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Issues involved: Disallowance of interest claimed in the Finance division of Chandra Transports; Addition of notional interest on Sundry debtors balances in Coastal Packagings.
Disposal of Appeals: Three appeals by the assessee against the order of Ld CIT(A), Guntur for assessment years 1998-99, 2003-04, and 2004-05 were disposed of collectively due to identical issues. Issue 1 - Disallowance of Interest: The assessee, involved in various business concerns, claimed interest payments in the finance division of Chandra Transport. The AO disallowed a proportionate interest amount in each year, citing diversion of loan funds to sister concerns without collecting interest. The Ld CIT(A) upheld the disallowance. The Tribunal noted a similar issue in a previous year and set it aside for verification. The current issue was also remanded to the AO for uniform consideration across all years. Issue 2 - Notional Interest on Sundry Debtors: The AO added notional interest on Sundry debtors' balances in Coastal Packagings, despite the assessee not collecting interest from debtors. The assessee explained the compulsion to oblige creditors' interest terms and the impracticality of collecting interest from numerous debtors. The Tribunal, citing legal precedent, ruled in favor of the assessee, directing the AO to delete the notional interest for all three years. Additional Issue - Bad Debts Disallowance: The AO disallowed bad debts claimed by the assessee for 2003-04, questioning the debt's actual bad status. The Tribunal clarified that the debt write-off sufficed for claiming bad debt u/s 36(1)(vii), directing the AO to delete the disallowance. Conclusion: All three appeals by the assessee were allowed for statistical purposes, with directions to delete the disallowances and notional interest. The judgment was pronounced on 11th November 2009 by the Appellate Tribunal ITAT VIZAG.
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