2003 (1) TMI 254 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of interest on borrowed funds.
3. Addition of initial security deposits for obtaining contracts.
4. Disallowance of retention money.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The Revenue's appeal for the assessment year 1991-92 was filed 97 days late. The Revenue requested condonation of the delay, citing the loss of documents in transit between the AO in Chandigarh and the CIT(C) in Ludhiana. The Supreme Court's judgment in *Collector, Land Acquisition vs. Mst. Katiji & Ors.* was relied upon to argue for a liberal interpretation of "sufficient cause." The assessee opposed, citing negligence and inaction by the AO, referencing the Supreme Court's decision in *Vedabai alias Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil & Ors.*. The Tribunal concluded that the delay was not deliberate and condoned it under Section 253(5) of the IT Act, emphasizing substantial justice over technical considerations.

2. Disallowance of Interest on Borrowed Funds:
The common issue for both assessment years was the disallowance of interest on funds borrowed by the assessee and advanced to a sister concern, M/s SAB Credits Ltd., without interest. The AO disallowed interest on the grounds of a clear nexus between the borrowed funds and the advances. The CIT(A) partially upheld and partially deleted the disallowance. The Tribunal referenced its earlier decision in the assessee's case for the assessment years 1989-90 and 1990-91, which was against the assessee. The Tribunal found the assessee's arguments regarding the source of funds unconvincing and upheld the AO's disallowance, restoring the AO's order and dismissing the assessee's appeal.

3. Addition of Initial Security Deposits for Obtaining Contracts:
The AO disallowed the assessee's claim of Rs. 11,92,936 as a deduction for initial security deposits, considering them capital in nature. The CIT(A) upheld this disallowance. Both parties agreed that the issue was covered by the Tribunal's earlier decision in the assessee's case for the assessment years 1989-90 and 1990-91, where the Tribunal had ruled against the assessee. The Tribunal followed its previous decision, confirming the CIT(A)'s order and dismissing the assessee's appeal on this ground.

4. Disallowance of Retention Money:
For the assessment year 1994-95, the AO disallowed the assessee's claim for deduction of retention money, which was retained by the Departments from running bills. The CIT(A) deleted the disallowance, relying on orders from earlier assessment years. Both parties acknowledged that the issue was covered by the Tribunal's earlier decision favoring the assessee. The Tribunal reaffirmed its previous ruling, confirming the CIT(A)'s deletion of the disallowance and dismissing the Revenue's appeal on this ground.

Conclusion:
- The appeals filed by the assessee for both assessment years were dismissed.
- The Revenue's appeal for the assessment year 1991-92 was allowed.
- The Revenue's appeal for the assessment year 1994-95 was partly allowed.