ORDER
B. M. KOTHARI, A. M. :
All these appeals involve consideration of common and connected points. Hence, we find it convenient to dispose of these appeals by a common order.
2. The learned representatives of the parties submitted that the main appeal relates to M/s H. Bhagwati & Sons both in relation to quantum appeal and the appeal relating to grant of registration. The decision in these appeals will govern the various grounds raised in appeals of the remaining three parties. It would, therefore, be appropriate to first consider the appeals in the case of M/s H. Bhagwati & Sons.
3. The facts pertaining to the various grounds raised in these appeals can be briefly summarised as under. M/s H. Bhagwati & Sons submitted a return of income on 20th Sept., 1984 declaring total income of Rs. 2,60,000. The assessment was completed on 16th March, 1985 computing the total income at Rs. 2,62,646. The assessment was set aside under s. 263 of the Act by the CIT vide order dt. 24th March, 1987 on the ground that registration was granted to the said firm without examining the basic facts and the ITO had not brought to tax the real and actual incomes derived by the assessee. A fresh assessment was made vide assessment order dt. 31st March, 1989 in which the income for asst. yr. 1984-85 was determined at Rs. 8,24,206.
4. Survey operation under s. 133A was carried out on 9th July, 1986 at the business premises situated at 169, New Cloth Market, Ahmedabad. It has been observed by the Assessing Officer (AO) in the assessment order that there are 4 sister concerns of the assessee-firm. These concerns are (i) M/s Hiralal Chandulal Chokshi, (ii) M/s. Hirabhai & Sons, (iii) M/s Bhagwati Textiles Proprietor Hiralal H. Bhagwati (HUF) and (iv) M/s Prakash Textiles. The AO inter alia, observed that (a) during the course of survey it was found that entire cash of all the sister concerns was kept together under the control of one single person, (b) the business of all the five concerns was carried on from the same premises, (c) the nature of business was identical, (d) accountants and some other employees were common, (e) business of all the sister concerns was controlled by common persons of the families and different firms were created from time to time just to create separate taxable entities, (f) the assessee-firm and other sister concerns were dealing with the product of Mafatlal Group; for this purpose orders were procured by the main family members who are controlling the different firms and then the transactions were adjusted or bifurcated at convenient times to reduce the tax liability by channelising them to the different sister concerns, (g) all sister concerns and the assessee firm (main concern) had common address and correspondence with the main suppliers was also conducted through common address and (h) that partners of all the five concerns are mainly members of family group of Bhagwati group, Nanavati group and Patwa group.
4. The AO has also recorded extracts from the statements of some of the partners recorded during the course of survey as well as during the course of assessment proceedings in the assessment order. After considering the entire material existing on records he came to the conclusion that the four sister concerns have been created by the same family groups at different points of time with a view to divert the assessees real income and to avoid tax liability. He, therefore, clubbed the income of all the four sister concerns in the hands of the assessee-firm and thereby determined the income at Rs. 8,24,206.
4.2 The AO also passed an order under s. 184(7) in which it was held that no genuine firm existed and, therefore, the firm is not entitled to grant of continuation of registration under s. 184. He also relied on this fact mentioned in the assessment order that the four sister concerns are not genuine concerns and income of all these four firms have been clubbed in the income of the main firm. On these two grounds he concluded that assessment of M/s H. Bhagwati & Sons should be made in the status of AOP. Accordingly, the claim for grant of registration/continuation of registration was refused.
4.3 In similar manner the income of the four sister concerns was clubbed for asst. yrs. 1985-86 and 1986-87 also and the assessees claim for grant of registration/continuation of registration was also refused. In the cases of the sister concerns, the AO gave reference of the order under s. 263 passed by the CIT in the case of M/s H. Bhagwati & Sons. He also relied on the material gathered as a result of survey under s. 133A on 9th July, 1986. The AO thereafter came to the conclusion that income in the hands of the assessee-firm is to be assessed on protective basis without prejudice to the finding as may be given in the case of M/s H. Bhagwati & Sons. Certain additions and disallowances were also made in the cases of the sister concerns. The registration to the three sister concerns which are partnership firms was also refused on similar grounds. One of the sister concerns is not a partnership firm but that is a sole proprietorship concern owned by Mr. Hiralal H. Bhagwati (HUF) (M/s Bhagwati Textiles).
5. The CIT(A) vide his common order passed in the case of M/s H. Bhagtwati & Sons for asst. yrs. 1984-85 to 1986-87 in relation to refusal to grant continuation of registration under s. 184(7) held that the assessee-firm as well as the three other sister concerns which are partnership firms are genuine firms and are entitled to grant of registration/continuation of registration. He, accordingly, directed the AO to treat the firm as genuine and grant registration. He also held that all the four sister concerns are genuine business concerns and has been separately assessed to tax for last several years. He also very thoroughly and elaborately considered each and every point discussed in the assessment order and after a very thoughtful and careful consideration came to the conclusion that income of the four sister concerns cannot be clubbed in the hands of the main firm. He, accordingly, granted registration/continuation of registration to the main firm as well as the remaining three sister concerns which are partnership firms. In the quantum appeal also he deleted the addition made on account of clubbing of income of the four sister concerns apart from dealing with other petty additions and disallowances made in the assessment order for other years.
6. The Revenue is aggrieved by such orders passed by the learned CIT(A) in the case of the main firm as well as in the cases of other sister concerns. We are concerned with only those appeals which have been mentioned in the cause title of the present order.
7. The learned Senior Departmental Representative vehemently argued that the CIT(A) has erred in directing the AO to grant registration to the main firm as well as to the other partnership firms. He has also grossly erred in deleting the income of the four sister concerns clubbed in the hands of the main firm. He extensively read the assessment order and the order passed by the AO under s. 184(7) to support his contention. The learned Departmental Representative placed strong reliance on the judgment of Honble Supreme Court in the case of Ladhu Ram Taparia vs. CIT (1962) 44 ITR 521 (SC). It was contended that the facts of the present case are similar to the facts in that case where the Honble Supreme Court has observed that if the ITO finds on investigation that a number of firms carrying on business under different firms names really belonged to one of the same group of persons, he can refuse to register these firms under s. 26A and treat the aggregate income of all firms as the income of this group of persons. The learned Departmental Representative also placed reliance on following other judgments :
1. CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC);
2. Simhadri Narasingh Prusty & Ors. vs. CIT (1971) 79 ITR 219 (Ori);
3. S. P. Gramophone Co. vs. CIT (1986) 158 ITR 313 (SC);
4. Manilal Dharmchand vs. CIT (1970) 78 ITR 96 (Bom);
5. CIT vs. Ravi Constructions (1988) 169 ITR 662 (AP);
6. CIT vs. Kanaiyalal Ram Chand (1979) 119 ITR 377 (P&H);
7. Addl. CIT vs. Jay Engineering Works Ltd. (1978) 113 ITR 389 (Del).
On the strength of the aforesaid judgments and in view of the elaborate reasons mentioned in the orders passed by the assessing authority, the learned Senior Departmental Representative strongly urged that the orders of the CIT(A) should be cancelled and that of the AO should be restored.
8. The learned counsel for the assessee strongly supported the order of the CIT(A). He reiterated almost similar arguments as were advanced on behalf of the assessee before the learned CIT(A). It was further pointed out that out of the four sister concerns treated as non-genuine or benami concerns one sister concern, viz., M/s Bhagwati Textiles is owned by Hiralal H. Bhagwati (HUF). The business carried on by the said HUF was always treated to be genuine ever since its inception, i.e., from asst. yrs. 1972-73 to 1983-84. The partnership firm M/s Hiralal Chandulal Chokshi which is being alleged to be a concern created for diverting the profits of the main firm, in fact was formed on an enterior date, i.e., prior to formation of the main firm M/s Hiralal Chandulal Chokshi came into existence in asst. yr. 1973-74 while the so called main firm M/s H. Bhagwati & Sons came into existence from 29th July, 1975. M/s Prakash Textile Associates came into existence from 1st June, 1976 and is assessed as a separate and genuine partnership firm since asst. yrs. 1977-78 to 1983-84. Similarly, M/s Hirabhai & Sons came into existence from 1st April, 1980 and has been assessed as a genuine firm upto asst. yr. 1983-84. The learned counsel also submitted that in the case of Hirabhai & Sons registration was granted by the first appellate authority and that firm was held to be a genuine firm. The Department has accepted that decision and has not preferred any second appeal against that order. Similarly, the order of the first appellate authority in the case of M/s Hiralal C. Chokshi for asst. yr. 1985-86 had also been accepted by the Department and no further appeal has been preferred. The learned counsel also submitted that at the time of survey as well as at the time of regular assessment proceedings explanation was submitted before the concerned authorities to prove that stocks found during the course of search belongs to different concerns. These stocks belonging to different concerns were identifiable and the same were separately identified sorted out and explained. The concerned authorities have not found any defect in the explanations so submitted with regard to each and stocks found during the course of survey. He also relied on various other reasons and submissions which have been incorporated at considerable length in the order passed by the learned CIT(A). The learned counsel for the assessee then supported the view taken by the CIT(A) on the strength of the following judgments :
1. Dy. CST (Law) Board of Revenue (Taxes) vs. N. Kelukutty (1985) 155 ITR 158 (SC);
2. K. D. Kamath & Co. vs. CIT (1971) 82 ITR 680 (SC);
3. Kanoi Udhyog vs. ITO (1987) 28 TTJ (Cal) 288 : (1987) 20 ITD 347 (Cal);
4. Vijeta Engg. Works vs. ITO (1989) 34 TTJ 546;
5. ITO vs. H. Ajitbhai & Co. (1989) 35 TTJ (Ahd) 476.
9. The learned representatives of both the parties submitted that other grounds raised in remaining appeal relate to petty additions made in different years. The learned Senior Departmental Representative submitted that he would like to rely upon the reasons mentioned in the assessment order in relation to those additions which have been deleted by the CIT(A). The counsel for the assessee relied on the reasons and conclusion mentioned in the order of the CIT(A).
10. We have given a very thoughtful consideration to the arguments advanced before us by the learned representatives and have also carefully gone through the orders of the learned Departmental authorities as well as the various decisions cited by the learned representatives.
10.1 The main grounds on the basis of which the AO refused to rant registration/continuation of registration to the main firm as well as to the three other partnership firms which are described as sister concerns are that the nature of business carried on by the said sister concerns is almost similar, the business is carried on by all of them from the same premises, the management vested in the hands of a few members of the family of three groups, some of the employees are common and cash and stocks found during the course of survey were found at the same place and were under the control of the common persons. Some more points have been discussed in the assessment order. Extracts of the statements of partners have also been reproduced in the assessment orders. On the basis of such factors, the AO has concluded that the family groups of Bhagwati family; Nanavati family and Patwa family have created different concerns from time to time with a view to divert its real income. By such conclusions the AO was of the view that M/s H. Bhagwati & Sons is the principal firm and the income has been diverted by this main firm in the hands of different sister concerns with a view to reduce its taxable income. Such a conclusion arrived at by the AO is based on mere suspicion and not on the basis of material or evidence admissible in law. Such an observation is being made by us on the ground that the facts existing on records clearly reveal that some of the sister concerns were even formed on a prior date as compared to the formation of the main firm. It cannot therefore, be validly contended that M/s H. Bhagwati & Sons created or floated different sister concerns with a view to divert its taxable income in the hands of different concerns. It is an undisputed fact that HUF of H. H. Bhagwati is carrying on a sole proprietorship concern under the name and style of M/s Bhagwati Textiles since 1972-73 while the main firm came into existence on 29th July, 1975. Similarly, the partnership firm styled as M/s Hiralal Chandulal Chokshi came into existence earlier than asst. yr. 1973-74. In fact, this partnership firm was created on 1st April, 1952 which is evident from a copy of the certified list of partners issued by the office of Registrar of firms, Bombay which has been placed in the computation at page 3. A firm which was in existence from 1952 can by no stretch of imagination be treated as having been created for the purpose of diverting the profit of so called main firm M/s H. Bhagwati & Sons which came into existence on 29th July, 1975. The other firm M/s Prakash Textile Associates came into existence on 1st June, 1976 and has been regularly assessed to tax as a separate and independent taxable entity and was treated as a genuine partnership firm ever since its inception upto asst. yr. 1983-84. Likewise M/s Hirabhai & Sons was also formed on 1st April, 1980 with five partners and was assessed to tax as a separate taxable entity and was also treated as a genuine partnership firm upto asst. yr. 1983-84.
10.2 The stock inventory found during the course of survey operations conducted under s. 133A dt. 9th July, 1986 has been placed at page 14 of the compilation. The said stock inventory clearly indicated that which particular bale of the cloth found in its stock belonged to which firm. The inventory prepared by the officers of the Department itself indicate the name of the different concerns to which the particular lot of stock belongs. This has been indicated by mentioning the name of the respective concerns in an abbreviated from like PTA, HCC, BT, HBS, HCC, etc. The AO has not indicated anything in the assessment order showing that any unaccounted stock was found during the course of survey as compared to the position of stocks revealed by the books of accounts of the respective business concerns. Likewise, the cash found during the course of survey was also properly explained with reference to the books of accounts and other relevant records maintained in relation to different business concerns. Shri Hiralal H. Bhagwati in his statement recorded on 9th July, 1986 clearly stated that cash is kept at one place but instructions are given to the cashier to keep it separately firmwise. It has not been indicated in the assessment orders that any addition whatsoever has been made in respect of any unexplained cash found during the course of survey.
10.3 One of the grounds relied upon by the AO was that family members of three different groups are partners of the five concerns. A chart showing details of partners, their respective share in the profits or losses of the firm has also been submitted in the compilation at page 2. The constitution of the different business concerns as per the said chart, the correctness of which has not been disputed by the Department, is as under :
Name of company
% of share
1. Bhagwati Textiles
100%
Names of Proprietor
Hiralal H. Bhagwati (HUF)
2. Hiralal Chandulal Chokshi
Name of Partners
1. Hiralal H. Bhagwati
5.0%
2. Prakash K. Bhagwati (HUF)
47.5%
3. Atulbhai K. Bhagwati (HUF)
47.5%
3. H. Bhagwati & Sons
Name of Partners
1. Hiralal H. Bhagwati
60%
2. Dhirubhai Vadilal Patwa
20%
3. Rasiklal N. Nanavati
14%
4. Sudhirbhai R. Nanavati
06%
4. Prakash Textile Associates
Names of Partners :
1. Prakashbhai Bhagwati
10%
2. Smt. Prabhavatiben K. Bhagwati
19%
3. Girishbhai D. Patwa
19%
4. Sudhirbhai R. Nanavati HUF
10%
5. Piyushbhai R. Nanavati HUF
9%
6. Dixitbhai C. Shah
6%
7. Mahesh R. Doshi
12%
8. Kaushik R. Shah Trustee of Ramanlal Bhogilal Shah Family Trust
15%
5. Hirabhai & Sons
Names of Partners :
1. Atulbhai K. Bhagwati
25%
2. Smt. Prabhavatiben K. Bhagwati
25%
3. Dhirubhai Vadilal Patwa HUF
19%
4. Rasiklal M. Nanavati HUF
19%
5. Mahesh R. Doshi
12%
The aforesaid chart reveals that the various business concerns do not have common partners nor the three families have equivalent shares in different partnership firms. The assessee has also submitted the details of various employees employed by different business concerns which does not support the contention of the Revenue that the employees are common. One or two employees may be common in some of the business concerns but that by itself cannot lead to the conclusion that the four sister concerns are benamis of the main firm.
10.4 The reliance placed by the learned Senior Departmental Representative on the various judgments also do not in any manner support the Revenues contention. The main case which was relied upon by him is that of Ladhuram Taparia vs. CIT (supra). The facts of that case are totally different and distinguishable. In that case it was, inter alia, found that each of the sister concerns had been considerably financed by the other sister concerns and huge purchases have been made from them and huge sales have been made to allied concerns. Most of the outside parties to whom goods had been sold and from whom goods had been purchased were the same for each of those firms. The bank accounts on behalf of different firms were operated by persons who were not partners of those firms. The constitution notified to the bankers in respect of different partnership firms was not in conformity with the constitution of the partnership firms shown to the IT Department. Taking into consideration, the totality of the facts of that particular case, the Honble Supreme Court came to the conclusion that the High Court was right in holding that no question of law arose out of the order of the Tribunal. The decision was thus based on the findings of fact given by the Tribunal on the basis of facts, material and evidence existing on the records of that case. The other judgment relied upon by the learned Senior Departmental Representative also in our considered opinion does not in any manner support the contention of the Revenue. For instance, the learned Senior Departmental Representative relied upon one more judgment of the Honble Supreme Court in the case of CIT vs. Durgaprasad More (supra). The point involved for consideration in that case was whether on the facts and circumstances of that case it could not be said that the finding of Tribunal as to the unreality of the trust put forward was not based on evidence or was otherwise vitiated. The further question was whether the principle of res judicata or the rule of estoppel was applicable to assessment proceedings. The Honble Supreme Court came to the conclusion that neither the principle of res judicata nor the rule of estoppel was applicable to assessment proceedings but the fact that the assessee included the income of the premises in his returns for other years after objecting to its inclusion in the year 1942-43 was a circumstance which the taxing authorities were entitled to take into consideration, in the absence of any satisfactory explanation. The ratio of this judgment does not in any manner support the Revenues contention but on the other hand, it may support the assessees contention in view of the fact that all these sister concerns were treated by the Department as separate, distinct and genuine taxable entities for last several years. The mere fact that some survey was conducted in the year 1986 would not lead to the conclusion that because the cash and stock was found in the common premises or the mere fact that management of some of the business activities was carried on under the supervision of a few individuals belonging to the three groups of families would not justify a conclusion that the four sister concerns are benamis of the main firm.
10.5 It would be worthwhile to make a useful reference to some of the judgments relied upon by the learned counsel for the assessee. In the case of Dy. CST (Law) Board of Revenue Taxes vs. K. Kelukutty (supra), the Honble Supreme Court held that where it is claimed that there are two partnership firms and not one constituted by the same persons and carrying on different businesses, the AO must test the claim in the light of the partnership law. It is only after that question has been first determined, viz., whether in law there is only one partnership firm or two partnership firms, that the next question arises, viz., whether the turnover is assessable in the hands of the partnership firm as a taxable entity, separate and distinct from the partners. There is first a decision under the law of partnership and thereafter, the second question, the question as to assessment, arises under the tax law. Similarly, the Honble Supreme Court in the case of K. D. Kamat & Co. vs. CIT (supra), inter alia, held as under :
“The legal requirements under s. 4 of the Partnership Act to constitute a partnership in law are (i) there must be an agreement to share the profits or losses of the business and (ii) the business must be carried on by all the partners or any of them acting for all. There is implicit in the second requirement the principle of agency.
Control and management of the business of a firm can be left by agreement between the parties in the hands of one partner to be exercised on behalf of all the partners………….
Held, reversing the decision of the High Court that the fact that the exclusive power and control, by agreement of the parties, was vested in one partner, and the further circumstance that only one partner could operate the bank accounts or borrow on behalf of the firm was not destructive of the theory of partnership provided two essential conditions were satisfied, namely (i) that there should be an agreement to share profits and losses of the business of the firms and (ii) that the business must be carried on by all the partners or any of them acting for all. Clause 5 r/w other clauses showed that the first condition, namely, all persons agreeing to share profits or losses, was satisfied. The second condition was also satisfied; even though vast powers of management and control had been given to K, the business was being carried on by him on behalf of all the partners. Both the ingredients of partnership were satisfied and the firm could be granted registration under s. 26A.”
10.6 We have gone through the order passed by Shri M. S. Darda, the learned CIT(A) both in relation to the quantum appeal as well as in relation to the appeal relating to grant of registration/continuation of registration under the provisions of the IT Act, 1961. In our view, the learned CIT(A) has elaborately dealt with each and every point raised by the AO in the assessment order and he has also supported his decision by meeting all these points by giving proper and convincing reasons. The income of different partnership firms and the concerns belonging to the HUF by no stretch of imagination can be clubbed in the hands of the main firm unless all these sister concerns are held to the benami concerns. The burden lies on the Department to prove that all the four sister concerns are benami concerns. Such burden can be discharged only if it is proved that the capital employed in the four sister concerns floated from the main firm and the destination of the profit derived by the four sister concerns had directly or indirectly flown back in favour of the main firm. The Department has not brought any material on records to prove any of these aspects. The burden further lies on the Department to prove not only that the four sister concerns are benami concerns but it has also to prove by bringing some positive or definite material on records to prove that the main firm is the real owner of the entire income earned by those four sister concerns and the main firm is the real owner of such income and none else. Such a burden has not been discharged by the Department by bringing any material or evidence whatsoever on records. On the other hand, the material available on records clearly indicate that the Department has not disputed the genuineness and the correctness of capital contributions made by the respective partners in the respective firm. The Department has also not disputed the correctness and genuineness of the capital contributed by the HUF in the sole proprietorship business carried on under the name and style of M/s Bhagwati Textiles. The profits of the respective sister concerns have been enjoyed by the partners of the three sister partnership firms and by the said HUF. The main firm as well as the three partnership firms have complied with all the legal requirements for grant of registration/continuation of registration under the provisions of the IT Act. In our view, the learned CIT(A) has dealt with the whole issue in an admirable manner with perfect clarity and the decision rendered by him is supported by proper reasoning and valid material and evidence available on records. We, therefore, confirm the finding given by him that the main firm as well as the three partnership firms are genuine firms and the income of the various sister concerns cannot be validly clubbed in the hands of the main firm. The orders passed by the CIT(A) accepting such conditions of the assessee in all the appeals under consideration are, therefore, confirmed.
11. We will now consider the remaining grounds of appeal raised in various appeals.
11.1 In ITA No. 1414/Ahd/1990 relating to quantum in the case of M/s Prakash Textile Associates the Revenue has raised the following other grounds also, –
“3. The learned CIT(A) has erred in allowing the inter firm interest.
4. The learned CIT(A) has erred in deleting the additions on gross profit.”
The facts relating to ground No. 3 have been discussed by the CIT(A) in paras 5 and 6 of the order passed by him. The disallowance of interest of Rs. 1,01,323 was made by the Asstt. CIT in respect of interest paid to sister concerns, viz., M/s Hiralal Chandulal Chokshi, M/s Bhagwati Textiles and M/s Hiralal & Sons after deducting the interest received from M/s H. Bhagwati & Sons on the ground that interest paid on inter firm transactions is required to be disallowed as the same is only an adjustment made for manipulating the books results. The CIT(A) deleted the same on the ground that all these sister concerns have been held to be independent and separate taxable entities and, therefore, interest paid or received from them will have to be treated as genuine transactions. We, therefore, delete the net addition of Rs. 1,01,323 made on this count. Since we have approved the view taken by the learned CIT(A) with regard to grant of registration to the partnership firm, with regard to genuineness of all the four sister concerns, the deletion of disallowance of interest made by him is also approved.
11.2 The facts relating to ground No. 4 regarding addition made in the declared gross profit has been discussed by the CIT(A) in paras 8 and 9. The AO made a lump sum addition of Rs. 25,000 in the declared gross profit as per discussion in para 5 of the assessment order. The CIT(A) has observed that the addition made by the Asstt. CIT by presuming that stock of each concern was manipulated to adjust the book results is not valid. He has further observed that all the sales and purchases were vouched and stock of the assessee-firm is identifiable and separate from the stock of other sister concern. The accounts of the assessee-firm are only audited after taking into consideration all such relevant facts and circumstances, he directed the AO to delete the lump sum addition of Rs. 25,000. In our view, the learned CIT(A) has rightly deleted the lump sum addition of Rs. 25,000 made by the AO. The AO has failed to point out any specific mistake or discrepancy is the account maintained by the assessee and, therefore, there is no justification in making any such lump sum addition in the declared trading results, particularly in a case where the entire purchases and sales are properly supported by vouchers and regular books of accounts.
12. In ITA No. 1416/Ahd/1990 in the case of Prakash Textile Associates for asst. yr. 1986-87 the Revenue has raised similar ground relating to deletion of disallowance made in respect of inter-firm interest paid by the assessee as well as relating to lump sum addition of Rs. 25,000 made in the declared gross profit. The CIT(A) had deleted the said disallowance and additions on similar reasoning as given by him in the appellate order passed for asst. yr. 1985-86. In view of the facts and reasons mentioned in the order of CIT(A) with which we fully agree, the view taken by the CIT(A) is confirmed.
13. The Revenue has taken similar ground relating to deletion of disallowance of inter-firm interest in the following other appeals :
ITA No.
Name of Party
Asst. yr.
1419/Ahd/1990
M/s H. Bhagwati & Sons
1984-85
1423/Ahd. 1990
M/s H. Bhagwati & Sons
1986-87 (Quantum appeal)
1424/Ahd/1990
M/s Hiralal Chandulal Chokshi
1984-85
1426/Ahd/1990
M/s Hiralal Chandulal Chokshi
1986-87
1426/Ahd/1990
M/s Hiralal H. Bhagwati
1984-85
1429/Ahd/1990
M/s Hiralal H. Bhagwati
1986-87
For asst. yr. 1986-87 the Revenue has filed appeal against order of the CIT(A) relating to quantum under s. 143(3) and relating to grant of registration under s. 184(7) which are marked as ITA Nos. 1422 and 1423/Ahd/1990. The ground relating to quantum appeal containing the aforesaid ground is placed in the appeal file of ITA No. 1423/Ahd/1990.
13.1 The facts relating to disallowance of interest paid to the above sister concerns are same in all these cases. The disallowance was made by the AO on the ground that the sister concerns have been held to be non-genuine concerns and income of the said sister concerns was clubbed in the hands of the main firm. Consequently, interest paid to them was also disallowed after considering the interest received from such inter-firm. The CIT(A) deleted the said disallowance on the ground that all the four sister concerns have been held to be genuine concerns and their income has been held to be separately assessable in their respective hands on substantive basis. We have confirmed such findings given by the CIT(A) and, accordingly, the deletion of disallowance made in respect of interest paid to the sister concerns is also considered to be justified. The view taken by the CIT(A) in relation to such a ground in all the aforesaid appeals is, therefore, also confirmed.
14. In the result, all the appeals by the Revenue are dismissed.