ITA No. 638 of 2005 1 In the High Court of Punjab and Haryana, Chandigarh. ITA No. 638 of 2005 Date of Decision: 21.01.2009 The CIT, Patiala. ....Appellant. Versus Punjab Tractors Ltd., Ropar. ....Respondents. Coram:- Hon'ble Mr.Justice J.S. Khehar Hon'ble Mr. Justice Nawab Singh Present: Mr. Urvashi Dhugga, Advocate for the appellant. Mr. Pankaj Jain, Advocate for the respondent. ... J.S. Khehar, J. (Oral). According to the learned counsel for the appellant, two questions of law arise for consideration at the hands of this Court: -- “Whether on the facts and in the circumstances of the case, the ITAT was right in law in deleting the addition made on account of interest on interest-free loans advanced by the assessee – company to its sister concern, M/s. Swaraj Mazda Ltd.? Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that for the purpose of calculation of deduction u/s 80HCC of the Income Tax Act, 1961, excise duty and sales tax should not be included in the ITA No. 638 of 2005 2 ‘total turnover’ ?” In so far as, the first question extracted hereinabove is concerned, during the course of hearing, learned counsel for the rival parties are agreed that the deduction available to an assessee under Section 36 (1)(iii) of the Income Tax Act, 1961 in respect of the interest component on capital borrowed, is to be determined in consonance with the judgment rendered by the Apex Court in S.A. Builders Ltd. vs. Commissioner of Income-Tax (Appeals) and another (2007) 288 ITR 1, so as to determine the commercial expediency of the assessee, in extending interest free loan. Since the needful had not been done by the Assessing Officer, as also, the Appellate Authorities, learned counsel for the parties are agreed that the orders passed by the Assessing Officer as well as the Appellate Authorities be set aside. Learned counsel for the parties are also agreed that the adjudication of the present controversy be remanded back to the Income Tax Appellate Tribunal, Chandigarh, requiring it to re-adjudicate the issue whether the respondent - assessee is entitled to deduction under Section 36 (1)(iii) of the Income Tax Act, 1961, on the interest component in respect of capital borrowed, based on the parameters laid down in S.A.Builders Ltd.'s case (supra), and while doing so, to grant liberty to the rival parties to lead evidence, if they so desire. Accepting the submissions advanced by learned counsel for the parties, the matter is remanded to the Income Tax Appellate Tribunal, Chandigarh. The parties are directed to appear before the Income Tax Appellate Tribunal, Chandigarh on 16.2.2009. In the aforesaid circumstances, the impugned orders are set ITA No. 638 of 2005 3 aside to the limited extent of determination of deduction claimed by the respondent-assessee under Section 36(1)(iii) of the Income Tax Act, 1961. In so far as, the second question is concerned (as extracted hereinabove), it is the common case of the learned counsel for the rival parties, that the proposition of law canvassed at the hands of the Revenue stands adjudicated upon by this Court in C.I.T. Vs. Vardhman Polytex Ltd., (2008) 296 ITR 382, wherein the issue has been decided against the Revenue and in favour of the assessee. Accordingly, the second issue, as noticed hereinabove, raised so as to challenge the impugned order passed by the Income Tax Appellate Tribunal is not acceptable in law and is, accordingly, declined. The instant appeal stands disposed of in the aforesaid terms. ( J.S. Khehar ) Judge ( Nawab Singh ) Judge. 21.01.2009 sk.