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TMI Blog2023 (3) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the appeal and the judgment of the High Court in Commissioner of Income Tax-I, Ludhiana vs. M/s. Abhishek Industries Limited, Ludhiana [ 2006 (8) TMI 123 - PUNJAB AND HARYANA HIGH COURT] was over-ruled. As regards amount given to the sister concern, the issue in the present case does not need to be examined as even in the present case, the issue with respect to money given to the sister concern-Punjab Biotechnology Plant Ltd. has already attained finality in Hero Cycles 's case [ 2015 (11) TMI 1314 - SUPREME COURT] With respect to loan given to Shri A.S. Bhatia, the issue has been considered by the Hon'ble Supreme Court in Hero Cycles 's case [ 2015 (11) TMI 1314 - SUPREME COURT] as loan of Rs.34 lacs was given to the Directors when the credit balance was Rs.15 crores and this amount did not effect the business transaction carried out by the company after taking loan from the bank. The question of liability has already been answered in favour of the assessee by the Supreme Court in Hero Cycles's case (supra) wherein the judgment passed in Abhishek Industries (supra) has been overrurled. The judgment of Hero Cycles's case (supra) has, thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sister concerns in which the Directors had substantial interest without charging any interest on them while the assessee-company was paying interest on loans taken from banks and other financial institutions. The AO considered the aforesaid advances given to the directors, relatives of directors and the sister concerns as diversion of funds by the assessee and therefore disallowed a sum of Rs.13,61,450/- being interest paid on loan taken on pro rata basis. The finding recorded by the AO in this behalf reads as under:- The company is engaged in the business of manufacturing of computer stationary. During the course of the assessment proceedings, it was noticed that an amount of Rs.3,11,22,866/- has been given as advance to Directors, relatives of Directors and to companied in which Directors have substantial interest and no interest has been charged in spite of the facts that the company is paying interest on loans taken from banks and other financial institutions. The interest so paid has been claimed as expenses by the assesee. The interest paid on such loans amounting to Rs.13,61,450/- is disallowed on pro-rata basis. Thus addition to the tune of Rs.13,61,450/- is being made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernal uncle and the assessee-company itself treated the amount standing in his name as loan given by the assessee to him. The auditors of the assessee-company had treated this loan as prejudicial to the interest of the assessee. The opinion of the auditors was that the action of the assessee in giving interest-free loans to Shri A.S.Bhatia was not guided by any business consideration. The amount recoverable from Shri A.S. Bhatia on sale of property was not recovered. No interest was charged by the assessee from Shri A.S. Bhatia. The Tribunal held that the amount standing in the name of Shri A.S. Bhatia was in the nature of loan advanced by the assessee to him without any commercial expediency and if the assessee-company had not diverted the funds to Shri A.S. Bhatia for nonbusiness consideration, they would have been available with the assesseecompany for its business purposes and to that extent, it would not have necessary to borrow from bank and pay interest thereon. By referring to the judgment passed by this Court in CIT Vs. Abhishek Industries Ltd., 261 ITA (PH), the Tribunal held that the interest attributable to a sum of Rs.49,38,930/- being diverted by the assessee-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be examined as even in the present case, the issue with respect to money given to the sister concern-Punjab Biotechnology Plant Ltd. has already attained finality in Hero Cycles 's case (supra). However, with respect to loan given to Shri A.S. Bhatia, the issue has been considered by the Hon'ble Supreme Court in Hero Cycles 's case (supra) as loan of Rs.34 lacs was given to the Directors when the credit balance was Rs.15 crores and this amount did not effect the business transaction carried out by the company after taking loan from the bank. The question of liability has already been answered in favour of the assessee by the Supreme Court in Hero Cycles's case (supra) wherein the judgment passed in Abhishek Industries (supra) has been overrurled. The judgment of Hero Cycles's case (supra) has, thereafter, been followed by this Court in Principal Commission of Income Tax vs. Holy Faith International (P) Ltd, ITA No. 87 of 2017, decided on 24.07.2017 and the benefit of interest was allowed under Section 36(1)(iii) by this Court. In paras No. 7, 8, 9 and 10, it was observed as under:- 7. Further, the judgment in the case of Abhishek Industries (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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