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2021 (6) TMI 899 - AT - Income TaxAdditions towards amount received towards interest - Loan used for the acquisition of any capital asset - waiver or remisssion of loan - Addition being amount remitted on account of unconditional and irrevocable standby letter of credit issued by National Australian bank and adjusted against loan received from GECSI holding that this receipt is revenue in nature - HELD THAT - The only argument of the AR is that the issue squarely covered in favour of the assessee by the decision of the honourable Supreme Court in case of Commissioner versus Mahindra and Mahindra Ltd 2018 (5) TMI 358 - SUPREME COURT and therefore the issue may be setaside to the file of the learned assessing officer with a direction to consider the claim of the assessee in view of this decision. DR did not have any objection to this aspect if the matter may be examined once again in the light of the decision of the honourable Supreme Court. Moreover, the assessee also needs to establish that the purpose of the loan was for purchase of terminals. There is another twist in the case of the assessee, which shows that the loan amount has been paid by Tabcorp Ltd to GE capital services India Ltd on behalf of the assessee, and further the original loan was credited to the overdraft account of the assessee. CIT A has categorically stated that assessee has not produced any evidence that the assessee has purchased any terminals. There was no evidence available that whether the loan was used for the acquisition of any capital asset or not. Moreover, the learned assessing officer while making the addition has also not stated that under which provisions of the act the above income is treated as business income of the assessee. Therefore, we set-aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to justify its claim in view of the decision of MAHINDRA AND MAHINDRA LTD. THRG. M.D. AO may examine the claim of the assessee and decide the issue afresh.Disallowances on depreciation on assets in the premises sealed by the government of India due to ban of lottery business. Addition on account of interest on inter corporate deposit given to MAC Solution Pvt Ltd.- HELD THAT - We have carefully considered that the above issue is squarely covered in favour of the assessee by the decision of the coordinate bench in 2016 (1) TMI 756 - ITAT DELHI for assessment year 2006 07 and 2007 08 wherein allowed the claim of the assessee following the decision of the honourable jurisdictional High Court in CIT versus Oswal Agro Mills Ltd 2010 (12) TMI 947 - DELHI HIGH COURT . Therefore respectfully following the decision of the coordinate bench in assessee‟s own case we also direct the learned assessing officer to allow the depreciation on assets in the premises sealed by the government of India due to ban on lottery business. Accordingly, ground number 2 of the appeal of the assessee is allowed. Accrual of income - Addition on account of interest ICD given - assessee company is along with other parties entered into a joint venture agreement and formed a company for marketing of lottery - HELD THAT - Assessee before us and stated that there is an uncertainty of recovery of the original amount of advances (ICD) and therefore in absence of any reasonable certainty of the recovery of the principal sum the interest cannot be said to be accrued to the assessee. The assessee has not produced any document/resolution/financial position of the companies to move the assessee has given ICD. We are dealing with the case for the assessment year 2008 09 in which year the assessee has already recovered 75 lakhs. Further out of the total advance of ₹ 503 lakhs assessee has already recovered ₹ 3 00 lakhs. Therefore, we do not find any evidence placed before us or before the lower authorities to even remotely suggest that assessee is not able to recover the above sum. We do not find any infirmity in the orders of the lower authorities in holding that interest has accrued to the assessee Accordingly, ground number 3 of the appeal of the assessee is dismissed.
Issues Involved:
1. Treatment of a sum received from Tabcorp as revenue or capital receipt. 2. Disallowance of depreciation on assets in premises sealed by the government. 3. Addition of interest income on Inter-Corporate Deposits (ICDs) given to MAC Solutions Pvt. Ltd. 4. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. Detailed Analysis: 1. Treatment of Sum Received from Tabcorp: The primary issue is whether the sum of ?99,512,500 received from Tabcorp should be treated as a revenue receipt or a capital receipt. The assessee claimed it as a capital receipt, arguing the loan was for capital expenditure, while the AO treated it as revenue receipt. The CIT(A) upheld the AO's decision, stating the loan was used for business purposes rather than acquiring capital assets. The Tribunal set aside the issue to the AO for fresh examination in light of the Supreme Court decision in Mahindra and Mahindra Ltd., directing the assessee to justify its claim with evidence. 2. Disallowance of Depreciation: The second issue pertains to the disallowance of depreciation of ?89,311 on assets in premises sealed due to a ban on lottery business. The Tribunal found the issue covered in favor of the assessee by a previous decision in the assessee's own case for AY 2007-08, following the jurisdictional High Court decision in CIT vs. Oswal Agro Mills Ltd. Consequently, the AO was directed to allow the depreciation. 3. Addition of Interest Income on ICDs: The third issue involves the addition of ?16,54,200 on account of interest on ICDs given to MAC Solutions Pvt. Ltd. The assessee argued that the interest had not accrued due to the uncertain financial position of the borrower. However, the Tribunal upheld the lower authorities' decision, stating that the interest had accrued as per the mercantile system of accounting and should be taxed in the year of accrual, notwithstanding the uncertainty of collection. 4. Initiation of Penalty Proceedings: The fourth issue concerns the initiation of penalty proceedings under Section 271(1)(c). The Tribunal deemed this issue premature and dismissed it. Separate Judgment for AY 2009-10: For AY 2009-10, the issues were similar to those in AY 2008-09. The Tribunal followed its earlier decision, allowing the depreciation claim of ?75,914 and upholding the addition of ?16,54,200 on account of interest on ICDs. The initiation of penalty proceedings was again deemed premature and dismissed. Conclusion: The appeals were partly allowed for both assessment years, with specific directions for fresh examination of the treatment of the sum received from Tabcorp and allowance of depreciation on sealed assets. The addition of interest income on ICDs was upheld, and the initiation of penalty proceedings was dismissed as premature.
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