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TMI Blog2006 (12) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, Chandigarh Bench "A" (for short, "the Tribunal") in I. T. A. Nos. 342/ Chandi/96 and 384/Chandi/96, for the assessment year 1992-93, raising the following substantial questions of law: (i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding the expenses of Rs. 86,914 spent on silver wares for distribution to the dealers and foreign visitors as business expenditure? (ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in deleting the dis allowance of interest of Rs. 2,43,000 on the grounds that there is no direct nexus between the borrowing and interest-free advances made to certain parties? (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any business consideration and without canying any interest. It was further .. that during the year, the assessee incurred interest liability of Rs. 2,19,86,611. The Tribunal accepted the plea raised by the assessee that there being no direct nexus between the borrowing and the interest-free advances made, the interest component on interest-free advances made to tain parties cannot be disallowed. 4.We have already considered an identical issue in CIT v. Abhishek Industries Ltd.[2006] 286 ITR 1 wherein this court held as under "As far as the issue of establishment of nexus of the funds borrowed vis-a-vis the funds diverted towards sister concern on interest-free basis is concerned, in our view, the stand of the assessee that the onus of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan, as working capital loan, as sale proceeds, etc., do not have any different colour. What ever are the receipts in the business, that have the colour of business receipts and have no separate identification. Sources has no concern whatsoever. The only thing sufficient to disallow the interest paid on the borrowing to the extent the amount is lent to sister concern without carrying any interest for non-business purposes would be that the assessee has some loans or other interest bearing debts to be repaid. In case the assessee had some surplus amount which, according to it, could not be repaid prematurely to any financial institution, still the same is either required to be circulated and utilised for the purpose of business or to be inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for non-business purposes without interest, a plea is sought to be raised that the amount advanced was out of its capital, which in fact stood exhausted in setting up of the unit. Such a plea may be acceptable at a stage I when no loans had been raised by the assessee at the time of dis , bursement of funds. This would depend on facts of each case — Section 106 of the Indian Evidence Act or the principles analogous thereto places the burden in respect thereof upon the assessee, as the facts are within its special knowledge. However, a presumption may be raised in a given case as to why an assessee who for the purpose of running its business is required to borrow money from banks and other financial institutions would be giving loan to its s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue was not able to persuade this court to take a view contrary to what has been taken by the Tribunal and further to show as to how the expense in question was not related with the business. Accord ingly, the question is answered against the Revenue and in favour of the assessee. Question No. (v) 9. As far this question is concerned, the contention raised on behalf of the Revenue is that the unit having been set up during the assessment year 1984-85, a period of 7 year to claim benefit under section 80-I of the Act, would expire in the assessment year 1991-92 and during the year in question, the assessee will not be entitled to claim this benefit. The finding recorded by the Tribunal permitting the benefit to the assessee under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and start of manufacturing therefrom. It is further submitted that to enable the assessee to start production, industrial licence was required which itself was received by the assessee.on March 23, 1985, relevant to the assessment year 1986-87. To sum up. he submitted that once setting up of the plant itself was completed in the assessment year 1986-87 and licence to manufacture was also granted during that year, there no reason to deny the benefit of section -: of the Act to the assessee for 7 years startingtherefrom. 10.We find the contention raised by counsel for the assessee, supported by :acts as narrated above, to be persuasive. Section 80-I of the Act applies toany industrial undertaking which fulfils four conditions as laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X
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