DCIT, New Delhi v. M/s. Sophisticated Marble3s & Geranite Industries, New Delhi

ITA 3753/DEL/2008 | 2004-2005
Pronouncement Date: 26-02-2010 | Result: Dismissed

Appeal Details

RSA Number 375320114 RSA 2008
Bench Delhi
Appeal Number ITA 3753/DEL/2008
Duration Of Justice 1 year(s) 2 month(s) 3 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Sophisticated Marble3s & Geranite Industries, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 26-02-2010
Date Of Final Hearing 09-12-2009
Next Hearing Date 09-12-2009
Assessment Year 2004-2005
Appeal Filed On 23-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G : NEW DELHI BEFORE SHRI DEEPAK R. SHAH ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NO.3753/DEL/2008 ASSESSMENT YEAR : 2004-05 DY. COMMISSIONER OF INCOME-TAX M/S. SOPHISTICATE D MARBLES & CIRCLE 24(1) NEW DELHI. VS. GRANITE IN DUSTRIES 42 SAINIK FARMS NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIVEK KUMAR SR. DR. RESPONDENT BY : SHRI K. SAMPATH ADVOCATE. O R D E R PER DEEPAK R. SHAH ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXIII NEW DEL HI DATED 10 TH OCTOBER 2008 FOR THE ASSESSMENT YEAR 2004-05 IN AN APPEAL AGAINST ASSESSMENT ORDER FRAMED UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961 (THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS BEF ORE US:- 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.3 20 084/- MADE OUT OF CAR EXPENSES AND DEPRECIA TION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.16 000/- MADE OUT OF TELEPHONE EXPENSES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.50 000/- MADE OUT OF BUSINESS PROMOTION EXPENSES . 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.37 86 528/- MADE OUT OF INTEREST ON BORROWED CAP ITAL. 3. THE ASSESSEE IS A PARTNERSHIP FIRM CONSISTING OF 2 PARTNERS NAMELY SHRI VIKRAM MITTAL S/O SHRI ASHOK MITTAL AND SMT. NIRUP AMA MITTAL W/O SHRI ASHOK MITTAL. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF MARBLE ITEMS. THE ASSESS EE DECLARED GROSS PROFIT OF RS.84.75 LAKH ON TOTAL SALES OF RS.446.46 LAKH. TOTAL INCOME OF RS.21 68 320/- WAS DECLARED IN THE RETURN OF INCOM E. 4. AS REGARDS GROUND NOS.1 2 & 3 THE LEARNED CIT(A ) DELETED THE ADDITION ON THE GROUND THAT THOUGH THE ASSESSEE APP EARED FROM TIME TO TIME AND THE DETAILS WERE FILED WITHOUT POINTING OUT AN Y EXPENSE AS NOT PERTAINING TO BUSINESS THE DISALLOWANCE WAS MADE ON AD HOC BA SIS. THIS IS NOT PERMISSIBLE IN LAW. THEREFORE THE DISALLOWANCE WA S DELETED. 3 5. WE ARE IN AGREEMENT WITH THE FINDING OF THE LEAR NED CIT(A). THOUGH THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED T HE REQUIRED DETAILS WITHOUT DISCUSSING ANYTHING IN THE ASSESSMENT ORDER THE ASSESSING OFFICER DISALLOWED 1/5 TH OF THE CAR EXPENSES AND DEPRECIATION ON CAR AND 1/ 5 TH ON TELEPHONE EXPENSES BEING TREATED AS PERSONAL NATURE . HOWEVER THE ASSESSING OFFICER HAS NEVER EXAMINED THE DETAILS OF SUCH EXPENSES BEFORE COMING TO THE CONCLUSION AS TO WHETHER ANY PERSONAL EXPENSES ARE INVOLVED IN THIS. THEREFORE MERELY ON ESTIMATE OR ON AD HO C BASIS NO DISALLOWANCE CAN BE MADE. THE ASSESSING OFFICER HAS TO GIVE A S PECIFIC FINDING AS TO WHICH EXPENSES ARE NOT WHOLLY AND EXCLUSIVELY FOR T HE BUSINESS PURPOSES. THEREFORE THE DISALLOWANCE IS NOT CALLED FOR. 6. AS REGARDS GROUND NO.4 THE ASSESSING OFFICER OB SERVED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS.63 30 762/-. THE ASSESSEE WAS ASKED TO GIVE DETAILS OF LOAN RAISED AND FOR THE PU RPOSE THEY WERE USED. THE ASSESSEE VIDE LETTER DATED 27.12.2006 SUBMITTED THA T THE INTEREST WAS PAID TO AMERICAN EXPRESS BANK ON ACCOUNT OF LOAN TAKEN OF R S.18.33 CRORE. THE ASSESSEE EXPLAINED THE UTILIZATION OF LOAN IN THE F OLLOWING MANNER:- 1) RS.4 65 80 000 ON 19.06.03:- OUT OF SAID AMOUNT RS.4 50 00 000/- GIVEN TO ASHOK MITTAL & CO. ON 19.06.03 AND SAID AMOUNT TRANSFERRED BY ASHO K MITTAL & CO. (PROP. ASHOK MITTAL) TO ESCROW A/C AGAINST PURC HASE OF LAND. 4 2) RS.4 65 80 000/- ON 26.06.03:- OUT OF SAID AMOUNT RS.1 20 00 000/- GIVEN TO CARRAR A MARBLE & GRANITE (PROP. ASHOK MITTAL) ON 27.06.03 AND ON THE SAME DAY CARRARA MARBLE & GRANITE TRANSFERRED THE SAID AMOUN T TO ASHOK MITTAL & CO. ASHOK MITTAL & CO. PAID TO BANK OF PU NJAB AGAINST REPAYMENT OF LOAN TAKEN FOR PURCHASE OF LAN D. 3) RS.4 41 65 500 ON 01.07.03 :- OUT OF SAID AMOUNT RS.4 40 00 000/- GIVEN TO ASHOK MITTAL & CO. ON 01.07.03 AND THE SAME WAS PAID TO BANK OF P UNJAB AGAINST REPAYMENT OF LOAN TAKEN FOR PURCHASE OF LAN D. 4) RS.4 60 28 700 ON 11.07.03:- OUT OF SAID AMOUNT RS.3 80 00 000/- PAID TO BANK OF PUNJAB AGAINST REPAYMENT OF LOAN TAKEN FOR PURCHASE OF LAN D ON BEHALF OF ASHOK MITTAL & CO. 7. THE ASSESSING OFFICER HELD THAT AS PER BALANCE-S HEET LOANS AND ADVANCES TO SISTER CONCERN ARE RS.21.72 CRORES. TH E AMOUNTS GIVEN TO M/S. ASHOK MITTAL & CO. AND M/S. CARRARA MARBLE & GRANIT E WHICH ARE THE PROPRIETARY CONCERNS OF SHRI ASHOK MITTAL WERE FOR THE PURPOSE OF PURCHASE OF LAND BY SHRI AHOK MITTAL WHICH CANNOT BE CONSID ERED TO BE FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER EXCLUDE D THE ADVANCES OUTSTANDING AS ON THE FIRST DAY OF THE FINANCIAL YE AR AND ALSO EXCLUDED THE CAPITAL BALANCE IN THE PARTNERS ACCOUNT FROM THE T OTAL ADVANCES SHOWN. THE ASSESSING OFFICER HELD THAT AMOUNT OF RS.10.96 CROR ES IS ADVANCED TO SISTER CONCERN WITHOUT CHARGING INTEREST AND WHICH IS NOT FOR THE PURPOSE OF 5 BUSINESS AND HENCE PROPORTIONATE INTEREST IS TO BE DISALLOWED. THIS RESULTED INTO DISALLOWANCE OF RS.37 86 628/-. THE LEARNED C IT(A) HELD THAT THE FACTS ARE NOT CORRECTLY APPRECIATED BY THE ASSESSING OFFI CER. THE LEARNED COMMISSIONER (APPEALS) ALSO CALLED FOR THE COPY OF MOU/AGREEMENT ENTERED INTO BETWEEN ASHOK MITTAL AND BELLAMY INVES TMENT & TRADING CO. PVT. LTD. AS WELL AS M/S. CHANDLER INVESTMENT TRADI NG CO. PVT. LTD. WHEREIN SHRI ASHOK MITTAL HAD MAJORITY SHARE HOLDING. THE LEARNED COMMISSIONER (APPEALS) ON APPRECIATION OF THE REPLY OF ASSESSEE AS WELL AS MOU/AGREEMENT AND APPLYING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADHAV PRASAD JATIA VS. CIT 118 ITR 20 0 HELD 17. APPLYING THE ABOVE TEST IT WILL BE BENEFICIAL TO APPRECIATE THE FACTS OF THE CASE. THERE IS NO DISP UTE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND SALE OF MARBLE ITEMS. IT IMPORTS MARBLE FROM DIFFERENT COUNTRIES AND AFTER GIVING SHAPE TO THE SAME IT SELLS IN THE MARKET AS REQUIRED BY THE CUSTOMERS. THE ASSESSEE ALSO HAS MANUFACTURING FACILITIES AT DAMAN SINCE 1996. THERE IS ALSO NO DISPUTE THA T SHRI ASHOK MITTAL OWNS THE TRADE NAME (LITOLIER). THIS IS A BRAND NAME FOR IMPORTED MARBLE AND ITS PRODUCTS ARE KNOWN TO BE USED IN FIVE STAR HOTELS AND BOLLYWOOD. IT IS EVID ENT FROM RECORD THAT VIDE MOU DATED 5.5.2003 SHRI ASHOK MI TTAL AND THE ASSESSEE FIRM ENTERED INTO AN UNDERSTANDING. T HERE IS ALSO NO DOUBT THAT IN PURSUANCE OF AN ORDER OF THE DEBT RECOVERY TRIBUNAL (DRT) IN PROCEEDING NO.1694 OF 1992 M/S. CHANDLER AND M/S. BELLAMY DID PURCHASE LAND AT MUMB AI. THE RIGHT TO DEVELOP THIS PROPERTY WAS GIVEN BY M/S . CHANDER AND M/S. BELLAMY TO SHRI ASHOK MITTAL AS A PART OF AN MOU WHEREIN THE LATTER PROPOSE TO DEVELOP THE SAID PROP ERTY BY CONSTRUCTING A MULTI-STOREY BUILDING WITH SHOWROOM SPACE OF ABOUT 10000 SQ. FT. THIS SHOWROOM SPACE WAS TO BE GIVEN TO 6 THE ASSESSEE FIRM ON LEASE AND THE ASSESSEE FIRM WA S ALSO GIVEN THE LICENCE TO USE THE BRAND NAME `LITOLIER FOR 3 YEARS. AGAINST THIS THE ASSESSEE WAS TO PAY A SECURITY DEP OSIT OF RS.20 CRORES AND ALSO TO PAY LEASE RENT OF RS.20/- PER SQ . FT. PER MONTH TO SHRI ASHOK MITTAL. THERE IS ALSO NOT DISP UTE THAT THE MOU WAS TO BE FOLLOWED BY AN AGREEMENT WHICH HAS N OT BEEN EXECUTED TILL DATE. HOWEVER THE MOU HAS BEEN FOLLOWED IN LETTER AND SPIRIT. WHEN SPECIFICALLY A SKED ON THE QUESTION ON THIS ISSUE IT WAS CONTENDED BY THE LEA RNED AR ON 24.09.2008 THAT THE MOU WAS A LEGAL ENTITY AND THER EFORE NEED NOT BE CONVERTED INTO AN AGREEMENT. 18. THEREFORE IT FOLLOWS THAT IT WOULD MAKE GOOD B USINESS SENSE FOR THE ASSESSEE WHICH IS ALREADY INTO MANUFA CTURE AND SALE OF MARBLES TO USE BRAND NAME OF `LITOLIER AND ALSO TO LEASE OUT A PROPERTY. THEREFORE IT HAS TO BE HELD THAT THIS PARTICULAR INTEREST FREE ADVANCE TO SHRI ASHOK MITA L AND HIS PROPRIETARY CONCERNS WAS A BUSINESS DECISION WHICH WAS LIKELY TO REAP RICH HARVEST. IN OTHER WORDS THERE WAS A DIRECT NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF TH E BUSINESS WHEN ONE CONSIDERS THE EXPENDITURE IN THE BACKDROP OF THE ASSESSEES LINE OF BUSINESS. THE DELHI HIGH COURT IN CIT V. DALMIA CEMENT (B) LTD. (2002) 254 ITR 377 HA S HELD THAT ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BE TWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF) THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM-C HAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRE CTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLY EX PENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFIT . THIS DECISION HAS BEEN APPROVED BY THE HONBLE SUPREME C OURT IN S.A. BUILDERS LTD. (2007) 288 ITR 1. THEREFORE IT IS HELD THAT THIS INTEREST FREE ADVANCE WAS FOR COMMERCIAL EXPED IENCY IN FURTHERING THE BUSINESS INTEREST OF THE ASSESSEE AN D FOR THE PURPOSE OF BUSINESS. 19. THE OTHER ISSUE IS WITH REGARD TO CONTENDED ADV ANCE TO SHRI NAND KISHORE CHATURVEDI TO THE TUNE OF RS.40 0 0 000/-. OUT OF THIS RS.40 00 000/- AN AMOUNT OF RS.15 00 0 00/- WAS 7 GIVEN THROUGH GLOBAL TRUST BANK VIDE ISSUANCE OF A CHEQUE. HOWEVER AS RIGHTLY HELD BY THE LEARNED AR THIS CH EQUE OF RS.15 00 000/- THOUGH ISSUED WAS NEVER ENCASHED. IN FACT THE LEDGER ACCOUNT AS FILED AS PART OF THE PAPER BO OK AND WHICH WAS ALSO BEFORE THE LEARNED AO CLEARLY SHOWS A REV ERSAL OF THE SAID AMOUNT. THE ACTUAL ADVANCE WAS ONLY RS.25 00 000/- FOR WHICH MONEY WAS NEVER BORROWED AND THEREFORE NO INTEREST WAS PAID AS WOULD BE EVIDENT FROM THE CURR ENT ACCOUNT OF THE ASSESSEE PLACED AT PAGES 39 40 & 41 OF THE PAPER BOOK DOCUMENTS WHICH WERE ALSO BEFORE THE LEARNED AO. I T IS OBSERVED THAT THE ASSESSEE NEVER HAD ANY OVER DRAFT . ON VERIFICATION OF THE DOCUMENTS DISSECTION OF THE AR GUMENTS MADE BY THE ASSESSEE IT IS HELD THAT THIS ADVANCEM ENT OF LOAN WAS NOT OUT OF INTEREST BEARING LOANS BUT FROM INT ERNAL ACCRUALS OF THE ASSESSEE HIMSELF. THEREFORE ANY D ISALLOWANCE OF THE INTEREST COMPONENT IS BASED ON AN INCORRECT APPRECIATION OF FACTS AND LAW. 20. BEFORE PARTING ON THIS GROUND APPEAL IT IS CRU CIAL TO ALSO MENTION THAT THE LD. A.O. HAS RELIED ON TWO DE CISIONS. ONE DECISION IS THAT OF CIT V. THE MOTOR GENERAL FI NANCE LTD. (2003) 254 ITR 449 (DEL). THE OTHER ONE IS S. A. BUILDERS LTD. VS. ITO (2004) 269 ITR 535 (P&H). IT WOULD BE IMPORTANT TO MENTION THAT THE DECISION OF THE PUNJA B & HARYANA HIGH COURT IN S.A. BUILDERS VS. ITO (SUPRA) STANDS REVERSED BY THE DECISION OF THE APEX COURT IN S.A. BUILDERS LTD. VS. CIT (2007) 288 ITR 1 (SC). IN SO FAR THE DECISION OF THE DELHI HIGH COURT IN MOTOR GENERAL FINANCE LTD. (SUPRA) IS CONCERNED THIS DECISION HAS BEEN SET ASIDE BY THE SUPREME COURT IN MOTOR GENERAL FINANCE LTD. VS. COMMISSIONE R OF INCOME TAX (2004) 267 ITR 381. THE HONBLE SUPREME COURT REMITTED THE MATTER BACK TO THE HIGH COURT FO R FRESH DISPOSAL AS THEIR LORDSHIPS WERE OF THE OPINION THA T THE HIGH COURT PROCEEDED ON ERRONEOUS FACTUAL BASIS. THEREF ORE ANY RELIANCE ON THESE TWO DECISIONS BY THE LD AO DOES N OT HELP THE CAUSE OF THE REVENUE AS THEY DO NOT ENUNCIATE THE C ORRECT POSITION OF LAW. 8 8. THE LEARNED DR SHRI VIVEK KUMAR SUBMITTED THAT T HERE IS NO DISPUTE THAT THE AMOUNT IS ADVANCED TO SHRI ASHOK MITTAL OU T OF BORROWED FUNDS. SHRI ASHOK MITTAL UTILIZED THE AMOUNT FOR HIS PERSO NAL PURPOSES. THEREFORE IT CANNOT BE CONSIDERED AS ADVANCED FOR THE PURPOSE OF BUSINESS AND HENCE PROPORTIONATE DISALLOWANCE IS CALLED FOR. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI K. SAMPAT H ON THE OTHER HAND STRONGLY RELIED UPON THE FINDING OF THE COMMI SSIONER (APPEALS) WHICH IS BASED ON APPRECIATION OF REPLY OF THE ASSESSEE D ATED 27.12.2006 AND THE AGREEMENT/MOU BETWEEN ASHOK MITTAL AND BELLAMY INVE STMENT & TRADING CO AND CHANDLER INVESTMENT & TRADING CO. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE T RAIL OF THE MONEY BORROWED AND UTILIZED CAN BE SUMMARIZED AS UNDER THE SUM AND SUBSTANCE OF THE ENTIRE TRANSACTION TO THE TUNE OF RS.17 90 00 000/- IS THAT AN AMOUNT WAS ALLEGEDLY G IVEN AS SECURITY DEPOSIT TO SHRI ASHOK MITTAL. THIS WAS DONE OUT OF THE LOA N OF RS.18 33 54 200/- OBTAINED FROM AMERICAN EXPRESS BANK. THE AMOUNT OF RS.17 90 00 000/- WHICH WAS GIVEN TO SHRI ASHOK MITTAL CAN BE BROKER IN TWO PARTS. RS.13 90 00 000/- WAS GIVEN TO ASHOK MITTAL & CO. A ND RS.4 00 00 000/- TO CARARA MARBLE & GRANITE CO. BOTH OF WHICH ARE PROP RIETARY CONCERNS OF SHRI ASHOK MITTAL. THIS AMOUNT WAS FURTHER GIVEN TO CHA NDLER INVESTMENT & 9 TRADING PVT. LTD. AND BELLAMY INVESTMENT & TRADING CO. PVT. LTD. IN CHANDLER INVESTMENT & TRADING CO. PVT. LTD. SHRI A SHOK MITTAL HAS 9990 SHARES AS ON 31.03.2004 OUT OF TOTAL EQUITY SHARES OF 10000. SIMILAR WAS THE POSITION IN BELLAMY INVESTMENT & TRADING CO. LTD. THE MONEY WAS FURTHER ADVANCED TO TWO COMPANIES WHICH WAS TOTALLY IN THE CONTROL OF SHRI ASHOK MITTAL. THIS MONEY HAD FURTHER BEEN PAID TO THE ST ATE GOVERNMENT OF MAHARASHTRA IN PURSUANCE OF THE ORDER BY THE DEBTS RECOVERY TRIBUNAL FOR A LAND WHICH HAD EARLIER BEEN OWNED BY M/S. FIT TIGHT NUTS AND BOLTS LTD. THIS LAND IS LOCATED IN BOMBAY. THEREFORE THERE I S NO DISPUTE THAT THE MONEY HAD INDEED BEEN GIVEN TO A SISTER CONCERN CON TROLLED BY SHRI ASHOK MITTAL WHICH HAD FURTHER BEEN ADVANCED TO TWO COMP ANIES WHERE SHRI ASHOK MITTAL AHD THE CONTROLLING SHAREHOLDING. THE EVENTUAL RECIPIENT OF THE MONEY ADVANCED WAS THE STATE GOVERNMENT OF MAHARASH TRA FOR PURCHASE OF THE LAND IN PURSUANCE OF THE ORDER OF DEBT RECOVER Y TRIBUNAL. 10. THE EXPENSES ARE CLAIMED UNDER SECTION 36(1)(II I) OF THE ACT WHICH STATES THAT THE AMOUNT OF THE INTEREST PAID IN RESP ECT OF CAPITAL BORROWED FOR THE PURPOSES OF BUSINESS OR PROFESSION HAS TO BE AL LOWED WHILE COMPUTING THE INCOME UNDER THE HEAD PROFITS AND GAINS OF BUS INESS. THEREFORE THE ISSUE TO BE EXAMINED IS WHETHER THE AMOUNT WAS BORR OWED FOR THE PURPOSE OF BUSINESS AND SUCH BORROWED FUND HAS BEEN UTILIZED F OR THE PURPOSE OF 10 BUSINESS. THE BUSINESS INTEREST IS WELL UNDERSTOOD BY THE ASSESSEE AND THE ASSESSING OFFICER CANNOT STEP INTO THE SHOES OF THE BUSINESSMAN SO AS TO DETERMINE HOW THE BUSINESS IS TO BE CONDUCTED. SIN CE THE ASSESSEE WAS TO ACQUIRE THE PREMISES FROM THE CONCERNS CONTROLLED B Y SHRI ASHOK MITTAL WHO WAS GIVEN THE RIGHT TO DEVELOP THE LAND AGREED TO B E PURCHASED BY BELLAMY INVESTMENT & TRADING CO. PVT. LTD. AND CHANDLER INV ESTMENT & TRADING CO. PVT. LTD. AND SUCH PREMISES WERE TO BE USED TO OPEN THE SHOWROOM FOR SALE OF THE MARBLE AND GRANITE ITEMS HELD BY THE ASSESSE E AND ALSO FOR THE USE OF BRAND NAME LITOLIER WHICH WAS OWNED BY SHRI ASHOK MITTAL IT CAN BE SAID THAT THE AMOUNT WAS ADVANCED FOR THE PURPOSE OF BUS INESS SO AS TO ACQUIRE VALUABLE RIGHT OF OCCUPANCY IN THE PREMISES AND TO USE THE BRAND NAME. SINCE THE TERMS OF MOU HAVE BEEN FOLLOWED IN LETTER AND SPIRIT ON THE BASIS OF WHICH IT CAN BE SAID THAT THE AMOUNT WAS BORROWE D FOR THE PURPOSE OF BUSINESS AND HENCE INTEREST PAID ON SUCH BORROWAL A RE ALLOWABLE. IF BY GIVING THE ADVANCES THE BUSINESS INTEREST OF THE AS SESSEE IS SERVED AND EVEN IF SUCH ADVANCES ARE WITHOUT CHARGING ANY INTEREST OR WHETHER SUCH ADVANCES ARE TO ASSOCIATE CONCERN IT WILL NOT ALTER THE SIT UATION. ADVANCES FOR THE PURPOSE OUT OF BORROWED FUNDS WILL STILL BE CONSIDE RED TO BE CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS AND HENCE INT EREST PAYABLE ON SUCH BORROWAL ARE ALLOWABLE AS DEDUCTION UNDER SEC.36(1) (III) OF THE ACT WHILE 11 COMPUTING THE BUSINESS INCOME. THEREFORE THERE IS NO GROUND TO DISALLOW THE INTEREST PAYABLE BY THE ASSESSEE. 11. IN THE RESULT THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY 2010. SD/- SD/- (GEORGE MATHAN) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26 TH FEBRUARY 2010. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR IT`AT.