COMMISSIONER OF INCOME TAX Vs. ATUL ENGINEERING UDYOG

JUDGEMENT

(1.) The present appeal has been filed by the Department under Section 260-A of the Income Tax Act (hereinafter referred to as the "Act") against the order of the Tribunal for the Assessment Year 2006-07.

(2.) The facts leading to the filing of the appeal is, that the assessee is a partnership firm and also has a sister concern, which is a Private Limited Company known as M/s Atul Generators Pvt. Ltd.

(3.) The assessee was incurring heavy losses. On the other hand, the sister concern was unable to utilise the natural gas that was being supplied by M/s Gas Authority of India Limited (hereinafter referred to as "GAIL") under a contract wherein the sister concern was under an obligation to obtain 80% of the quantity of gas as a minimum guarantee. The assessee had generators worth Rs.93 lacs for the purpose of generating power, but had no gas. Accordingly, an agreement was executed between the assessee and its sister concern whereby generators were supplied by the assessee for which a floating security deposit of Rs.80 lacs was given by the sister concern. In this agreement, the sister concern was to use the generators and generate electricity on the basis of the gas supplied by the GAIL. In return, the sister concern would supply electricity to the assessee at concessional rate. The deposit was made by the sister concern to the assessee in the ordinary course of business. The assessee firm is not a shareholder in the Company though its partners are shareholders in the Company. The payment received by the assessee was utilised for payment to the creditors from whom the assessee had purchased the raw material for manufacture of its products and other statutory liabilities.