2011 (11) TMI 741 - AT - Income Tax

Summary

Issues Involved:
1. Relief in loan utilized for the purchase of depreciable assets.
2. Allowance of interest on loan not paid by the assessee.
3. Depreciation on assets purchased out of funds received from financial institutions.
4. Admission of fresh evidence without affording an opportunity to the Assessing Officer.

Summary:

Issue 1: Relief in Loan Utilized for Purchase of Depreciable Assets
The Revenue contended that the CIT(A) erred in allowing relief for a loan of Rs. 4,61,36,264/- utilized for purchasing depreciable assets. The assessee argued that the loan waiver by State Bank of India and M.P. Financial Corporation was a capital receipt and should not be added back. The CIT(A) held that the loan waived was of a capital nature and could not be added back, which was upheld by the Tribunal.

Issue 2: Allowance of Interest on Loan Not Paid by the Assessee
The Revenue argued that the CIT(A) wrongly allowed interest on a loan amounting to Rs. 9,98,01,259/- which was not paid by the assessee. The assessee contended that the interest was not claimed as a deduction in any year, and thus, the addition u/s 41(1) was incorrect. The Tribunal upheld the CIT(A)'s decision, stating that the interest liability was never claimed nor allowed, and thus, could not be added back u/s 41(1).

Issue 3: Depreciation on Assets Purchased Out of Funds Received from Financial Institutions
The Revenue's ground regarding depreciation on assets purchased out of funds received from financial institutions was dismissed as it did not arise from the A.O.'s or CIT(A)'s order. The Tribunal found no basis for this ground and dismissed it.

Issue 4: Admission of Fresh Evidence Without Affording Opportunity to the Assessing Officer
The Revenue claimed that the CIT(A) entertained fresh evidence without giving the A.O. an opportunity to examine it. The Tribunal noted that the CIT(A) sought clarifications from the auditor within his powers u/s 250(4) and did not consider it as additional evidence under Rule 46A. Thus, this ground was also dismissed.

Conclusion:
The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s order in favor of the assessee. The appeal of the Revenue in ITA no.651/Agr/2008 was dismissed.