2012 (12) TMI 442 - AT - Income Tax

Disallowance of loss on devaluation of shares - Shares are held as stock in trade and valued on Cost or NRV whichever is lower Held that - As the method of accounting adopted by the assessee was accepted by the Department in the earlier years. Not even single evidence has been placed on record by the A.O. to prove that the transaction is not genuine. In view of the consistent policy of the assessee company addition liable to be deleted. Issue decides in favour of assessee Disallowance of interest in respect of loan given to sister concerns Funds were given to its sister concerns for the purpose of business expediency - Held that - Following the decision in assessee own case related to previous years that it cannot be said that the funds given to sister concerns were not for the purpose of business expediency of the assessee. Such loan was used to repay of loan taken from the bank. No fresh borrowing from any of the banks and it is only due to addition of interest payable during the year and other miscellaneous expenditure that the figure of loan has undergone a change. Issue decides in favour of assessee

Summary

Issues:
1. Disallowance of business loss including transaction backed delivery as non-genuine.
2. Disallowance of interest.
3. Non-admittance of additional ground of appeal regarding non-allowability of interest on unsecured loans.
4. Charging of interest under sections 234B of the Act.

Analysis:

Issue 1:
The appeal was against the disallowance of business loss, including transaction backed delivery, deemed non-genuine. The assessee argued that a co-ordinate bench decision favored them, citing consistent valuation policies. The Tribunal, following previous decisions, ruled in favor of the assessee, setting aside the Commissioner's order.

Issue 2:
Regarding the disallowance of interest, the Tribunal referred to earlier years' decisions and found that interest was payable for commercial expediency, with no fresh borrowings during the year. The Tribunal directed the Revenue to allow the interest claim, setting aside the Commissioner's order.

Issue 3:
The challenge was against the non-admittance of an additional ground on non-allowability of interest on unsecured loans. The Tribunal considered a similar case's decision, where interest not provided in accounts could still be allowed if the liability existed. Relying on this precedent, the Tribunal allowed the ground raised by the assessee.

Issue 4:
The final issue concerned the charging of interest under sections 234B of the Act. The Tribunal held that such interest was consequential and directed the Assessing Officer to give effect in line with their findings. Consequently, the assessee's appeal was allowed, favoring them on all grounds raised.