease of land/Airport Restaurant. The Government shall make best efforts to procure a No Dues Certificate from the relevant authorities as soon as practicable. (v) ₹ 5,64,73,145/- by way of Demand Draft or Bankers Cheque in favour of the Government towards share consideration for purchase Shares calculated on the basis of the Price Per Share as defined in this Agreement. Admittedly, the appellant ultimately acquired 88.75% of the equity shares of M/s Kolkatta Hotels Private Limited and one Ashok Malhotra, a Director of the appellant acquired the balance shares. The other consortium member under the share purchase agreement, namely, Modern Publishers did not acquire any share. 8. The following facts, therefore, stand established. M/s Kolkatta Hotels Private Limited is a sister concern of the appellant by virtue of the appellant holding 88.75% of its equity shares. The appellant invested a huge amount of about ₹ 18 crores in the sister concern. The appellant and its sister concern are in the same business. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in coming to the conclusion that the amount was advanced by the appellant to its sister concern on account of commercial expediency and that the advance was used by its sister concern for the purposes of its business. The additional facts further establish the findings. 11. The Tribunal s observation that there is nothing on record that the money advanced by the appellant to its sister company had been used as a measure of commercial expediency, was not justified. The appellant furnished all the documents in this regard. The appellant expressly stated that the amounts had been utilized for commercial activity. This assertion was never denied. The appellant was not required to do anything further to establish its assertion that its sister company had utilized the amounts for the purposes of its business. The finding of the Tribunal is not based on any material. It is important to note that the Tribunal had not even suggested that such a case was put to the appellant or its authorized representative and that despite the same the appellant failed to establish the same. 12. The view of the Tribunal that the CIT (Appeals) had not considered the decision of the Supreme Court in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether it was for commercial expediency, the authorities and the courts should have examined the purpose for which the assessee advanced money to its sister concern and what the sister concern did with the money. It was further held that it is not relevant whether the assessee has utilized the borrowed amount in its own business or has advanced the same as interest free loan to its sister concern. What is relevant is whether the amount, so advanced was as a measure of commercial expediency or not. It is not necessary that the amount so advanced is earning profit or not but there must be some nexus between expenses and the purpose of business. It is important to note that the Division Bench in arriving at its conclusion followed the judgment of the Supreme Court in S.A. Builders Ltd. vs. Commissioner of Income-Tax (Appeals) and another (supra). The Division Bench, in fact, after remanding the matter, expressly directed the Tribunal to consider the matter in the light of the principles laid down by the Supreme Court in S.A. Builders Ltd. vs. Commissioner of Income-Tax (Appeals) and another (supra). 14. The appellant s case meets each of the tests stipulated by the Division Be ..... 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