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TMI Blog2012 (8) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... amount outstanding in the name of sister concern of the assessee - assessing officer added the outstanding amount in the name of sister concern since three years' period has been expired – Held that:- Provisions of section 41(1) found that the principle that the expiry of period of limitation prescribed under the Limitation Act cannot extinguish the debt but it will only prevent the creditor from enforcing the debt. Therefore, the provisions of section 41(1) are not applicable - assessing officer is not justified in adding back the amount of Rs. l lakh to the total income of the assessee – In favor of assessee Deduction u/s 80IB for extracting granite from granite hills and crushing granite boulders - DR submitted that extracting granit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. representative, the assessee has transferred some funds to the group concerns. This transfer was not out of finance availed by the assessee. According to the ld. representative, the funds generated during the year under consideration were transferred to the group concern. The ld. representative further submitted that the borrowed funds were not diverted. Therefore, the assessing officer is not justified in estimating the interest at 12%. 4. On the contrary, Shri T.J. Vincent, the ld. DR submitted that the assessee has made interest free advance to Poabs Organics Pvt Ltd. The assessee has not indicated the purpose for which the loan was advanced or the commercial expediency which necessitated advance of funds by the assessee. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the purpose for which the funds were transferred to group concern. If the funds were transferred for business of the group concern, then it may come within the meaning of commercial expediency. In the absence of any explanation of the assessee, this Tribunal is of the opinion that when the funds were diverted and the assessee paid interest on the borrowed funds, the proportionate interest relatable to funds transferred to group concern has to be disallowed. Therefore, we do not find any infirmity in the order of the lower authority. Accordingly the same is confirmed. 6. The next ground of appeal is with regard to sales promotion expenditure. During the course of hearing, the ld. representative for the assessee very fairly submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessing officer added the outstanding amount in the name of sister concern since three years' period has been expired. No doubt, for recovery of any amount the limitation provided under the Limitation Act is three years. The three years' period is only to enforce the recovery of the debt through court of law. However, it will not extinguish the debt. We have carefully gone through the judgment of the Apex Court in the case of Sugauli Sugar Works (P.) Ltd ( supra ). In the case before the Apex Court, the assessee transferred certain advances and deposits out of the suspense account to capital reserve. The Income-tax Officer came to the conclusion that the liability had come to an end since the creditor has not taken any steps to recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oulders. 13. The ld. DR submitted that extracting granite from granite hills cannot be considered to be a manufacturing activity. Referring to the definition introduced by Finance Act, 2009, the ld. DR submitted that no distinct article or object was created by crushing granite boulders into small pieces and the character of the original article does not change so as to amount to manufacturing activity. 14. On the contrary, the ld. representative for the assessee submitted that the definition of "manufacture" was introduced by Finance Act, 2009. The assessment years under consideration are 2006-07 and 2007-08, therefore, the definition introduced by Finance Act, 2009 is not applicable to the facts of the case. For the earlier assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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