- (1.) This appeal has been preferred by the Revenue under section 260A of the Income-tax Act, 1961 (in short, "the Act"), for the assessment year 2008-09 against the order of the Income-tax Appellate Tribunal, Chandigarh Bench "B" (in short, "the Tribunal"), dated August 22, 2012, annexure A3 in I.T.A. No. 109/Chd/2012, claiming the following substantial questions of law: "(i) Whether, on the facts and in law, the hon'ble Income-tax Appellate Tribunal was right in holding that the provisions under section 2(22)(e) of the Income-tax Act, 1961, are not attracted in this case? (ii) Whether the hon'ble Income-tax Appellate Tribunal was right in law in holding that the transactions of advancing of money by the assessee to the company and earning interest on it amounted to business transactions? (iii) Whether the hon'ble Income-tax Appellate Tribunal was right in law in holding that no disallowance under section 36(1)(iii) is called for in this case, failing to appreciate that the assessee has not been able to establish that the initial purpose of advancing amount to M/s. Nalanda Spinners Ltd. was for the purpose of commercial expediency?" A few facts relevant for the decision of the controversy involved, as narrated in the appeal, may be noticed. The respondent-assessee is engaged in trading of vehicle and spare parts, running of vehicle workshop, insurance commission, DMA commission from banks and finance companies and C & F agent. It filed its return of income for the assessment year under consideration on August 23, 2008, declaring loss of Rs. 30,61,523. The case was selected for scrutiny and assessment under section 143(3) of the Act was made by the Assessing Officer on November 26, 2010, annexure A.1 at an income of Rs. 2,55,79,453. Additions/disallowances of Rs. 2,75,00,000 under section 2(22)(e) of the Act, Rs. 7,90,796 under section 14A of the Act and Rs. 3,50,000 under section 36(1)(iii) of the Act were made. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income-tax (Appeal)-II, Ludhiana (Commissioner of Income-tax (Appeals)). Vide order dated November 30, 2011, annexure A.2, the Commissioner of Income-tax (Appeals) partly allowed the appeal and deleted the above additions. Not satisfied with the order, the Revenue filed an appeal before the Tribunal. Vide order dated August 22, 2012, annexure A.3, the Tribunal partly allowed the appeal. Hence, the present appeal by the Revenue.
(2.) We have heard learned counsel for the parties and perused the record.
(3.) Learned counsel for the Revenue submitted that there was no commercial expediency and in such a situation, the interest paid by the assessee to M/s. Dada Motors Pvt. Ltd. was rightly disallowed by the Assessing Officer under section 36(1)(iii) of the Act. Reference was made to the judgment of the apex court in S.A. Builders Ltd. v. CIT, 2007 288 ITR 1 (SC).;