Commissioner Of Income Taz-Ix v. Dapinder Paul Singh

$~2&3 IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 250/2015 &C.M.Nos.6896-97/2015+ITA 251/2015& C.M.No.6898/2015+ITA 251/2015& C.M.No.6898/2015 COMMISSIONER OF INCOME TAZ-IX Appellant Through: Mr.Rohit Madan, Mr.Ruchir Bhatiaand Mr.Akash Vajpai, Advs. versus DAPINDER PAUL SINGH Respondent Through: Ms.Poonam Ahuja and Mr.RohitKumar Gupta, Advs. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE R.K.GAUBA ORDER22.04.2015 % 1. The Revenue is aggrieved by the order of Income Tax AppellateTribunal (ITAT) dated 15.03.2013, in ITA Nos.l521/Del/2010 and4383/Del/2011. It urges that the cancellation of Rs.28,76,961/-, added bythe Assessing Officer (AO) under Section 36(i)(iii) of the Income Tax Act,1961 is erroneous. The assessee is a proprietor of one M/s PeninsularCreations which engages itself in the business of 100% export of laminatedsheets (sunmica). He is also a Director of M/s Artmica Laminates Pvt. Ltd.The AO found for Assessment Year (AY) 2006-07 the assessee hadadvanced interest free loan to Artmica Laminates and the proprietorshipconcern had claimed substantial bank interest. This was disallowed and asum of Rs.28,76,961/- was determined on account of interest forgone. In theopinion of the AO, the advance was out of the borrowed funds. The CIT (Appeals) set aside the order of the AO. It also said the that the assessee'sciaim for commerciai expediency of the proprietorship concern of theassessee was correct and allowed the claim with respect to interest free loanfrom the borrower. The CIT (Appeals) who relied upon the decision of theSupreme Court m S.A.Builders Ltd. vs. Commissioner of Income Tax(Appeals), Chandigarh andAnr. 2007 (I) SCO 781 to hoid that in eveiy caseinterest on borrowed fund need not be added back to the assessee. In fact, ifthe assessee advances ioan to a sister concern, the facts and circumstances ofthe case have to be seen. It was also held that the monies can be advancedto a sister concern for commercial expediency in severai circumstances andthat where the has a interest in the andholding company deep subsidiary advances borrowed it wouid be entitied to deduction ofmoney, ordinariiy interest on its borrowed ioans. The ITAT affirmed the decision of theCIT(Appeals). 2. We have considered the reasoning of the ITAT and find that it issupported by the judgment of the Supreme Court in S.A. Builders (supra).Furthermore, the said decision has been followed subsequently in the CITTulip Star Hotels Limited (ITA No.43/2009 decided on 18.08.2011) byanother Division Bench of this Court. Following the said decisions, nosubstantial question of law arises. The appeal is, therefore, dismissed. APRIL 22, 2015/mr S. RAVINDRA BHAT, JR.K.GA