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2.(A) On the facts and in the circumstances of the case and m law, the learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of proportionate interest on the advances of Rs. 1,50,00,000/-- to Lexicon Finance P. Ltd, and the reasons assigned for doing so are wrong and contrary to the facts and the provisions of the Act and Rules made thereunder.

(B) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in rejecting the additional evidence being the confirmation letter from Reliance Silicones (India) Ltd; to' the effect that they had borrowed funds from Lexicon Finance P. Ltd. against the guarantee and pledge of shares of IPCA Laboratories Ltd. belonging to the appellant and the reasons assigned by him for doing so are wrong and" contrary to the provisions of the Act and Rules made thereunder.

He further submitted that the assessee is engaged in the exporting of the films in earlier years. The Assessing Officer did not agree with the assessee.

The Assessing Officer noted that the assessee has made interest free advances to the following companies also without any business purpose.

   Sr. No.   Name of the Party                   Amount (Rs.)
      1      East West Travels & Tours                850,000
      2      Lexicon Finance (P) Ltd.              15,000,000
      3      Amitabh Bachchan Corporation Ltd.     11,050,589
      4      Shri Amitabh Bachchan                    814,459
      5      Pashupati (P) Ltd                     12,000,000
      6      Cosmos Communications (P) Ltd.         6,000,000
      7      Aminex Communication (P) Ltd           2,500,000
      8      Welford A P Ltd                        7,000,000
      9      Wonil Toys (P) Ltd.                    1,000,000
     10      Gammon India Ltd.                      3,060,000
                                                   59,275,048

8. The Assessing Officer noted that the assessee has advanced a sum of `1,50,00,000/- to Lexicon Finance P. Ltd, `8,14,459/- to Mr. Amitabh Bachchan and `30,60,000/- to Gammon India Ltd. The Assessing Officer was of the view that the assessee has advanced borrowed capital to these parties and not for the purpose of business. Therefore, he disallowed proportionate interest. When the matter went before the CIT(A), he confirmed the order of the Assessing Officer.

9. After hearing the rival submissions and going through the order of the tax authorities below, we noted so far as the disallowance of interest on the advances given to Lexicon Finance (P) Ltd. is concerned, the said disallowance was also made by the CIT(A) in the preceding assessment year i.e 1997-98 and when the matter came before this Tribunal, vide its order dated 16.03.2007, in ITA No.6365/Mum/2003 and ITA Nos. 6497/Mum/2003 in the case of the assessee itself held as under:

The learned AR before us even though tried to distinguish the fact that in A.Y. 1997-98, the CIT(A) confirmed the disallowance on the ground that the assessee could not produce any evidence to show that Lexicon Finance (P) Ltd., was indeed going to initiate liquidation proceedings against RSIL. In the impugned assessment year, the assessee has filed confirmation from RSIL dated 23.11.2004 that they had borrowed a sum of `1,50,00,000/- against the guarantee of the assessee and pledge of shares of IPCA Laboratories held by the assessee. The assessee company had to release the shares of IPCA Laboratories which were pledged and to avoid the loss, which could have been caused due to sale of those shares by Lexicon Finance Limited to recover the money. On this basis, it was contended that advance was given by the assessee to Lexicon Finance Limited for the purpose of business but since in the preceding assessment year this issue has been restored to the file of the Assessing Officer for re-adjudication in accordance with the decision of Hon'ble Supreme Court in the case of S.A.Builders (supra), we therefore, set aside the order of the CIT(A) on this issue with the direction that the Assessing Officer shall verify the confirmation submitted by the assessee from RSIL and in case the Assessing Officer is satisfied with the confirmation filed by the assessee as genuine, the addition so made be deleted.