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TMI Blog2013 (11) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... ership fee and registration fee to Bio Diesel Association – Held that:- Expenditure in this case has been incurred in connection with enabling engineers and other technical staff to participate in conferences and discussions organized by the Bio Diesel Association of India. The discussion held in the conferences were academic in nature and highlight the constraints faced by the industry and the new technologies and trends emerging as a result of globalization of economy. The problem faced in day to day working of bio diesel industry also come up from discussions and suggestions made during such discussions help the technical staff in solving the day to day problems – The expenditure is held as Revenue expenditure – Decided against the Revenue. - ITA NOS. 1104&1105/DEL/2012 & CO NO. 151/DEL/2012 - - - Dated:- 8-2-2013 - Shri R. P. Tolani And Shri Shamim Yahya,JJ. For the Appellant : Sh. A. K. Chadha, CA For the Respondent : Sh. Tarun Seem, Sr. D. R. ORDER Per Shamim Yahya : AM. These appeals by the Revenue and Cross Objection by the assessee emanate out of order of the Ld. Commissioner of Income Tax (Appeals) for A.Yrs. 2003-04 2008-09 and the appeals were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt furnished in Form no. 3CD by the Tax Auditors. Col. 22(b), of the Form 3CD Report states that a sum of Rs. 7810046/- being bad debts pertaining to prior period has been debited. Taking cognizance of this observation of the Auditors, the Assessing Officer in the course of original assessment proceedings had asked the assessee company to justify (a) the claim of bad debts written off and (b) the basis on which the amount of Rs. 7810046/- pertaining to prior period had been claimed in the financial year relevant to the assessment year under consideration. In response to the aforesaid, a detailed reply was filed on behalf of the assessee company vide its letter dated 7.12.2005 wherein complete details along with justification regarding claim of bad debts written off was furnished. Considering the above, Ld. Commissioner of Income Tax (A) held that the issue of bad debts in this case was raised and examined by the Assessing Officer. Thereafter having taking into consideration the explanation and documents furnished by the assessee company, the Assessing Officer did not find it appropriate to make any disallowance. Therefore, Ld. Commissioner of Income Tax (A) held that the he was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause a small item of Rs. 250,000/- excluding sales tax was supplied to this customer in the assessment year 2002-03. Sales tax of Rs. 10,000/- was not paid by the party they argued that item was to be supplied inclusive of tax on Rs. 250,000/- and therefore sales tax was not reimbursed by the customer which has been written off. Bajwa Agro Industries Ltd. Out of total sale proceeds of Rs. 2,29,00,000/- a sum of Rs. 28,19,827/- which was kept as retention money by the customer had to be written off because the customer refused to release the money on the following grounds: 1. The plant supplied by the assessee did not perform according to the parameters laid down in the contract. The assessee had several meetings with the customer and had correspondence with it but of no avail. 2. Further the customer has also filed suit against the assessee for recovery of further sum of Rs. 6,70,000/- for engaging the services of outside firm to rectify defect purported to have occurred in the installation of the above plant. This was resisted by the assessee. Due to the above the assessee feels it was pointless carrying the above debit in its books and the amount was transferred to bad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 2 Bajwa Agro Oils Ltd. 22900000 1997-98 2819827 3 Chand Vanspati 15800000 1995-96 1170163.75 4 Diamond Agro Industrial Ltd. 20500000 1995-96 300000 5 Goetze India Ltd. 27150000 1995-96 401402 6 Jindal Proteins Ltd. 5600000 1999-2000 388390 7 N.K. Oil Induct Ltd. 13000000 1998-99 478081 8 Nutech Agro Oils Ltd. 4297915 1996-97 255783 9 Prashant India Ltd. 5900000 1998-99 1318385 10 Raj Solvex Induct Ltd. 13520770 1999-2000 268014 11 VRV Breveries Bottling 6875000 1996-97 400000 6.1 Assessing Officer has duly considered the aforesaid reply and having satisfied himself with regard to the admissibility of the bad debts, Assessing Officer did not make any addition in the original assessment. 6.2 Thus, we are in agreement with the Ld. Commissioner of Income Tax (A) finding that the issue of bad debts was raised and examined by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oil and bio diesel plants. During the asstt. proceedings, it was noticed by the Ld. Assessing officer that the appellant company had claimed loss of Rs. 20,16,607/- against the project undertaken on behalf of M/s. Godrej Agrovet Limited. Accordingly, the appellant company was required to furnish the necessary details of the loss in question and justification for admissibility thereof. In response to the aforesaid, a reply was filed on behalf of the appellant company vide letter dated 14.12.2010. In the said reply, it was stated on behalf of the appellant company that the loss in question pertains to the supply and erection of plant and machinery of M/s. Godrej Agrovet Limited during the financial year 2006-07 and 2007-08. It was explained that during the F.Y. 2006-07, the appellant had completed the project of M/s. Godrej Agrovet Limited and recorded sales of Rs.4,05,62,254/- and GP of Rs. 32,06,679 was disclosed thereon. It was submitted that there were certain defects in the project completed in the case of M/s. Godrej Agrovet Limited and necessary rectification/removal of defects had to be undertaken during the F.Y. 2007-08 relevant to the asstt year under consideration. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/removal of defects etc. and therefore, the actual expenses net of reimbursement made by M/s. Godrej Agrovet limited was only claimed in the year of incurring of expenditure of RS.27,90,507/-. In view of the aforesaid, I have no hesitation in holding that the finding of the-Ld.AO that necessary details have not been made available to him is opposed to the facts on records. Accordingly, the disallowance of Rs. 20,16,607/- is being deleted. 11. Against the above order the Revenue is in appeal before us. 12. We have heard the rival contentions in light of the material produced and precedent relied upon. We find ourselves in agreement with the Ld. Commissioner of Income Tax (A) that the claim of loss of Rs. RS.2016607/- was sustained by the assessee company in the normal course of business. We note that it is an established business practice that in cases of setting up of plant and machinery/ manufacturing units, normally, performance guarantee and warranty agreements are executed between the supplier of plant and machinery and the buyer. Therefore, any defects/mistakes pointed out/detected during the currency of warranty/performance guarantee, it is the contractual obligation on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer required the assessee company to explain as to why the amount in question should not be disallowed as capital expenditure. In response to the aforesaid, it was explained on behalf of the appellant that the assessee company has claimed Rs. 10 lacs on account of gold sponsorship fee for attending conference held by Bio Diesel Association and the balance of Rs. 12000/- has been paid for registration etc. It was submitted that the expenditure in question was recurring in nature and the appellant company has to make such payments on year to year basis to cater the quality products for its customers. It was argued that the payment of Rs. 10.12 lacs has not resulted into acquisition of any capital asset nor any right of permanent character has been obtained as a result of the aforesaid payment. It was argued that the said expenditure was incurred with a view to assist/facilitate the trading operations of the appellant company. It was therefore submitted that the payment in question was allowable u/s 37(1) of the IT Act. 1961. However, the aforesaid explanation did not find favour with the Id. AO and the same was rejected. The case of the Id. AO was that the payment of Rs. 10 lacs f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to add, alter, delete, amend, modify or vary cross objections before or at the time of hearing of appeal. 20. In this case in the course of assessment proceedings it was noticed by the Id. Assessing Officer that the assessee company has granted unsecured interest free loans to its sister concerns, namely, M/s Asian Spice Extracts Ltd. and M/s. Terra Safe Technologies (P) Ltd. He further noticed that a sum of Rs. 2,22,62,252/- was recoverable from another sister concerns namely M/s Chemical Construction (P) Ltd. Therefore, he was of the view that part of the interest payment of Rs. 1,13,13,951- was disallowable proportionately on account of interest free advances given to the sister concerns. Accordingly, the appellant company was required to furnish explanation in this regard. In response to the aforesaid, a detailed reply was filed on behalf of the appellant company vide letter dated 14.12.2010. It was explained that the amount of Rs. 2,22,62,252/- was outstanding against M/s. Chemical Construction (P) Ltd. as on 31.03.2008. The advance in question was made against purchase of equipments and material from the said concern. It was explained that as against the advance of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 4,99,230/- on an adhoc basis in relation to the advance given to M/s Chemical Construction Co. (P) Ltd. Accordingly, the disallowance to the extent of Rs. 4,99,230/- is being deleted. However, as regards balance disallowance of Rs. 87,448/- made on account of advances given to M/s Terra Safe Technology (P) Ltd. and Asian Spice Extracts Ltd., I find that the appellant company has not established any business purpose in the aforesaid cases. Therefore, the disallowance of Rs. 87,448/- is justified and being sustained. 22. Against the above order the Assessee filed cross objection before us. 23. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that the assessee has inter-alia submitted before the authorities below that advance to sister concerns was given in the normal course of business of the assessee. Further, it has been submitted that the assessee has adequate surplus funds which was not carrying any interest to give as advance to sister concerns. Moreover, the assessee submitted that it is settled law that where the assessee has mixed, owned and borrowed funds and interest free advances has been given to the sist ..... X X X X Extracts X X X X X X X X Extracts X X X X
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