2015 (7) TMI 216 - HC - Income Tax

Accrual of interest - Disallowance of interest not charged on debit balance? - Tribunal upholding the order of CIT (A) who deleted the disallowance - Held that - The issue has been discussed by the ITAT in paragraph 49 and 50 in which it has given reasons for upholding the findings of CIT (A). The issue is also covered Inter party in CIT v. Dhampur Sugar Mills Ltd. 2005 (4) TMI 567 - ALLAHABAD HIGH COURT - Decided in favour of the assessee. Addition on account of sale of baggasses at lower rate than market rate to tis sister concern - Tribunal upholding the order of CIT (A) who deleted the disallowance - Held that - No material to record finding that market price of baggasse was ₹ 18/- throughout the year in the relevant financial year, to hold that the agreement between the appellant and M/s U.P. Straw & Agro Products Ltd. was not a genuine transaction. The agreement was not between the parties before the accounting year to ensure continuous supply of bagasses to sister concern. Any interruption in supply could have affected the manufacturing process of the purchaser company. The rates of sale given by the A.O. ranged between ₹ 12.41 to ₹ 18/- per qtl. in the financial year 1987-88. The bagasse is a byproduct of which prices fluctuate during the year. If there was agreement to the sister concern for bulk supply, which was entered into prior to the accounting year at ₹ 10/- per qtl., it cannot be said that the agreement was not genuine or that price was fixed to suppress the turn over of sale and the resultant profits. The findings recorded by ITAT and the circumstances in which the rate of ₹ 10/- per qtl. was found to be reasonable are essentially findings of fact, which do not call for interference by the Court - Decided in favour of assessee. Depreciation booked in the P/L account - Tribunal upholding the order of CIT (A), who directed the Assessing Officer not to disturb the depreciation booked in the P/L account while the depreciation on revalued of asset in not allowable for the purpose of computation of income u/s 115J - Held that - The question is covered by the judgment of this Court in CIT, Bareilly v. Rampur Distillery and Chemicals Ltd. (2013 (1) TMI 59 - ALLAHABAD HIGH COURT ) wherein held that the Tribunal did not commit any error in law in allowing the depreciation on the revaluation reserve, which is a prescribed and statutory method of accounting, and by which the book profits do not get reduced, giving any added benefit to the companies including Minimum Alternate Tax (MAT) companies. - Decided in favour of the assessee

Summary

Issues:
1. Disallowance of interest not charged on debit balance.
2. Addition made on account of sale of bagasses at a lower rate.
3. Depreciation on revalued assets not allowable for income computation.

Issue 1: Disallowance of interest not charged on debit balance

The appeal concerned an order by the Income Tax Appellate Tribunal related to Assessment Year 1988-89. The Tribunal upheld the findings of the CIT (A) in deleting the disallowance of interest not charged on a debit balance. The ITAT discussed the issue in detail, citing a similar case in favor of the assessee. The Court decided the issue in favor of the assessee based on the precedents and facts presented.

Issue 2: Addition made on account of sale of bagasses at a lower rate

The case involved the sale of bagasse by a sugar mill to its sister concern at a lower rate than the market price. The Assessing Officer added an amount due to the price difference, alleging the transaction was not genuine. However, the CIT (A) and ITAT upheld the deletion of the addition, considering the agreement between the parties and the overall business context. The Court found that the agreement for bulk supply at a fixed rate was genuine, especially given the fluctuating market prices of bagasse. The decision was based on factual findings and circumstances, leading to a ruling in favor of the assessee.

Issue 3: Depreciation on revalued assets not allowable

The Tribunal upheld the CIT (A)'s direction not to disturb the depreciation booked in the Profit and Loss account, even though depreciation on revalued assets is not allowable for income computation under the Income Tax Act. The Court referred to a previous judgment to support this decision, thereby ruling in favor of the assessee. The questions of law were answered accordingly, and the income tax appeal was dismissed.

This judgment addressed various issues related to income tax assessments and upheld decisions favoring the assessee based on legal reasoning, factual analysis, and precedents.