M/s. TOLANI SHIPPING CO. LTD., MUMBAI v. DCIT CEN. CIR. 17, MUMBAI

ITA 2946/MUM/2005 | 2001-2002
Pronouncement Date: 10-12-2010 | Result: Dismissed

Appeal Details

RSA Number 294619914 RSA 2005
Bench Mumbai
Appeal Number ITA 2946/MUM/2005
Duration Of Justice 5 year(s) 7 month(s) 19 day(s)
Appellant M/s. TOLANI SHIPPING CO. LTD., MUMBAI
Respondent DCIT CEN. CIR. 17, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-12-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 10-12-2010
Date Of Final Hearing 15-11-2010
Next Hearing Date 15-11-2010
Assessment Year 2001-2002
Appeal Filed On 21-04-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI R. S. SYAL (AM) AND SHRI D.K. AGARWAL (JM) ITA NO.2946/MUM/2005 ASSESSMENT YEAR : 2001-02 M/S. TOLANI SHIPPING CO. LTD. 10-A BAKHTAWAR NARIMAN POINT MUMBAI-400 021. ..( APPELLANT ) P.A. NO. (AAACT 4127 C) VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-17 MUMBAI. ..( RESPONDENT ) ITA NO.2861/MUM/2005 ASSESSMENT YEAR : 2001-02 ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-17 & 28 ROOM NO.401 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-20. ..( APPELLANT ) VS. M/S. TOLANI SHIPPING CO. LTD. 10-A BAKHTAWAR NARIMAN POINT MUMBAI-400 021. ..( RESPONDENT ) ASSESSEE BY : SHRI S. M. AGRAWAL REVENUE BY : MS. KU SUM INGLE O R D E R PER D.K. AGARWAL (JM). THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER DATED 18.2.2005 PASSED BY THE LD. C IT(A) FOR THE ASSESSMENT YEAR 2001-02. ITA NO.2946 & 2861.M/05 A.Y:01-02 2 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS FOR TRANSP ORTATION OF DRY/BULK CARGO UNDER TIME/VOYAGE CHARTER FILED RETUR N SHOWING INCOME OF RS.4 38 73 309/- U/S.115JA OF THE INCOME TAX ACT 1 961(THE ACT). SUBSEQUENTLY THE ASSESSEE FILED REVISED RETURN AND THE SAM E WAS PROCESSED U/S.143(1) OF THE ACT. LATER ON THE CASE WAS SELE CTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER NORMAL P ROVISIONS OF THE ACT AT AN INCOME OF RS.2 37 17 366/- AND AT 3 0% OF BOOK PROFIT OF RS.4 38 73 309/- UNDER SEC.115JB OF THE ACT VIDE O RDER DATED 31.3.2004 PASSED U/S.143(3) OF THE ACT. ON APPEAL THE LD. CIT(A) PARTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE AND REVENUE BOTH ARE IN APPEAL BEFORE US. ITA NO.2946/MUM /2005 (ASSESSEE'S APPEAL): 4. GROUND NO. 1 TO 5 AND 8 ARE AGAINST THE APPLICAT ION OF PROVISIONS OF SEC.14A OF THE ACT RESULTING IN AN ADDITION OF RS.40 90 801/- BY ASSESSING OFFICER WHICH HAS BEEN ENHANCED BY THE LD. CIT(A) BY RS.1 89 11 473/- I.E. TOTALLING TO RS.2 30 02 274/-. 5. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IN PAR A-15 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER OBSERVED THAT ON PERUSA L OF COMPUTATION OF INCOME THE PROPORTIONATE EXPENSES CLAIMED UNDER P&L ACCOUNT AGAINST THE EXEMPT INCOME ARE TO BE DISALLOWED. THIS FACT WAS CONFRONTED TO THE ASSESSEE. THE ASSESSING OFFICER HAS CALCUL ATED THE DISALLOWANCE OF SUCH EXPENSES AGAINST EXEMPT INCOME AMO UNTING TO RS.40 90 801/- AS UNDER :- ITA NO.2946 & 2861.M/05 A.Y:01-02 3 1. INVESTMENT IN SHARES AND SECURITIES (AS PER BALANCE SHEET) -A : RS . 13 24 51 702/- 2. TOTAL INVESTMENT OF THE ASSESSEE INCLUDING INVESTMENT IN CURRENT ASSETS (ASSETS SIDE OF BALANCE SHEET) -B : RS .1 58 69 28 841/- 3. TOTAL INTEREST CHARGED TO PROFIT AND LOSS A/C. -C : RS. 15 24 00 244/- 4. INTEREST ATTRIBUTABLE TO TAX FREE RECEIPTS (A/BXC) -D : RS. 1 27 19 960/- 5. OTHER EXPENSES ATTRIBUTABLE TO TAX FREE RECEIPT-TAKEN ON ESTIMATE BASIS @ 10% OF DIVIDEND AND TAX FREE RECEIPT -E : RS. 4 09 080/- 6. TOTAL INTEREST AND EXPENSES ATTRIBUTABLE TO TAX FREE RECEIPT (D + E) -F : RS. 1 31 29 040/- 7. IN CASE AMOUNT F IS HIGHER THAN THE DIVIDEND RECEIPT THEN IT IS RESTRICTED TO TAX FREE RECEIPTS -G : RS. 40 90 801/- THE TOTAL EXPENSES ATTRIBUTABLE TO TAX FREE RECEIPT WO RKS OUT TO RS.40 90 801/-. THUS THE INCOME DERIVED FROM TAX FREE SECURITIES WORKS OUT RS.NIL (40 90 801 - 40 90 801) 6. ON APPEAL BEFORE THE LD. CIT(A) IT WAS CONTENDED T HAT IT HAS SHARE CAPITAL OF RS.11.82 CRORES AND RESERVES OF RS.57.47 CRORES AND THEREFORE THE INVESTMENT IN SHARES AND INTEREST FREE S ECURITIES ARE DEEMED TO HAVE INCURRED IN SHARE CAPITAL AND RESERVES AN D SURPLUS. IT WAS FURTHER STATED THAT THE ASSESSING OFFICER HAS OVERLOOKE D THAT THE LOANS HAVE BEEN BORROWED FOR THE PURPOSE OF BUSINESS AND THE INTEREST PAID ON SUCH LOANS IS TO BE CONSIDERED AS BUSINESS EXPENDITUR E. IT WAS FURTHER STATED THAT THE TOTAL TAX FREE INCOME HAS BEE N DISALLOWED ALTHOUGH THE COMPANY HAS NOT AVAILED ANY LOAN FOR MAK ING THE INVESTMENT. IT WAS FURTHER STATED THAT THE INVESTMENT IN SHARES WERE HELD FOR LONG TERM BENEFITS AND NO TRADING ON REGULA R BASIS WAS CARRIED ITA NO.2946 & 2861.M/05 A.Y:01-02 4 OUT AND HENCE NO EXPENDITURE BE ALLOCATED ON THE INCO ME ARISING OUT OF THESE INVESTMENTS. 7. HOWEVER THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE ENTIRE AMOUNT OF INTEREST ATTRIBUTABLE TO TAX FREE RECEIPTS W ORKED OUT AT RS.1 31 29 040/- SHOULD NOT BE DISALLOWED U/S.14A OF THE ACT. THE ASSESSEE HAS EXPLAINED THAT IT HAD RESERVES AND SHARE CAPITA L SUFFICIENT TO COVER THE INVESTMENT IN SHARES AND INTEREST FREE SECURI TIES. THE ASSESSEE FURTHER STATED THAT BORROWING AMOUNTING TO RS.84 .96 CRORES WAS SECURED AGAINST MORTGAGE OF SHIPS AND THAT TOTAL INTE REST OF RS.15.24 CRORES CONSIST OF A SUM OF RS .13.92 CRORES AS INTEREST ON LOAN AVAILED FROM THE BANK FOR THE PURCHASE OF SHIPS AND THE BALANCE SUM OF RS.1.32 CRORES HAS BEEN INCURRED FOR MEETING THE CAP ITAL REQUIREMENTS OF THE SHIPPING BUSINESS. THE ASSESSEE FURTH ER STATED THAT NO COMPANY OR BUSINESS ORGANISAZATION WILL FINANCE M ONEY TO EARN TAX FREE INCOME OF RS.40 90 801/- BY PAYING INTEREST O N RS.1 31 29 040/- ON SUCH LOANS. THE ASSESSEE FURTHER STATE D THAT IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT THAT WHEN THE DEPARTMENT HAS TO MAKE ESTIMATE OF AN EXPENDITURE OR INCOME THE ESTIMATE SHOULD BE A FAIR ESTIMATE AND TO THE FACTS OF THE CASE THE METHOD OF THE ASSESSING OFFICER IN BIFURCATING THE INTERE ST ON THE BASIS OF TOTAL BALANCE SHEET ASSETS WAS INCORRECT. THE ASSESSEE ALSO STATED THAT PROVISO TO SECTION 14A CAME INTO EFFECT FROM 01.04. 01 WHEREAS THEIR APPEAL IS FOR A.Y. 2001-02 AND HENCE NO ENHANCEM ENT CAN BE MADE IN THIS YEAR. 8. THE LD. CIT(A) WHILE REJECTING THE ASSESSEE'S PLEA REL IED ON VARIOUS DECISIONS CITED IN PAGES 9 TO 12 OF HIS ORDER HAS O BSERVED AND HELD AS UNDER (PAGE-12 ) :- ITA NO.2946 & 2861.M/05 A.Y:01-02 5 25. THE APPELLANT HAS NOT MAINTAINED SEPARATE ACCOUNTS FOR THESE INVESTMENTS IN TAX GENERATING IN COMES AND NON-TAX GENERATING INCOMES. IN VIEW OF THE ABO VE DECISIONS THE ENDS OF JUSTICE WOULD BE MET IF THE INTEREST PAYMENTS ARE PRO-RATED BETWEEN INVESTMENTS FROM WHI CH TAXABLE INCOME HAS BEEN EARNED AND INVESTMENTS WHIC H HAVE EITHER YIELDED NO INCOME OR EXEMPT INCOME. 26. IN VIEW OF THE ABOVE THE INTEREST EXPENDITURE TO EARN THE DIVIDEND INCOME HAS TO BE APPORTIONED. SI NCE THE EXACT EXPENDITURE IS NOT AVAILABLE AND THE FUND S AVAILABLE ARE BOTH BORROWED FUNDS AND THE APPELLANT COMPANYS OWN FUNDS THE MOST JUST METHOD OF CALCULATING WOULD BE ON THE BASIS OF PRORATING OF T HE EXPENSES. 27. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER LIMITING IT TO THE TOTAL DIVIDEND EARNED IS INCORR ECT AND WITHOUT ANY BASIS. THE SAME HAS TO BE CALCULATED O N A PRORATA BASIS. THE TOTAL INTEREST PAID OUT BY THE APPELLANT IS RS.15 24 00 244/-. THE TOTAL FUNDS AVAILABLE WI TH THE APPELLANT IS RS.1 58 69 28 841/- LAKHS WHICH INCLUD E ITS OWN FUNDS AS WELL AS INTEREST AND NON INTEREST BEAR ING FUNDS. AGAINST THIS THE APPELLANT HAS MADE AN INVESTMENT IN VARIOUS QUOTED AND NON-QUOTED SHARES OF RS .23 95 20 433/- LAKHS. THEREFORE THE AMOUNT OF INTEREST ATTRIBUTABLE TO THE INVESTMENT OF RS.239.5 LAKHS OUT OF TOTAL FUNDS AVAILABLE OF RS.1 586/- LAKHS WO ULD BE RS.2 30 02 274/-. AS A RESULT THE SUM OF RS.2 30 02 274/- WOULD BE THE INTEREST EXPENDITURE INCURRED FOR EARNING OF THE DIVIDEND INCOME ON A PR O-RATA BASIS. AS A RESULT THIS AMOUNT IS TO BE ADDED TO T HE TOTAL INCOME OF THE APPELLANT AS EXPENDITURE DISALLOWED U/S.14A OF THE ACT. THE INCOME RETURNED IS ACCORDI NGLY TO BE INCREASED BY [RS.2 30 02 274 RS .40 90 801] = RS.1 89 11 473/-. 9. AT THE TIME OF HEARING BOTH PARTIES HAVE AGREED T HAT THIS ISSUE STANDS COVERED BY THE JUDGMENT OF HON'BLE JURISDICTIONA L HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. VS. DCIT THEREFORE TH E ISSUE MAY BE DECIDED ACCORDINGLY. 10. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND ME RIT IN PLEA OF THE ITA NO.2946 & 2861.M/05 A.Y:01-02 6 PARTIES THAT THE ISSUE STANDS COVERED BY THE RECENT JUDGM ENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG . CO. LTD. VS. DCIT IN INCOME TAX APPEAL NO.626 OF 2010 AND WRIT P ETITION NO.758 OF 2010 DATED 12.8.2010 SINCE REPORTED IN (2010) 328 ITR 81 (BOM.) WHEREIN THEIR LORDSHIPS AFTER CONSIDERING THE DECISION O F THE TRIBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD. (117 ITD 169 ( MUM)(SB) WHILE HOLDING THAT THE PROVISIONS OF SUB SECTIONS (2) AND (3) OF SEC.14A OF THE ACT ARE CONSTITUTIONALLY VALID HAVE HELD VIDE PLA CITUM 88(VI) APPEARING AT PAGE 138 OF THE ITR AS UNDER : (VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09 WHEN RULE 8D WAS NOT APPLICABLE THE ASSESSING OFFI CER HAS TO ENFORCE THE PROVISIONS OF SUB SECTION (1) OF SECTION 14A. FOR THAT PURPOSE THE ASSESSING OFFICER IS DU TY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFI CER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURN ISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT WE SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEN D BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECI DE THE SAME AFRESH IN THE LIGHT OF THE DIRECTIONS OF THE HON'BLE JU RISDICTIONAL HIGH COURT IN THE ABOVE CITED CASE AFTER PROVIDING REASONABL E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND ACCORDINGLY THE GROUNDS TA KEN BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. GROUND NO.6 IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF GIFT EXPENSE OF RS.3 71 154/-. ITA NO.2946 & 2861.M/05 A.Y:01-02 7 12. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DURING THE COURSE OF HEARING THE ASSESSEE WAS ASKED BY ASSESSING OFFICER TO SUBMIT THE DETAILS OF GIFT EXPENSES. IN RESPONSE IT WAS STATED BY TH E ASSESSEE THAT THE ASSESSEE HAS SPENT AN AMOUNT OF RS.3 71 154/- TOW ARDS PURCHASE OF GIFT ARTICLES. IT IS THE GENERAL PRACTICE OF THE COMPANY TO DISTRIBUTE GIFTS ON CERTAIN OCCASIONS TO BUSINESS ASSOCIATES TO ENABLE MAINTAIN AND STRENGTHEN RELATIONS WITH THEM. SUCH GIF TS ARE GIVEN IN THE NORMAL COURSE OF BUSINESS. IN THE ABSENCE OF ANY PROO F OR JUSTIFICATION FOR THE SAME THE ASSESSING OFFICER DISALLOWED GIFT EXPENSE OF RS.3 71 154/-. ON APPEAL THE LD. CIT(A) FOR TH E SAME REASONS UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . 13. AT THE TIME HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS FILED THE DETAILS OF EXPENSES AND ALL THE EXPENSES HAVE BEEN INCURRED IN NORMAL COURSE OF BUSINESS AND NO DI SALLOWANCE WAS MADE IN PAST AND IN SUBSEQUENT ASSESSMENT YEAR AND IN SU PPORT HE ALSO PLACED ON RECORD COPY OF THE ASSESSMENT ORDER FOR T HE ASSESSMENT YEAR 2003-04 WHEREIN NO SUCH DISALLOWANCE WAS MAD E BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 29.3.200 6 PASSED U/S.143(3) (II) OF THE ACT. 14. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER O F THE ASSESSING OFFICER AND THE LD. CIT(A) . 15. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIN D THAT THERE IS NO DISPUTE THAT THE ABOVE DISALLOWANCE WAS MADE ON ESTIMATE BASIS WITHOUT POINTING OUT ANY ITEM OF DISALLOWABLE NATURE . IT IS ALSO A FACT ITA NO.2946 & 2861.M/05 A.Y:01-02 8 THAT THE ASSESSEE HAS INCURRED SUCH EXPENSES IN THE NORMAL COU RSE OF BUSINESS. IT IS ALSO A FACT THAT NO SUCH DISALLOWANCE WAS M ADE IN PAST. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND KEEPING IN VIEW THE ASSESSEE'S NATURE OF BUSINESS AND ALSO I N THE ABSENCE OF ANY MATERIAL TO SHOW THAT SUCH EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE FOR ITS PERSONAL USE WE ARE OF TH E VIEW THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINE D BY THE LD. CIT(A) IS NOT SUSTAINABLE AND ACCORDINGLY THE SAME I S DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. 16. GROUND NO.7 IS AGAINST THE SUSTENANCE OF DISALLOWAN CE OF RS.3 08 729/- OUT OF RS.4 10 909/- U/S.43B OF THE ACT. 17. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT ON PERU SAL OF SCHEDULE -4 OF THE AUDIT REPORT IN FORM NO.3CD IT WAS FOUND B Y THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT MADE THE PAYMENTS ON ACCOU NT OF PF AMOUNTING TO RS.4 95 707/- ON DUE DATE. THE ASSESSING O FFICER AFTER CONSIDERING THE ASSESSEE'S EXPLANATION DISALLOWED RS.4 10 9 09/- ON THE GROUND THAT THE PAYMENT WAS NOT MADE ON DUE DATE AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(A) W HILE OBSERVING THAT OUT OF NINE PAYMENTS SIX PAYMENTS HAVE BEEN MADE AFTER THE END OF RELEVANT FINANCIAL YEAR AND THE BALANCE PAYMEN TS DO NOT PERTAIN TO THIS YEAR AT ALL ALLOWED A RELIEF OF RS.1 02 180/ - AND CONFIRMED THE BALANCE AMOUNT. 18. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE ARE OF THE OPINION THAT THE I SSUE INVOLVED IN THE PRESENT CASE IS NO MORE RES INTEGRA AND IS COVERED BY TH E DECISION OF ITA NO.2946 & 2861.M/05 A.Y:01-02 9 THE HONBLE SUPREME COURT IN CIT VS. ALOM EXTRUSIONS LT D. (2009) 319 ITR 306 (SC) WHEREIN THEIR LORDSHIPS HAVE CONSIDERED T HE APPLICABILITY OF SECTION 36(1)(VA) READ WITH SECTION 2(2 4)(X) AS WELL AS 43B OF THE ACT AND IT HAS BEEN HELD THAT THE AMENDMEN T WAS CURATIVE IN NATURE AND APPLICABLE RETROSPECTIVELY WITH EFFECT F ROM APRIL 1 1988. 19. IN CIT VS. AIMIL LTD. (2010) 321 ITR 508 (DEL.) THEIR LORDSHIPS WHILE OBSERVING THAT THE ASSESSEE HAS DEPOSITED EMPLOYERS CONTRIBUTION AS WELL AS EMPLOYEES CONTRIBUTION TOWARDS P F AND ESIC AFTER THE DUE DATE AS PRESCRIBED UNDER THE RELEVANT A CT/RULE BUT BEFORE THE DUE DATE FOR FILING THE RETURN UNDER THE INCOME TAX ACT HAVE HELD THAT NO DISALLOWANCE COULD BE MADE IN VIEW OF TH E PROVISIONS OF SEC.43B AS AMENDED BY THE FINANCE ACT 2003. 20. IN VIEW OF THE ABOVE LEGAL POSITION AND IN ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE WE A RE OF THE VIEW THAT THE PAYMENTS OF PF MADE BY THE ASSESSEE AFTER THE DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT/RULE BUT BEFORE THE DUE DATE OF FILING OF RETURNS UNDER THE INCOME TAX ACT ARE ALLOWABLE AND ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO ALLOW THE SAME AFTER DUE V ERIFICATION. THE COMMON GROUND TAKEN BY THE ASSESSEE IS THEREFORE PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 21. GROUND NO.9 IS AGAINST THE DIRECTION OF THE LD. CI T(A) TO CHARGE TAX ON REGULAR TAXABLE INCOME INSTEAD OF CHARGING THE SAME U/S.115JB OF THE ACT. 22. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE DIRECT THE ASSESSING OFFICER TO COMP UTE THE INCOME ACCORDING TO LAW AFTER GIVING EFFECT OF THIS ORDE R OF THE TRIBUNAL ITA NO.2946 & 2861.M/05 A.Y:01-02 10 AND ACCORDINGLY THE GROUND TAKEN BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 23. ADDITIONAL GROUND TAKEN BY THE ASSESSEE READS AS UNDE R : 1. THE LD. ASSESSING OFFICER HAS ERRED IN NOT DE DUCTING THE UNABSORBED DEPRECIATION OF EARLIER YEARS REMAIN ED AFTER ADJUSTING THE SAME FROM BUSINESS INCOME AS UNABSORBED DEPRECIATION FORMS PART OF THE DEPRECIAT ION OF THE CURRENT YEAR AND THE SAME IS DEDUCTIBLE FROM IN COME FROM OTHER SOURCES. 24. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THIS GROUND WAS NOT TAKEN IN APPEAL BEFORE THE L D. CIT(A) AS THE TAX WAS COMPUTED U/S.115JB OF THE ACT IN THE ASSESSMENT OR DER WHICH WAS MORE THAN BUSINESS PROFITS. BUT THE LD. CIT(A) HAS GIVEN DIRECTION TO ASSESSING OFFICER IN PARA-34 OF HIS ORDER TO RECTIFY TH E CALCULATION OF TAX. 25. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE ADMIT THE ABOVE GROUND BEING A LEGAL GROUND. HOWEVER IN THE ABSENCE OF ANY CLEAR FINDING AND KEEPIN G IN VIEW THAT THE LD. CIT(A) IN PARA 31 AND PARA-34 OF HIS ORDER H AS DIRECTED THE ASSESSING OFFICER TO CONSIDER THE SAME THEREFORE IN THE I NTEREST OF JUSTICE WE ARE OF THE VIEW THAT THE MATTER SHOULD GO B ACK TO THE FILE OF THE ASSESSING OFFICER AND ACCORDINGLY WE SET ASIDE THE ORDE RS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BA CK THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE SAME AFRESH AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2946 & 2861.M/05 A.Y:01-02 11 ITA NO.2861/MUM /2005 (REVENUES APPEAL):- 26. GROUND NO.1 AND 2 ARE AGAINST DELETION OF ADDITI ON OF ADVERTISEMENT EXPENSES RS.3 55 882/- 27. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS O BSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS DEBITED ADVERTISEMENT EXPENSES RS.3 55 882/- ON ACCOUNT OF BRIDGE TOURNAMENT SPONSORSHIP EXPENSES. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE DISALLOWED. IT WAS STATED BY THE ASSESSEE T HAT THE SAID EXPENDITURE OF RS.3 55 882/- WAS INCURRED IN SPONSORSHIP OF BRIDGE TOURNAMENT AND THE SAME IS PURELY ADVERTISEMENT AND PU BLICATION EXPENDITURE FOR PROMOTION OF THE BUSINESS OF THE COMPAN Y . HOWEVER THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS NOT ESTABLISHED BY ANY DOCUMENTARY EVIDENCE THAT THE TOURN AMENT EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS. FURTH ER NO DETAILS OF THE EXPENSES HAVE BEEN SUBMITTED AND HENCE HE DISALLOWED RS.3 55 882/- . ON APPEAL BEFORE THE LD. CIT(A) IT WAS SUBMITTED BY THE ASSESSEE THAT THE SPONSORSHIP OF TOURNAMENT IS ONE OF T HE EFFECTIVE METHOD OF PUBLICITY AS THE SAME IS ATTENDED BY HIGHLY P LACED OFFICERS OF LARGE COMPANIES HAVING IMPORT AND EXPORT BUSINESS WHICH REQUIRES THE SERVICES OF SHIPPING COMPANIES FOR TRANSPORT OF LARGE QUAN TITIES OF GOODS FOR IMPORT AS WELL AS EXPORT. IT WAS FURTHER ST ATED THAT IN THE SISTER CONCERN OF THE ASSESSEE THE ADDITION MADE BY THE ASSESSI NG OFFICER FOR ASSESSMENT YEAR 1999-00 HAS BEEN DELETED. TH E RELIANCE WAS ALSO PLACED IN CIT VS. TATA IRON & STEEL CO. LTD. 1 06 ITR 363(BOM.) AND CIT VS. DCM 115 ITR 659 (DEL.). THE A SSESSEE HAS ALSO FILED THE DETAILS OF SPONSORSHIP OF BRIDGE TOURNAME NT EXPENSES TO SHOW THAT THE ABOVE AMOUNT WAS INCURRED WITH REGARD T O PRIZE MONEY ITA NO.2946 & 2861.M/05 A.Y:01-02 12 BANNERS SPONSORSHIP EXPENSES AND PARTICIPATION FEES. THE LD. CIT(A) AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD WH ILE OBSERVING THAT VARIOUS SPONSORSHIP ACTIVITIES SUCH AS BRIDGE TOURNAMENT M UMBAI MARATHON MUSIC CONCERTS ETC. ARE ALL WAYS OF ADVERTISING T HE COMPANY AND CANNOT BE CONSIDERED AS ANY OTHER THAN BUSINESS EXP ENSES DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 28. AT THE TIME OF HEARING THE LD. DR WHILE RELYING ON THE ORDER OF THE ASSESSING OFFICER SUBMITS THAT SINCE THE ASSESSEE HAS FILED DETAILS OF EXPENSES BEFORE THE LD. CIT(A) THEREFORE IN THE INTEREST OF JUSTICE IT WOULD BE FAIR AND REASONABLE IF THE MATTER IS SET ASIDE AND THE ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. 29. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SU PPORTS THE ORDER OF THE LD. CIT(A). 30. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS INCURRED THE ABOVE EXPENSES O N SPONSORSHIP OF TOURNAMENT. WE FURTHER FIND THAT ON THE QUERY RAISED BY THE ASSESSING OFFICER AS TO WHY THE SAID EXPENDITURE SHO ULD NOT BE DISALLOWED BY HOLDING IT AS NON-INCIDENTAL TO BUSINESS PURPOSES THE ASSESSEE REPLIED VIDE LETTER DATED 25.3.04 THAT THE SAID EXPENDITURE OF RS.3 55 882/- WAS INCURRED IN SPONSORSHIP OF BRIDGE TOURN AMENT AND THE SAME IS PURELY ADVERTISEMENT AND PUBLICATION EXPEND ITURE FOR PROMOTION OF BUSINESS OF THE COMPANY. WE FURTHER FIND T HAT NO OTHER QUERY IN THIS REGARD WAS RAISED BY THE ASSESSING OFFICER. WE FURTHER FIND THAT BEFORE THE LD. CIT(A) THE ASSESSEE WHILE EXP LAINING THAT THE SAID EXPENSES HAVE BEEN INCURRED FOR BUSINESS EXPENSES HAS F ILED DETAILS OF EXPENSES AND ALSO RELIED ON THE APPELLATE OR DER OF HIS SISTER ITA NO.2946 & 2861.M/05 A.Y:01-02 13 CONCERN M/S. TOLANI LTD. FOR ASSESSMENT YEAR 1999-00 WHERE IN THE LD. CIT(A) DELETED THE SIMILAR DISALLOWANCE. 31. IN CIT VS. DELHI CLOTH AND GENERAL MILLS CO. LTD . (1978) 115 ITR 659(DEL.) IT HAS BEEN HELD THAT THE EXPENDITURE INCUR RED BY THE ASSESSEE IN ORGANISING FOOTBALL AND HOCKEY TOURNAMENTS WAS AN ALLOWABLE DEDUCTION U/S.10(2)(XV). 32. RESPECTFULLY FOLLOWING THE SAME AND KEEPING IN VIE W THE CONSISTENCY WE ARE OF THE VIEW THAT THE EXPENDITURE INC URRED BY THE ASSESSEE ON SPONSORSHIP OF BRIDGE TOURNAMENT ETC. IS ALLOWA BLE AS BUSINESS EXPENDITURE AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE SAME. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. 33. GROUND NO.3 IS AGAINST THE DELETION OF DISALLOWANCE OF DRY DOCK EXPENSES RS.57 54 734/-. 34. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS O BSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS INCURRED SOME EXPENSES AS DRY DOCKING ON SHIPS OWNED. THE ASSESSEE WAS ASKED AS TO W HY THE SAID EXPENSES SHOULD NOT BE DISALLOWED. THE ASSESSEE STATED THAT THE INTERNATIONAL MARITIME ORGANISATION STATUTORILY REQUI RES DRY DOCKING BY ALL SHIP OWNERS. THE EXPENDITURE INCURRED ON DRY DOCK ING IS CURRENT REPAIR EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE COMPANY. THE ASSESSEE FURTHER STATED THAT THE D RY DOCKING AND REPAIR AND MAINTENANCE IS IMPERATIVE TO E NSURE SAFETY OF LIFE AND CARGO AT SEA. AS PER SECTION 31 OF THE ACT TH E AMOUNT SPENT ON CURRENT REPAIRS IS ALLOWABLE EXPENDITURE. THE ASSESSEE STATED THAT FROM THE BEGINNING OF THEIR SHIPPING BUSINESS THE DRY DOCK EXPENDITURE HAS BEEN ALLOWED AS REVENUE EXPENDITURE. HOWEVER THE ITA NO.2946 & 2861.M/05 A.Y:01-02 14 ASSESSING OFFICER FOLLOWING THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 1999-00 WHEREIN IT WAS HELD THAT EXPENSES ARE TO BE CON SIDERED AS REVENUE EXPENDITURE WHICH HAS TO BE DISTRIBUTED WITHIN THE PERIOD SHIP HAS TO GO FOR DRY DOCKING AGAIN WHILE OBSERVING THAT ALLOWING THE ENTIRE EXPENDITURE IN ONE YEAR MIGHT GIVE A VERY DI STORTED PICTURE OF THE PROFITS OF THE YEAR AND HENCE HE ALLOWED 1/3 RD OF TOTAL EXPENSES AND DISALLOWED BALANCE AMOUNT OF EXPENDITURE RS.57 54 734/- AS CAPITAL EXPENDITURE. ON APPEAL THE LD. CIT(A) OBSER VED THAT THERE IS NO PROVISION UNDER THE ACT FOR DEFERRED REVENUE EXPEN DITURE. HE FURTHER OBSERVED THAT THE APPELLANTS SHIP IS TO BE DR Y DOCKED TO CARRY OUT MAJOR REPAIRS AND TO MAKE IT SEA WORTHY. AFTER A CERTAIN AGE THE SHIPS ARE STATUTORILY REQUIRED TO BE DRY-DOCKED TWICE EV ERY FIVE YEARS. HOWEVER THE REPAIRS AND MAINTENANCE WHICH ARE STIPULATE D AND WHICH ARE CONDUCTED EVERY TWO AND HALF YEARS ARE ONLY TO ENSU RE THAT THEY ARE SEA WORTHY AND ITS REGULAR REPAIR AND MAINTENANCE THAT IS CARRIED OUT. THEREFORE ACCORDING TO THE LD. CIT(A) SINCE IT I S CLEARLY A REVENUE EXPENDITURE AND HAS BEEN INCURRED IN THE YEAR UNDER CO NSIDERATION HELD THAT THERE IS NO REASON TO APPORTION PART OF IT TO SOME OTHER YEAR AND THEREFORE HE ALLOWED THE ENTIRE AMOUNT AS REVEN UE EXPENDITURE. 35. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FO R THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. HE THEREFORE SUBMITS THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BE RESTORED. 36. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE W HILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) PLACED ON RECORD THE COPY OF THE TRIBUNAL ORDER IN THE CASE OF SISTER CONCERN OF THE ASSESSEE IN ACIT V S. TOLANI ITA NO.2946 & 2861.M/05 A.Y:01-02 15 BULK CARRIERS LTD. IN ITA NO.1934/MUM/2006 FOR ASSESSME NT YEAR 2002-03 DATED 29.9.2008 WHEREIN THE SIMILAR DISALLOWA NCE WAS DELETED BY THE TRIBUNAL. HE THEREFORE SUBMITS THAT T HE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 37. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THA T THE FACTS ARE NOT IN DISPUTE INASMUCH AS THERE IS NO DISPUTE THAT THE ASSESSEE HAS INCURRED REPAIR EXPENSES RS.86 32 100/- ON DRY DOCKING TO MAKE THE SHIP SEA-WORTHY AS THE SAME IS STATUTORILY REQUIRED TO BE DRY-DOCKED TWICE EVERY FIVE YEARS. 38. IN TOLANI BULK CARRIERS SUPRA IT HAS BEEN HELD VI DE PARA 6 OF THE ORDER AS UNDER :- 6. WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVE FOUND THAT THE SAID EXPENSES W ERE INCURRED BASICALLY ON THE REPAIRS PAINTING WORKS ENGINE REPAIRS ETC. WE HAVE ALSO OBSERVED AND MADE OUT FR OM THE NARRATION MENTIONED AGAINST EACH HEAD OF EXPENDITURE THAT THE SAME IS NOT IN THE NATURE OF CAPITAL. THEREFORE WE ARE OF THE CONSIDERED OPINION THAT TH E SAID EXPENDITURE IS ALLOWABLE AS REVENUE. LD AR RELIED O N THE DELHI BENCH DECISION IN THE CASE OF WHIRLPOOL OF IN DIA LTD (22 SOT 103)(DEL) AND APEX COURT JUDGMENT IN THE CA SE OF SARVANA SPINNING MILLS PVT LTD (293 ITR 201)(SC) TO ADVANCE HIS CASE THAT THE SAID EXPENDITURES ARE CUR RENT REPAIRS AND ALLOWABLE AS REVENUE EXPENDITURE. IN THE LIGHT OF THE ABOVE FACTS AND THE JUDICIAL PRONOUNCE MENTS WE ARE OF THE OPINION THAT ORDER OF THE CIT (A) DOE S NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY GROUND 1 IS DISMISSED. 39. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE TRIBUNAL ORDER SUPRA HOLD THAT THE ABOVE EXPENDITURE INCURRED BY THE ASSESSEE ON D RY DOCKING ITA NO.2946 & 2861.M/05 A.Y:01-02 16 EXPENSES ARE REVENUE EXPENDITURE AND ARE ALLOWABLE UN DER THE ACT. ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF T HE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. T HE GROUND TAKEN BY THE REVENUE IS THEREFORE REJECTED. 40. GROUND NO.4 IS AGAINST THE DELETION OF ADDITION OF INTEREST INCOME RS.51 83 561/-. 41. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT ON PERU SAL OF AUDIT REPORT IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE A SSESSEE HAS RECEIVED RS.1 03 67 122/- AS INTEREST . THE ASSESSEE WAS ASK ED TO SHOW CAUSE AS TO WHY THE DIFFERENCE BETWEEN MARKET RATE OF INTEREST AND INTEREST CHARGED AT CONCESSIONAL RATE SHOULD NOT BE DI SALLOWED. THE ASSESSEE VIDE LETTER DATED 25.3.2004 SUBMITTED AS UND ER (PAGE-5 OF ASSESSMENT ORDER ):- DURING THE FINANCIAL YEAR 1996-97 TOLANI BULK CAR RIERS LTD. OUR SUBSIDIARY COMPANY HAD ACQUIRED VESSEL M .V. PRABHU MIHIKA. TOLANI BULK CARRIERS LTD. HAD INTEN DED TO ACQUIRE THE SAID SHIP BY FUNDING FROM THE PROCEEDS OF A RIGHTS ISSUE (1:1) AND PARTLY OUT OF FINANCING BY I CICI LTD. WHILE TOLANI BULK CARRIERS LTD. WAS MAKING ALL ARRANGEMENTS TO GO AHEAD WITH THE RIGHTS ISSUE IT WAS ADVISED THAT IN VIEW OF THE ADVERSE CAPITAL MARKET CONDITIONS THE RIGHTS ISSUE MIGHT NOT SAIL THROUGH . HOWEVER IN THE MEANTIME TOLANI BULK CARRIERS LTD. HAD COMMITTED AND HAD AGREED TO ACQUIRE A SHIP AND IT W OULD HAVE BEEN UNWISE TO RENEGE ON THE SAME AS IT WOULD HAVE HAD HUGE IMPACT ON THE REPUTATION OF THE TOLANI GRO UP OF SHIPPING COMPANIES IN THE WORLD OF SHIPPING. IN THE LIGHT OF THE POSTPONEMENT/CANCELLATION OF TH E RIGHTS ISSUE TOLANI BULK CARRIERS LTD. WAS PLACED IN A COMPROMISING POSITION AND HAD TO NEGOTIATE WITH ICI CI LTD. TO OBTAIN LOAN FROM IT. ICICI LTD. WAS AGREEA BLE TO PART FINANCE THE SHIP FINANCING PROVIDED WE AS PR OMOTER COMPANY CONTRIBUTE TO TOLANI BULK CARRIERS LTD. S UCH ITA NO.2946 & 2861.M/05 A.Y:01-02 17 AMOUNTS AS WOULD RESULT IN DEBT EQUITY REMAINING NO T WORSE THAN 2 TO 1. IT WAS ALSO STIPULATED BY ICICI LIMITED THAT AS THE PROMOTER COMPANIES HAD ORIGINALLY PLANN ED A RIGHTS ISSUE AND ABORTED THE SAME THE RATE OF INTE REST ON THE LOANS SO ADVANCED WOULD BE @ 15% P.A. OR AT RAT E OF DIVIDEND DECLARED BY THE COMPANY TO ITS SHAREHOLDER S ON THE EQUITY CAPITAL FOR ANY FINANCIAL YEAR WHICHEVE R IS LESS. NOT HAVING ANY OTHER OPTION AND CONTROL OVER THE SITUATION OUR COMPANY AND TOLANI LIMITED THE PROM OTER COMPANIES ACCEPTED THE STIPULATIONS OF ICICI LIMIT ED. THUS TOLANI BULK CARRIERS LTD. WENT AHEAD WITH THE ACQUISITION OF PRABHU MIHIKA WITH THE HELD OF LOAN ASSISTANCE OF US $ 13.75 MILLION APPROX. FROM ICICI LIMITED. WE ARE TO STATE THAT THESE WERE GIVEN TO THE SUBSID IARY COMPANY AS PER THE STIPULATIONS OF ICICI LTD. AND THE INTEREST RATE AT WHICH THE COMPANY HAS GIVEN LOAN T O THE SUBSIDIARY COMPANY WAS AS PER STIPULATION OF ICICI LTD. OUR COMPANY RECEIVED INTEREST AT THE RATE OF 8% P.A . ON THE SUBORDINATED DEBTS DUE FROM TOLANI BULK CARRIER S LTD. AS DURING THE FINANCIAL YEAR 2000-01 TOLANI BULK C ARRIERS LTD. DECLARED A DIVIDEND OF 8% TO ITS SHAREHOLDERS. ASSESSEE HAS EXPRESSED THE VIEW THAT SINCE IT WAS A SUBORDINATED LOAN BY ICICI IT WAS COMPELLED TO GIVE LOAN INTEREST AT RATE OF 8% WHICH WAS EQUAL TO DIVIDEND DECLARED. THIS WAS DONE AS PER REQUIREMENT OF ICICI BANK. HOWEVER THE ASSESSING OFFICER OBSERVED THAT BOTH LENDOR A ND BORROWER BELONG TO TOLANI GROUP OF COMPANIES; ASSESSEE HAS BORROWE D FROM ICICI @ 15% ; THERE IS A NEXUS BETWEEN LOAN TAKEN BY THE ASSESSEE FROM ICICI AND GIVEN TO TOLANI LTD. AT CONCESSIONAL RAT E; THE MARKET LENDING RATE WAS 11-12% WHICH WAS GIVEN AT 8% BY THE A SSESSEE AND THE LOSS WAS INCURRED VOLUNTARILY BY THE ASSESSEE AND WAS NOT INCIDENTAL TO BUSINESS AND HENCE HE DISALLOWED THE DIFFE RENCE BETWEEN INTEREST @ 12% AND 8% RS.51 83 561/- AND ADDED TO THE INCOME O F THE ASSESSEE. ON APPEAL THE LD. CIT(A) HELD THAT SINCE THE LOAN WAS ITA NO.2946 & 2861.M/05 A.Y:01-02 18 GIVEN AS PER STIPULATION OF ICICI LTD. WHICH REQUIRES T HAT THE RATE OF INTEREST CANNOT EXCEED THE DECLARED DIVIDEND THE QUEST ION OF CHARGING NOTIONAL INTEREST ON THE SAID LOAN DOES NOT ARISE AND A CCORDINGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 42. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE O RDER OF THE ASSESSING OFFICER. 43. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE R ELIED ON THE ORDER OF THE LD. CIT(A). 44. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE ASSESSEE'S EXPLANATI ON THAT THE LOAN WAS GIVEN AS PER THE STIPULATION OF ICIC LTD. @ 8% WHICH CANNOT EXCEED THE DECLARED DIVIDEND WAS NOT CONTROVERTED BY TH E REVENUE EVEN AT THIS STAGE. WE FURTHER FIND THAT THERE IS NO DISPUTE THAT THERE IS A NEXUS BETWEEN THE LOAN TAKEN BY THE ASSESSEE FIRM FR OM ICIC LTD. AND GIVING TO ITS SISTER CONCERN. 45. IN S.A. BUILDERS LTD. VS. CIT (2007) 288 ITR 1(SC ) IT HAS BEEN HELD AS UNDER (PLACITUM 35 PAGE-9 OF 288 ITR) : WE AGREE WITH THE VIEW TAKEN BY THE DELHI HIGH COU RT IN CIT V. DALMIA CEMENT (B.) LTD. [2002] 254 ITR 377 T HAT ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITS ELF) THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN T HE ARM- CHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUM- STANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLE D TO MAXIMIZE HIS PROFIT. THE INCOME-TAX AUTHORITIES MUS T PUT THEMSELVES IN THE SHOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD ACT. THE AUTHORITIES MUST NOT LOOK AT THE MATTER FROM THEIR OWN VIEW POI NT BUT THAT OF A PRUDENT BUSINESSMAN. AS ALREADY STATED AB OVE ITA NO.2946 & 2861.M/05 A.Y:01-02 19 WE HAVE TO SEE THE TRANSFER OF THE BORROWED FUNDS T O A SISTER CONCERN FROM THE POINT OF VIEW OF COM- MERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PROFITS . 46. IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT ON RECORD BY THE REVENUE AGAINST THE FINDING OF THE LD. CIT(A) WE RESP ECTFULLY FOLLOWING THE ABOVE DECISION HOLD THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION OF INTEREST MADE BY THE ASSESSING OFFICER. THE GROUND TAKEN BY THE REVENUE IS REJECTED. 47. IN THE RESULT THE ASSESSEE'S APPEAL STANDS PARTLY ALL OWED FOR STATISTICAL PURPOSES AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.12.2010. SD/- SD/- (R. S. SYAL) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 10.12.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.