DCIT, CHENNAI vs. DSM SOFT PRIVATE LIMITED, CHENNAI

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) – 1, Chennai, dated 13.01.2016 and pertains to assessment year 2010-11.

The only issue arises for consideration is with regard to diversion of interest-free funds to group concerns of the assessee.

Shri Sahadevan, the Ld. Departmental Representative, submitted that the assessee borrowed funds from banks and others and paid interest. The assessee has given interest-free loans to subsidiary companies. According to the Ld. D.R., in the earlier assessment year, this Tribunal examined the issue and found that the loans / advances were paid on commercial expediency, therefore, there cannot be any disallowance. The Department has already filed an appeal against the order of this Tribunal, therefore, according to the Ld. D.R., just to keep the matter alive, the Revenue has filed this appeal before this Tribunal.

On the contrary, Ms. Hemalatha, the Ld. representative for the assessee, submitted that the assessee borrowed funds for the purpose of business and the same was advanced to sister concerns on commercial expediency. This Tribunal examined the issue in the assessee's own case for assessment years 2004-05 and 2005-06 and found that the advance paid by the assessee was for commercial expediency. Referring to the order of the Assessing Officer, the Ld. representative submitted that merely because the order of this Tribunal was contested before the High Court, that cannot be a reason for not following the order of this Tribunal.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, an identical issue of disallowance made by the Assessing Officer was examined by this Tribunal for assessment years 2004-05 and 2005- 06 in & 12/Mds/2010. This Tribunal by following the judgment of Apex Court in S.A. Builders Ltd. v. CIT (2007) 288 ITR 1, found that the advance made by the assessee to sister concerns was for commercial expediency. Accordingly, a similar disallowance of interest was deleted by this Tribunal by order dated 11th June, 2010. When this order of the Tribunal was brought to the notice of the Assessing Officer, he simply observed that the Department is contesting the matter before higher forum. This Tribunal is of the considered opinion that when this Tribunal passed an order deleting the addition on identical circumstances, the Assessing Officer is bound to follow the same. Merely because an appeal is filed before the High Court that cannot be a reason for not following the order of this Tribunal. Therefore, this Tribunal finds that the CIT(Appeals) has rightly deleted the addition made by the Assessing Officer by placing reliance on the order of this Tribunal. In such circumstances, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

In the result, the appeal filed by the Revenue is dismissed.