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TMI Blog2017 (8) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... diary company or between the group companies inter se. The two companies may even be in a different line of business. It would make no difference. It would still be commercially expedient for one group company to advance amounts to another group company. In the present case, the impugned advance had been made out of interest free funds available with the assessee and, therefore, there was no question of disallowing interest under Section 36(1)(iii) of the Act. After considering the entire evidence on record and the case law on the point, it was concluded by the Tribunal that disallowance of interest under Section 36(1)(iii) of the Act pertaining to the sister concerns was not justified. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... any? (iii) Whether the Hon'ble ITAT, while allowing relief to the assessee, has erred in law in ignoring an important issue that the investment made by the assessee in the shape of 'Share Application Money' in those sister concerns, the share capital of which was almost fully subscribed was a colorable transaction of interest free loans/advances to its sister concerns and such colorable transactions are not permissible in the eyes of law? 2. A few facts necessary for adjudication of the controversy involved, as narrated in appeal, may be noticed. The assessee-company is engaged in the business activity of publication of children books and as printers at its plants situated at Sahibabad in Uttar Pradesh and Jalandhar. During the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer. It was observed that the assessee had not even attempted to show that the investments in sister concerns served any business purpose. The entire emphasis of the assessee was to support the claim that the impugned investments had been made from self owned funds and not from interest bearing funds. The investments had been made from a separate current account in which the deposits represented accruals from the business of the assessee company i.e. sales. With these observations, the disallowance of interest expenditure made by the Assessing Officer was confirmed by the CIT(A). Aggrieved by the order, the assessee filed appeal before the Tribunal. Vide order dated 13.06.2016, Annexure A.III, the Tribunal allowed the appeal of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 36(1)(iii) of the Act pertaining to the sister concerns was not justified. The relevant findings recorded by the Tribunal in this regard read as under:- "We have heard the rival contentions and have perused the material available on record. It is seen that the reliance placed by the Ld. CIT(A) on the judgment of 'Bright Enterprises Private Limited' of the ITAT, Amritsar Bench, is not proper, since that judgment has been reversed by the Hon'ble Jurisdictional High Court vide order dated 26.07.2015, reported in 381 ITR 107 (copy placed at APB 100 to 106), holding as under:- "17. The Assessing Officer's view that the advance was not for business purposes as the appellant had no business dealing with the sister company is er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, utilize those funds for giving advance to its directors." 8. Further, the reliance on the following judgments also support the case of the assessee overruling the judgment of 'Abhishek Industries', wherein it has been held that the disallowance under Section 36(1)(iii) is uncalled for: (i) 'CIT-1, Ludhiana Vs. Rakesh Gupta, ITA No.37-2014, dated 2.07.2015. (ii) 'ACIT Vs. Omax Bikes Limited' ITA No.1085/Chd/2013 dated 06.08.2015. 9. We are of the view that the ld. Counsel for the assessee is correct in contending that since the decisions in the case of 'Abhishek Industries Limited' (supra) and 'Bright Enterprises Private Limited (supra) followed by the Authorities below while making and confirming addition have been overruled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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