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TMI Blog2011 (7) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate deposit placed with Alpic Finance Ltd. Rs. 48,00,000/-, amount not recovered from debtors Rs. 72,552/- and accrued interest on inter-corporate deposits Rs. 8,60,274/-, de-novo after providing reasonable opportunity of being heard to the assessee in the matter - Appeal is partly allowed - ITA No. 2010/Mum/2010 - - - Dated:- 15-7-2011 - SHRI R.S. SYAL, AND SHRI V. DURGA RAO. JJ. Appellant by: Mr. Rajashri Devidy Revenue by: Miss Sonali Gorbole ORDER PER V. DURGA RAO, J.M.: This appeal filed by the revenue is directed against the order of CIT(A)-21, Mumbai, passed on 16/12/2009 for the assessment year 2003-04, wherein the revenue has raised the following grounds of appeal:- 1. On the facts and circumstances of the case as well as in law, the Ld. CIT(A) erred in holding that the expense incurred on corporate film making is revenue expenditure and benefit is not of an enduring nature to the assessee company in terms of enhanced sales. 2. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition made by the AO in irrecoverable amounts written off by the assessee company treating the loss as capital in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CIT(A) is that it has been held in various decisions that the expenditure incurred in making of advertisement film is an expenditure of revenue in nature. Therefore, we find no infirmity in the order of CIT(A) deleting the disallowance of Rs. 1,25,000/- made by the AO on account of corporate film making charges treating the same as revenue expenditure. Accordingly, this ground of appeal of the revenue is dismissed. 5. As regards ground No. 2 regarding deletion of addition of Rs 57,30,641/- with regard to irrecoverable amounts written off, it is observed by the AO that assessee had written off advance made to suppliers at Rs. 70,367/- and inter corporate deposit placed with Alpic finance Ltd. Rs. 48,00,000/-, amount not recovered from debtors Rs. 72,552/- and accrued interest on inter corporate deposits Rs. 8,60,274/- aggregating to Rs. 58,03,193/-.. The asesssee explained before the AO that the amounts relates to amounts advanced in the ordinary course of business and write off of the same should be allowed as a deduction and the Assessee made detailed submissions before the AO during the course of assessment proceedings. After considering the submissions of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gument of the assessee company fails and the claim for write off of Rs. 48,00,000/- and Rs. 8,60,274/- is disallowed and added to the income of the assessee company. Similarly the amount of Rs. 70,367/- shown by the assessee company as advances paid to suppliers also cannot be allowed as a deduction under section 36(1)(vii) of the Act purely because they have not been rooted through profit and loss account in the historic past, resulting into total addition of Rs. 57,30,461/- to the total income of the assessee for the year under consideration on account of inadmissible and inaccurate claim of bad debts u/s 36(1)(vii) of the Act. Aggrieved, the assesse carried the matter in appeal before the CIT(A). 6. Before the CIT(A), the assessee argued that it advanced amounts to suppliers in the ordinary course of its business. It was a common practice prevalent in the manufacturing industry to advance monies to suppliers to ensure its smooth supply of materials as and when required. Accordingly, the assessee company advanced money to V.L. Cables Pvt. Ltd. for purchase of materials which was not actually delivered. Further, the assessee purchased materials from Asian Hardware but part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness to the appellant. Reliance is placed on [2009] 29 DTR (Del) 280, Bonanza Portfolio Ltd. [2009] 29 DTR 277(Del), Securities Ltd. [2008] 25 SOT 440(Mum), Kotak Securites Ltd. 4.3(b) In respect of inter corporate deposit of Rs. 48 lakhs with M/s Alpic Finance Ltd. the inter corporate deposit was placed by appellant in the normal course of business as one of its business activities. In the past several years the appellant was accounting for accrued interest thereon in the books of account/prof it and loss account. Thus, the income on the inter corporate deposit was duly offered to tax by the appellant in the preceding years. Thus it could not be denied that placement of inter corporate deposit was not in the normal course of business. The appellant has satisfactorily proved that the company went in liquidation and therefore there was no possibility of recover of the principal amount. In my considered view, such irrecoverable amount, on which interest income was regularly shown by appellant, was allowable as bad debt and also as business loss. There are number of decisions on this issue that in the case of irrecoverable advances made during normal course of business, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, dealing in financial operations for parking of surplus funds and other activities, more specifically defined in the Object Clause of the Memorandum of Association of the Company. During the year the company has undertaken the activity of IT enabled services . The learned counsel pointed out that inter-corporate deposits also advanced in the earlier years and offered for taxation as business income. She strongly supported the order passed by the CIT(A). 8. We have heard the learned representatives of the parties and perused the record as well as gone through the orders of the authorities below. The AO has observed in the assessment order that interest accrued on inter-corporate deposits in the past also not shown as business income. Whereas the learned CIT(A) has observed that income on inter-corporate deposits was duly offered for taxation by the assessee in the preceding years. He gave a finding that the placement of inter-corporate deposits was in the normal course of business. In view of the above contradictory findings given by the authorities below, we set aside the order of the CIT(A) and remit the matter back to the file of the AO to examine the issue whether interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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