9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (2) TMI 167 - AT - Income TaxProvision for payment made on behalf of subsidiary company claimed as expense - assessee had a fully owned subsidiary company styled as Gujarat Narmada Auto Limited which was engaged in the manufacture of two/ three wheelers - CIT(A) allowed the claim - Held that - Even if the version of the CIT(A) taken as correct, then also, the loss being crystallized on 3.3.1997, the same was in the Asstt.Year 1997-98 and not during the assessment year under consideration i.e. Asstt.Year 1998-99. Therefore, the CIT(A) was not justified in deleting the disallowance on the above count. Further, no material was brought on before us to show that the assessee s liability to make payment of ₹ 3.50 crores was crystallized during the under consideration and that no part of the payments were also made during the year under consideration. Therefore, in our considered view, the CIT(A) was not justified in deleting the disallowance made by the AO. We, therefore, set aside the order of the CIT(A) in respect of the issue under consideration and restore back the order of the AO. - Decided in favour of revenue. Disallowance of interest on interest free loans / advances given by the assessee to its subsidiaries and associate concerns - Held that - AO has disallowed interest expenditure on advances given to the sister concern on the ground that the borrowed funds were utilized for business purpose by the assessee by advancing the interest free advance to the sister concerns. On appeal the CIT(A) had deleted the disallowance by following his order for Asstt.Year 2007-08. We find that the order of the CIT(A) for Asstt.Year 1997-98 was appealed by the Revenue, and the Tribunal confirmed the order of the CIT(A) deleting the disallowance of interest expenditure. No distinguishing features could be pointed out by the DR. It is also observed that in the years under appeal also, advances were given to the same parties. Thus, the facts being identical, respectfully following the precedents, we confirm the order of the CIT(A), and the grounds of the appeal of the Revenue in all the years under appeal are dismissed. - Decided in favour of assessee.
Issues Involved:
1. Deduction of Rs. 3.50 crores provision made for payment on behalf of Gujarat Narmada Auto Ltd. (GNAL). 2. Disallowance of interest on interest-free loans/advances given by the assessee to its subsidiaries and associate concerns. Issue-wise Detailed Analysis: 1. Deduction of Rs. 3.50 crores provision made for payment on behalf of Gujarat Narmada Auto Ltd. (GNAL): The Revenue challenged the deletion of the addition of Rs. 3.50 crores by the CIT(A), which was a provision made by the assessee for payment on behalf of GNAL. The AO disallowed the deduction, arguing that the provision for loss/expenses is not allowable, and expenses can only be allowed based on actual payment. The AO noted that the payments were made in the financial years 1999-2000 and 2000-01, not in the year under consideration (1998-99). On appeal, the CIT(A) allowed the deduction, reasoning that the loss was ascertainable and final during the year under consideration as the liquidator had no balance left for realization, making the loss on account of guarantee final. The CIT(A) relied on the decision of the Supreme Court in the case of CIT vs. Amalgamations Pvt. Ltd. (226 ITR 188). The Tribunal, however, found that even if the loss was crystallized on 3.3.1997, it would pertain to the Asstt.Year 1997-98, not 1998-99. As no part of the payments was made during the year under consideration, the Tribunal set aside the CIT(A)'s order and restored the AO's order. 2. Disallowance of interest on interest-free loans/advances given by the assessee to its subsidiaries and associate concerns: The AO disallowed interest expenditure of Rs. 8,74,18,857/- for A.Y.1998-99, Rs. 8,32,03,857/- for A.Y.1999-2000, and Rs. 7,92,30,945/- for A.Y.2000-2001, holding that interest-bearing funds were diverted for interest-free advances to subsidiaries and associate concerns. On appeal, the CIT(A) deleted the disallowance, following his own decision for A.Y.2007-08, where the commercial expediency was proved as directed by the ITAT after considering the Supreme Court decision in S.A. Builders. The Tribunal upheld the CIT(A)'s decision, noting that similar disallowances were deleted in earlier years, including A.Y.2003-04, where the Tribunal had allowed the claim of the assessee. The Tribunal found no distinguishing features in the years under appeal and confirmed the CIT(A)'s order, dismissing the Revenue's grounds of appeal. Cross Objections by the Assessee: The assessee filed Cross Objections for A.Y.1998-99 and A.Y.2000-01, seeking direction to allow the deduction of Rs. 3.50 crores in the year of payment if the Tribunal held that the deduction was allowable in the year of payment. However, these Cross Objections were dismissed as they were barred by limitation and lacked plausible reasons for condonation of delay. Additionally, the Tribunal did not conclude that the deduction was allowable in the year of payment, rendering the Cross Objections meritless. Conclusion: The Tribunal set aside the CIT(A)'s order for A.Y.1998-99 regarding the Rs. 3.50 crores provision and restored the AO's order. The appeals of the Revenue for A.Y.1999-2000 and 2000-01 were dismissed, upholding the CIT(A)'s deletion of disallowance of interest expenditure. The Cross Objections filed by the assessee for both years were dismissed.
|
