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2003 (1) TMI 254

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..... of appeal were lost in transit and were not traceable till date. This resulted in delay in filing the appeal. It was contended that there being sufficient reason for the delay, the same should be condoned. Reliance has also been placed on the judgment of Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji Ors. (1987) 62 CTR (Syn) 23 (SC) : (1987) 167 ITR 471 (SC). 2.1 The learned counsel for the assessee strongly opposed the request of the Revenue for condoning the delay. He submitted that the delay was not of a few days but of 3 months and 7 days. The delay in this case was caused due to negligence and inaction on the part of the AO. Relying on the judgment of Supreme Court in the case of Vedabai alias Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil Ors. (2002) 173 CTR (SC) 300 : (2002) 253 ITR 798 (SC), the learned counsel submitted that a distinction must be made between a case where the delay is inordinate and a case where the delay is of a few days. He submitted that in this case, the delay is not of a few days. Therefore, a more cautious approach would be required for condoning the delay. He further submitted that while deciding t .....

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..... appropriate action well before the due date of filing the appeal. The fact that these records had been lost while in transit and were not traceable till the date of filing of appeal remains uncontroverted. Even if we attribute the delay due to negligence or inaction on the part of the AO, the bona fide of the Revenue could not be called into question. Therefore, even the judgment of Supreme Court in the case of State of West Bengal vs. Administrator, Howrah Municipality, does come to the rescue of the Revenue. Even in the said case, the Hon'ble Supreme Court has held that the words "sufficient cause" should receive a liberal construction so as to advance the cause of substantial justice. The delay in filing the appeal in that case was considered to be due to sufficient cause and was condoned. Similarly, in the case of Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil Ors., relied upon by the learned counsel, the Hon'ble Supreme Court has held that "sufficient cause" should receive a liberal construction. No hard and fast rule can be laid down in this regard and the Court has to exercise its discretion on the facts of each case keeping in mind that in construing the expres .....

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..... the order for the earlier assessment years. The AO further observed that in the same manner, the assessee had advanced further amount of Rs. 3 lakhs by withdrawing from the cash credits account with State Bank of Patiala. Similarly, amounts of Rs. 9 lakhs and Rs. 25.85 lakhs were also withdrawn and given to the above sister concern on the dates when there was a debit balance of Rs. 2,08,36,531. He, therefore, disallowed the interest of Rs. 20,08,836 for the asst. yr. 1991-92. In the same manner and on same facts, the AO disallowed the interest of Rs. 22.37 lakhs for the asst. yr. 1994-95. 4. Being aggrieved, the assessee impugned the disallowance of interest in appeals before the CIT(A). It was contended that before the CIT(A) that out of fresh loans of Rs. 37.85 lakhs, advance of Rs. 3 lakhs was given from current account, which does not constitute borrowed funds. The learned CIT(A) examined this submission of the assessee and found that entire advance of Rs. 37.85 lakhs given in the assessment year under reference including an amount of Rs. 3 lakhs were relatable to the cash credits account where there was a debit balance of more than Rs. 2 crores. Thus, the entire advance of .....

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..... ceipts and not out of the borrowed funds. Therefore, proportionate interest on these amounts requires to be allowed. He further submitted that out of the old balance of Rs. 82 lakhs given to M/s SAB Credits Ltd., the assessee received an amount of Rs. 26.50 lakhs from the said concern on 29th June, 1990. On the same date, an amount of Rs. 26,48,346 was given to M/s Malwa Cotton, another sister concern. M/s Malwa Cotton returned an amount of Rs. 25,84,860 on the same date to the assessee and on the same day, the assessee again returned an amount of Rs. 25.85 lakhs to M/s SAB Credits Ltd. Thus, it was contended that there was no fresh advance of Rs. 25.85 lakhs given to M/s SAB Credits Ltd., as the same was returned out of the amount of Rs. 26.50 lakhs received on the same date. In fact, the amount received from M/s SAB Credits Ltd. exceeded by Rs. 80,000 given to the same concern. Therefore, proportionate interest on this amount could not be disallowed. He also placed a copy of cash credits account of the assessee with M/s State Bank of Patiala and also a copy of the account of M/s SAB Credits Ltd. in the books of M/s S.A. Builders (P) Ltd. 7. The learned Departmental Representat .....

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..... sister concern without charging any interest. There is no material on record to show that assessee derived any business advantage by advancing an interest-free amount of Rs. 82 lakhs to its sister concern. The assessee has also not established that the impugned amount was advanced during the course of its business. The CIT(A) has deleted the interest in respect of amount of Rs. 64 lakhs on the ground that the assessee had utilised the receipts from the customers for advancing the amounts to its sister concern. Considering the fact that the debit balance on the dates when amounts were advanced to its sister concern far exceeded the amounts received from the clients, it could not be said that the assessee had utilised the receipts from its clients for advancing the amounts to the sister concern because even if we take into account these amounts, there would still remain a debit balance in the overdraft account. This would be clear from the following facts: Date Debit balance in the bank a/c (p. 6 of AO) Amount received from clients Net debit balance after the receipt [p. 7 of CIT(A)] (-) (-) 15-9-1989 87,63,789 .....

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..... st would be justified because the assessee cannot be said to have utilised the amounts for the purpose of its business. Looking to the facts of the case, the Hon'ble High Court has held that even the direct nexus need not be established. The various other judgments cited by the Revenue and discussed above also support the case of the Revenue. The learned counsel has relied on the judgment of Delhi High Court in the case of CIT vs. Orissa Cement Ltd. where the Tribunal had deleted the disallowance of interest on the ground that the assessee had advanced the same out of the sale proceeds and on the basis of facts of the case Hon'ble Delhi High Court has held that no question of law was involved. This judgment was given in the light of its own facts. But in the present case, the fact that on the dates when amounts were advanced, there was a substantial debit balance in the overdraft account has not been controverted by the learned counsel. Therefore, the judgment of Hon'ble Delhi High Court would not be applicable to the facts of the present case. 40. Besides, the learned counsel has also relied on the decision of Tribunal, Chandigarh Bench, in the case of Asstt. CIT vs. Steel Stri .....

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..... oney for more than 120 days if the amount advanced by the assessee was really a share application money. Further, the assessee had itself shown the amount given to M/s Munak Galvasheet Ltd. as loan to company under the same management. These facts clearly show that amount advanced to M/s Munak Galvasheet Ltd. was not for the purpose of allotment of shares and, therefore, the same was in the nature of interest-free loan. 8. Now the next issue that needs to be considered is, whether the assessee was justified in advancing an amount of Rs. 1,03,50,000 to its sister concern without charging any interest when, in fact, the assessee had borrowed a sum of Rs. 1,03,24,000 from its sister concern, namely, M/s V.K. Credit Investment (P) Ltd. on interest @ 20 per cent. It may be mentioned that nowhere the assessee has taken the plea before the authorities below that assessee had sufficient interest-free funds available with it, which could be considered to have been utilised for the purpose of giving interest-free loan to M/s Munak Galvasheet Ltd. 9. The facts detailed above clearly show that amounts advanced to M/s Munak Galvasheet Ltd. were partly by utilising the overdraft account .....

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..... r making donations cannot be held to be for business purposes as it was not utilised for the purpose of assessee's business. As per provisions of s. 36(1)(iii) of the Act, the assessee is entitled to deduction of interest only if the three conditions are satisfied, namely, (i) assessee must have borrowed amount on interest, (ii) borrowed amount must have been utilised for the purpose of assessee's business and (iii) interest must have been paid on the borrowed amount. Now in this case, the interest paid on amounts borrowed and diverted to a sister concern M/s Munak Galvasheet cannot be considered having been utilised for the purpose of assessee's business. Therefore, one of the conditions mentioned in s. 36(1)(iii) has not been fulfilled. Moreover, the assessee has not adduced any explanation before either of the authorities below justifying the advancing of amount to M/s Munak Galvasheet Ltd. for the purpose of assessee's business or to show some business advantage obtained by giving such loan. 10. Having regard to the aforesaid facts and circumstances of the case, we are of the view that CIT(A) was not justified in deleting the disallowance of proportionate interest of Rs. 15, .....

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..... those dates the debit balance in the books exceeded more than Rs. 2 crores. Therefore, there was a direct nexus between the amounts withdrawn from the cash credits account and the amounts given to M/s SAB Credits Ltd. on which disallowance of interest is held to be justified. In addition, the assessee further advanced a sum of Rs. 44 lakhs and Rs. 36 lakhs to M/s SAB Credits Ltd. on 20th June, 1990 and 23rd June, 1990, respectively. But these amounts were given to M/s SAB Credits Ltd. not from the cash credits account but from the Punjab National Bank on which interest was not disallowed by the AO. The assessee received a sum of Rs. 26.50 lakhs from M/s SAB Credits on 29th June, 1990, and the same could not be considered as refund of the old balance of Rs. 82 lakhs. In fact, such payment could be considered against the opening balance of Rs. 3,53,50,000 and further amounts of Rs. 80 lakhs (44 lakhs + 36 lakhs) mentioned above. The plea of the assessee could have been accepted, had there been overall decrease in debit balance due from M/s SAB Credits Ltd. In fact, as against the opening debit balance of Rs. 3,53,50,000, such debit balance increased to Rs. 4,45,50,000 before an amoun .....

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..... proper execution of the contracts. The amount was not even in the nature of retention money as the deduction was not made from the running bills. The amount was of a refundable nature after the successful execution of contracts. The assessee has now come in appeal before us for the asst. yr. 1991-92. 10. Both the learned counsel and the learned Departmental Representative were fair enough to concede that this issue is squarely covered in favour of the Revenue and against the assessee by the aforesaid order dt. 20th June, 2002, of Tribunal, Chandigarh Bench, in assessee's own case in ITA Nos. 1052 1053/Chd/1993 and ITA Nos. 1072 1073/Chd/1993 (cross-appeals) for the asst. yrs. 1989-90 and 1990-91. 11. We have heard both the parties and carefully considered their rival submissions with reference to the facts, evidence and material placed on record. We find that the same issue came up for consideration before Tribunal, Chandigarh Bench, in assessee's own case in ITA Nos. 1052 1053/Chd/1993 and ITA Nos. 1072 1073/Chd/1993 (cross-appeals) for the asst. yrs. 1989-90 and 1990-91 and vide order dt. 20th June, 2002, the Tribunal decided this issue in favour of the Revenue and .....

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..... f the case for the asst. yr. 1991-92 under appeal are identical to the facts of assessee's case for the asst. yrs. 1989-90 and 1990-91. Respectfully following the aforesaid order of the Tribunal, we confirm the order of CIT(A) and dismiss this ground of the assessee's appeal for asst. yr. 1991-92." 12. The last ground of Revenue's appeal for the asst. yr. 1994-95 relates to the facts that learned CIT(A) was not justified in deleting the disallowance of Rs. 94,275 made by the AO on account of retention money. Briefly stated, the facts of the case are that the assessee had claimed deduction in respect of retention money retained by the Departments from the running bills. However, the AO disallowed such claim on the ground that such claim was also disallowed in the earlier assessment years. Aggrieved, the assessee impugned the disallowance in appeal before the CIT(A) who deleted the disallowance by relying on the order for the earlier assessment years. Revenue is aggrieved by the order of the CIT(A). Hence, this appeal before us. 13. Both the learned Departmental Representative and the learned counsel submitted that this issue is also covered by the aforesaid order of Tribunal, .....

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..... , held that the retention money was not the income of the assessee unless the assessee actually received it. We also find that in the case of Associated Cables (P) Ltd. vs. Dy. CIT (1994) 119 CTR (Trib)(Bom)(TM) 66, it was held that the retention money could not be considered as the income of the assessee and had to be excluded in computing the total income. 41. Since in the present case, the retention money of Rs. 1,80,000 had not actually been paid to the assessee and its refund depended upon the satisfactory performance of the assessee in its contract work, it could not be said that this amount had actually accrued to the assessee in the year under consideration. We, therefore, accept the conclusion of the learned CIT(A) that this amount was not taxable in the year under consideration and would be taxable only when the whole or part of Rs. 1,80,000 actually became receivable by the assessee. This ground is, therefore, rejected.' The facts of the present cases are similar to the facts of the case for the earlier assessment year. Therefore, respectfully following the aforesaid order of the Tribunal, we confirm the orders of the CIT(A) in deleting the impugned additions. Acco .....

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