- (1.) CHANDIGARH passed in ITA Nos. 1221/Chd/1998 and 1034/Chd/1999 in respect of the asst. yr. 1995 -96, proposing the following substantial questions of law : "(i) Whether, on the facts and circumstances of the case, the Tribunal was right in law in deleting the addition made on account of interest on interest -free loans advanced by the assessee company to its subsidiary and associate companies in which the directors were interested ? (ii) Whether, on the facts and circumstances of the case, the Tribunal was right in law in deleting the addition made on account of interest on investment in shares by the assessee company in its subsidiary and associate companies ? (iii) Whether, on the facts and circumstances of the case, the Tribunal was right in law in allowing the fees paid by the assessee company to the Punjab Pollution Board, Patiala in the year of payment even though the payment resulted in enduring benefit to the assessee company for the period of 15 years -
(2.) DURING the course of assessment for the asst. yr. 1995 -96, the AO made following additions to the income declared by the assessee : "(i) Rs. 23,02,891 on account of interest on interest -free loans advanced by the assessee company to its subsidiary companies and associate companies in which the directors were interested. (ii) Rs. 44,89,890 on account of interest on investments in the share capital of subsidiary companies. (iii) Rs. 1,86,667 on account of disallowance of fee paid to the Punjab Pollution Board, Patiala holding that it was fee paid for subsequent years and was thus not allowable for the assessment year under reference."
(3.) THE CIT(A) partly allowed the appeal and held that additions in respect of advances made by the assessee out of overdraft account only, are justified. Reliance was placed on judgment of the Hon'ble Supreme Court in CIT vs. Rajendra Kumar Moody 1978 CTR (SC) 141 : (1978) 115 ITR 519 (SC) and also the decision of the Tribunal in the case of the assessee for the earlier assessment years. It was further held that there was no nexus between borrowed capital and the investment in subsidiaries and additions on that account was set aside. Disallowance of fee paid to the Pollution Board was, however, sustained. The Tribunal set aside the finding of CIT(A) on the issue of disallowance in respect of payments made to the Pollution Board and held that spreading over of the expenditure for 15 years, the period of validity of the certificate was not called. Reliance was placed on judgments of Madras High Court in CIT vs. Hotel Savera (1998) 148 CTR (Mad) 585 : (1999) 239 ITR 795 (Mad) and Madhya Pradesh High Court in D&H Secheron Electrodes (P) Ltd. (1983) 35 CTR (MP) 41 : (1983) 142 ITR 528 (MP). We have heard learned counsel for the parties and perused the record.;