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Showing contexts for: hero cycles in Hero Cycles Ltd., Ludhiana vs Addl. Cit, Ludhiana on 3 April, 2017Matching Fragments
(b) That the Ld. CIT(A) has erred in law and on facts in failing to appreciate that even though M/s Munjal Sales Corporation and M/s Hero Cycles Ltd. are not strictly related as per section 40A(2) of the Act, the partners of the former are family members of the directors of the latter and thus the key personnel of both the concerns are related;-
and hence, the ratio laid down by the Hon'ble Supreme Court in the case of C/T Vs. Glaxo Smith/dine Asia Pvt. Ltd. (236 CTR 113) is not applicable in this case."
8. The rate of commission of 1% had been paid to M/s Munjal Sales Corporation for the last many years and had always been accepted by the department.
9. The returned income of M/s Munjal Sales Corporation and the appellant company for the last 5 years and the years subsequent to the assessment year are as follows:
Assessment Year Hero Cycles Ltd. (Rs.) Munjal Sales Corp.
2012-13 1310649510 102596810 2011-12 2111707624 106352354 2010-11 1521475260 95072250 2009-10 813393500 75290510 2008-09 437366646 52061320 2007-08 606299210 31584380 2006-07 986908810 45145250 2005-06 457757450 30293070
(b) That the Ld. CIT(A) has erred in law and 9n facts in not appreciating the fact that the huge debit balances, that too to group concerns for an unreasonable period of time since there is an indirect cost attached to it which leads to reduction of profit of the assessee. The ratio of decision of the Hon'ble Punjab & Haryana Court in the case of M/s Abhishek Industries Ltd 298 ITR 1 squarely applies to this case."
37. The b r i e f facts are that during the course of assessment proceedings, the Assessing Officer called the details of debtors standing in the balance sheet of the assessee as on 31.03.2010. The Assessing Officer noted that there was a debit balance of Rs.17,02,59,780/- in the name of M/s Hero Exports and a debit balance of Rs.2,41,53,924/- in the name of M/s Hero Motors Ltd. as on 31.03.2010. With regard to the debit balance in the case of M/s Hero Exports, the Assessing Officer observed that there was a net opening balance of Rs.26,39,28,512/- as on 01.04.2009 and a net closing debit balance of 17,02,59,780/- as on 31.03.2010. The Assessing Officer further observed that though there were regular transactions between the two concerns but throughout the year, neither the balance had been squared of nor the debit balance has been turned into credit balance. The Assessing Officer also pointed out that the payments received by the assessee from M/s Hero Exports in the said account were proportionately too small to the amount outstanding as on any of the dates on which the payments were received. For example the first payment of Rs.12crores in this account was received on 15.05.2009 whereas the outstanding balance on the date after this payment was Rs.8,75,23,245/-. The Assessing Officer was of the view that the debit balances in the account of M/s Hero Exports was in the nature of providing interest free advances. The Assessing Officer asked the assessee to explain why the advances standing in the name of M/s Hero Exports and M/s Hero Motors may not be considered in the nature of interest free advance. The appellant submitted that all the transactions made by the assessee with M/s Hero Exports were in respect of sales of cycles and cycle parts to that firm. There was not even a single transaction involving any amount advanced by the assessee company to M/s Hero Exports during this year. The assessee further submitted that the opening balance in this account was Rs.26.39 crores. The assessee had sold products to M/s Hero Exports worth Rs.57.48 crores against which the firm had also made payments to the tune of Rs.63.77 crores and the net closing balance was 17.02 crores. The assessee submitted that the payments from M/s Hero Exports were being received in due course. The Assessing Officer was not satisfied with the appellant's submissions the Assessing Officer pointed out that M/s Hero Exports and M/s Hero Cycles Ltd. were a part of the Hero Group and the debit outstanding in the name of M/s Hero Exports was used by M/s Hero Exports to give interest free advances as under: