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TMI Blog2013 (9) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... or its related company on account of share application money - It was also noticed by the CIT(A) that the assessee has sufficient reserves i.e. Rs. 62.23 crore with the assessee - The finding of the CIT(A) remained uncontroverted that the Assessing Officer failed to prove the nexus between borrowings and subsequent advancing of loan to subsidiary company – Therefore relying upon the decision in the case of S.A.Builders [2006 (12) TMI 82 - SUPREME COURT ], the expenditure of interest has not been allowed – Decided against the Assessee. Depreciation on leased assets u/s 32(1) of the Income Tax Act – Held that:- Relying upon the decision of Supreme Court of India in the case of Shaan Finance (P) Ltd. v. CIT [1998 (3) TMI 8 - SUPREME Court], it was held that the ownership of the machines remained with the assessee and there is no scope for transferring the machines to the parties - Assessee-company fulfilled all the conditions laid down u/s 32 of the Act, therefore, the claim for depreciation is to be allowed – Decided in favor of Assessee. Interest income against bank guarantee or letter of credit – Held that:- Interests had been directly linked with the commercial activity of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income of the year being excess provision made in earlier years. This means the assessee had written back provisions made in earlier years of certain expenses claimed by it amounting to Rs. 58,541. The Assessing Officer after examining the issue and perusing other relevant material found that the amount of Rs. 58,541 is liable to be assessed u/s 28(iv). Accordingly he added the amount to the income of the assessee. Remaining amount of Rs. 13,52,374, the A.O. invoked provisions of section 41(1)(a) and added the same to the income of the assessee. Detailed submissions were filed before the CIT(A). Reliance was also placed on various case laws. Accordingly it was submitted that if the disallowance of Rs. 13,52,374 is not considered as doubtful debts then they should be treated as expenditure u/s 37. Brief submission of the assessee are mentioned in the order of the CIT(A) in para 3.2 at pages 9 and 10. After considering the submissions and perusing the relevant material on record, the CIT(A) noted that the assessee has claimed deduction on account of doubtful debts and advances as under:- Sr. No. Name of the party Amount Rs. Remarks 1. J & K Cigarette Limited 1,61,250 Doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant made a honest judgement that the debt has become bad and written off the same in the books of account by squaring the individual debtors accounts. It is also a matter of fact that earlier the provisions for bad debts though claimed but was not allowed as the individual debtors account were not written off. In this assessment year, the appellant has written off the individual debtors' account and claimed debts by debiting to the profit and loss account. All these facts are evident from the details submitted by the appellant during the course of assessment proceedings. Further, I find that the ld.AO has also not properly appreciated the entries recorded in respect of provision written back by the appellant. The fact that it was not the trading liability that ceases to exist that can be taxed u/s 41(1)(a) or u/s 28(iv) as observed by the ld.AO. It Is not the money received by the appellant but actually a provision for liability made earlier and now no longer required. Therefore, I find that ld.AO grossly erred in invoking provisions of section 41(1)(a) or section 28(iv) as no income accrues / arises to the appellant. The appellant has very rightly reduced the provision by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncontroverted. 10. However regarding the issue involved in appeal of assessee, which is in respect of addition confirmed at Rs. 8,28,620, we noted that the CIT(A) has admitted that they are allowable as business loss. However he confirmed that no evidences are adduced by the assessee. The detail of deduction claimed by the assessee are tabulated in the order of the CIT(A) at page 11 which are also reproduced somewhere above in this order. From this detail it is seen that the assessee has claimed deduction of Rs. 1,61,250 on account of doubtful debts / loans and advances and deduction of Rs. 6,14,900 on account of advances given for material supply and Rs. 52,500 which is again given for supply of material. From this detail it is clearly seen that no further details are required, as the advances given by the assessee is not in doubt which is recorded in the books of account which were produced before the A.O. Therefore, in our view these are allowable as business loss. We, therefore, allow the claim of the assessee and the Assessing Officer is directed to modify his order accordingly. 11. There is no more ground in the appeal of the assessee. 12. There is one more ground in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A copy of the prohibitory order was also enclosed. Accordingly it was submitted that no disallowance was warranted. In respect of M/s.Luster Print Media and M/s.Dalmia Fresenius Media, it was explained that all the amount of share application money given to group concerns is for business purposes. It was submitted that the Assessing Officer failed to appreciate that additions made are not of borrowed funds as the advances were given in earlier year when the assessee has sufficient interest free funds. It was further explained that the interest has been disallowed by the A.O. on the pretext of interest bearing borrowed funds which has been used for making loans and advances to these two concerns. Adhoc disallowance of interest at 20% on full amount was also not justified. Reliance was placed on various case laws as mentioned in page 55 of the appellate order. After considering the submissions and taking into consideration various case laws i.e. in the case of S.A.Builders 288 ITR 1 (SC), Phaltan Sugar Works v. CWT CIT v. Dalmia Cement Bharat Ltd. [(2009) 183 Taxmann 422 (Del.)] and the decision of the Gujarat High Court in Shree Digvijay Cement Co. Ltd. v. CIT (1982) 138 ITR 45 (Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was not accepted by the A.O. that one of its business activities was to give assets on lease. The assessee is owner of the machines and ownership remained with the company and there is no scope for transferring these machines to the parties. This rent has been shown by the assessee as income, therefore, depreciation is allowable. However as stated above the A.O. has not accepted this contention of the assessee and disallowed the depreciation claimed by the assessee. Detailed submissions were filed before the CIT(A). Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Shaan Finance (P) Ltd. v. CIT 231 ITR 308. After considering the submissions the CIT(A) found that the assessee-company had given assets on lease. The ownership of the machines remained with the assessee and there is no scope for transferring the machines to the parties. The leasing of plant and machinery has been one of the regular business activities of the assessee-company. Since the assessee-company fulfilled all the conditions laid down u/s 32 of the Act, the claim for depreciation is to be allowed. Placing reliance on the decision of the Delhi High Court in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission was made before the CIT(A), which has been recorded in page 4 of his order. Thereafter the CIT(A) considering the case of the assessee and the decision of the Mumbai Bench of the Tribunal in the case of Pfizer Ltd. v. JCIT in ITA No.1825 & 2977/Mum/2003 vide order dated 07.08.2006 found that the additions were not made properly by the A.O. The CIT(A) noted that in view of the decision of the Tribunal mentioned above, the value of opening stock, purchases, sales, closing stock are required to be adjusted in terms of the provisions of the said section in regard to the excise duty etc. attributable to it. The CIT(A) further noted that apart from these adjustments, the adjustment in regard to the excise duty benefit availed under the Modvat Scheme by the assessee-company in regard to raw material consumed is required to be made. If after such adjustment there is a balance amount, that is required to be brought to tax and the said amount is to be added to the income of the assessee. No adjustment on this account will be there only in the theoretical situation where the assessee has utilized Modvat credit available only to the extent attributable to the raw material consumed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This explanation was not accepted by the A.O., and accordingly, he treated interest income as income from other sources. Similar contentions were raised before the CIT(A). The CIT(A) after considering the submissions and taking into consideration various decisions of various Courts i.e. in the case of (i) Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT 227 ITR 172 (SC), (ii) CIT v. Bokaro Steel 236 ITR 315 (SC), (iii) CIT v. Karnal Co-operative Sugar Mills Ltd. 243 ITR 2 (SC), (iv) CIT v. Sterling Food 237 ITR 579 (SC) and (v) Pandian Chemicals Ltd. v. CIT 262 ITR 278 (SC) held that A.O. was correct in treating the interest income as income from other sources. The learned Counsel for the assessee stated that the interest earned on margin money has to be netted off against the interest paid by the assessee. The margin money was given to various banks for availing various loan facilities for the purpose of business, and therefore, earning of interest on the same account is liable to be treated as business income. It is also submitted that the interest expenditure is more as against interest income, therefore, for this reason also separate treatment given by the A.O. is not just ..... X X X X Extracts X X X X X X X X Extracts X X X X
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