9911796707
TMI Blog2016 (8) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... PURNA GUPTA, A.M.: This appeal has been filed by the assessee against the order of learned Commissioner of Income Tax (Appeals)-II, Ludhiana dated 24.9.2014 for assessment year 2011-12. 2. At the outset it may be stated that the appeal had been dismissed for non-prosecution vide order of the I.T.A.T. dated 15.6.2015, but on a Miscellaneous Application filed by the assessee, it was recalled vide order dated 29.4.2016. In pursuance to the same, the present appeal was heard by the Bench. 3. We find that the present appeal was filed late by 26 days. An application for condonation of delay was filed before us stating the reason for the delay being the closure of the unit and declaration of the bank account of the assessee as NPA, which matter was being pursued before the DRI, Chandigarh. The learned D.R. opposed the application filed. We find that the assessee had adduced reasonable cause for delay and moreover since the delay is only of 26 days, we condone the same and proceed to adjudicate the appeal. 4. The assessee has raised the following grounds : 1. That the worthy Commissioner of Income Tax (Appeals) II, Ludhiana has erred in confirming the addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the whole of the advances were made out of the owned funds of the amalgamatee Company duly accepted by Hon'ble Punjab Haryana High Court while approving / sanctioning of amalgamation. 8. That the Ld. worthy Commissioner of Income Tax (Appeals)-II, Ludhiana has erred in not deciding the questions raised in Grounds of Appeal at Sr. # (vii), read as under: That the Ld. Assessing Officer has erred in disallowance ₹ 48,31,677/- u/s 36(1)(iii) against his own Judgment /Order that the interest on the amount advanced which has stood debited for the entire financial year needs to be capitalized. 9. That the worthy Commissioner of Income Tax (Appeals) - II, Ludhiana has erred in holding that the Agreement between the parties in giving loans advances without consideration i.e. Interest is void contact is not legally enforceable. Once the loans advances have been accepted by Hon'ble Punjab Haryana High Court while approving / sanctioning the Scheme of Amalgamation, the Judgment passed by the worthy Commissioner of Income Tax (Appeals) - II, Ludhiana is beyond his jurisdiction directly interfering the jurisdictional High Court, which may be vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital requirements. No amount was diverted from the loan accounts after the merger of Titan Comfine Ltd. with the assessee s company for advancing any amount to these finance companies. Hence, there is no nexus between the loans obtained from the bank and the sundry debtors outstanding in the name of the Finance Companies and, therefore, no disallowance of interest to be made. The Assessing Officer was not satisfied with the assessee s contention. The Assessing Officer observed that it was evident that these interest free advances were given without any commercial expediency. The Assessing Officer further observed that even though these advances were made before the merger, neither any recovery nor any effort for recovery was made by the assessee and these advances continued as such after the merger. The Assessing Officer further pointed out that the assessee has incurred interest expenditure of ₹ 2,18,78,452/-. The Assessing Officer also observed that the nature of these outstanding amounts were infact loans and advances although these were shown under the head sundry debtors. In this regard, the Assessing Officer also referred to the balance sheet of Titan Comfine Ltd. where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tan Comfine Ltd. ended 31.3.2009, placed at PB 73-85 reflects the following : a) The impugned interest free advances were shown either as loans advances or debtors in the balance sheet (PB-73,76). b) Own interest free funds of Titan Comfine Ltd. being share capital and reserve and surplus were ₹ 5,20,69,283/-. c) No interest bearing loans taken by Titan Comfine Ltd.are reflected in the balance sheet. d) No interest expenses are debited to the Profit Loss Account. 12. The only conclusion which can be derived from the above is that the impugned advances were made by Titan Comfine Ltd., which was either out of its own funds which were enough to fund the advance or if out of interest bearing funds, the same had been paid off and no longer existed. Subsequently, in 2009, Titan Comfine Ltd. merged with the assessee company. Even after merger, the fact remains as it is and it cannot be said post merger that interest bearing funds of the assessee i.e M/s Jagannath Alloys Ltd., were used for the purpose of making the advance. The interest bearing funds of the assessee taken pre or post merger with Titan Comfine Ltd., have no nexus at all with the advances which were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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