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TMI Blog2015 (10) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 28-8-2015 - N. R. S. Ganesan, JM And Chandra Poojari, AM, JJ. For the Appellant : Shri P Radhakrishnan, JCIT For the Respondent : Shri Saroj Kumar Parida, Adv ORDER Per Chandra Poojari , Accountant Member This appeal by the Revenue is directed against the order of the Commissioner of Income-tax(Appeals) dated 30.12.2014. 2. The Revenue has raised the following grounds in this appeal: 2.1 The Id. CIT(A) erred in deleting the disallowance of ₹ 50,00,000/- made by the Assessing Officer towards the expenses on the guarantee payments made by the assessee to the banks and other parties on behalf of its subsidiary company is allowable as deduction. 2.2. The Id. CIT(A) erred in holding that the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . on behalf of W.S. Telesystems Ltd. (subsidiary of WS Industries) to acquire the working capital facilities. He also stated that the assessee company is only a co-defendant (being the guarantor) and after the winding up of WS Telesytems by BIFR as sick industry, Mls. Vysya Bank Ltd. has moved to Debt Recovery Tribunal for the recovery of the money from M/s. W.S. Telesystems along with the assessee company as co-defendant. Therefore, the liability towards corporate guarantee obligation has been made by the assessee company and claimed as provision for contingent liability under the head other costs . After careful examination of the assessee's submission, it is clear that the claim made the assessee is not acceptable because it is mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. We find that similar issue was considered by this Tribunal in assessee's own case in ITA No.1373/Mds/2008 dated 21.8.2009 for the assessment year 2004-05, wherein it was observed as follows: 10. We have heard both the counsels and perused the relevant records. The learned Departmental Representative supported the order of the Assessing Officer and claimed that the said corporate guarantee has nothing to do with asessee's business. He also claimed that it was also not clear as to the year for which the same related to. He further argued that the said expenditure of the assessee has not resulted in any earning of income. The learned counsel of the assessee, on the other hand, claimed that expenditure incurred on account of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terests of the business of the assessee. Hon'ble Apex Court in the case of CIT Vs. Walchand and Co. Private Ltd. 65 ITR 381 (SC) has held that in applying the test of commercial expediency whether the expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjudged from the point of view of businessman and not of the revenue. 12. Hon'ble Apex Court in the case of CIT Vs. Indian Bank Limited 56 ITR 77 (SC) had held that there is no need to examine whether the expenditure or allowance which is permissible must be capable of producing taxable income. 13. We further find that in the Articles and Memorandum of Association of the assessee, it has been clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 ITR 895 (Mad) where the facts were the following:- The assessee company had guaranteed Ioans taken by a subsidiary company on an overdraft arrangement with a bank. The subsidiary company went into liquidation in 1955 and the assessee company as guarantor was obliged to discharge the liability to the bank. After adjusting the amount recovered from the liquidators the sum due to the assessee company from its subsidiary was ₹ 9,08,764/- and the assessee claimed this amount as a business loss in its assessment for 1958-59. The assessee received from the liquidators during the subsequent years 1959-60 to 1962-63 varying sums totaling ₹ 4,85,508.28. The officer held that the loss was not incidental to the business of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 1962-63, the loss arose only then and hence the Tribunal was right in allowing it in that year. The aforesaid decision of the Hon'ble Madras High Court was affirmed by the Hon'ble Apex Court in the case of M/s Amalgamations Ltd., 226 ITR 188. 16. Hon'ble Apex Court in the case of CIT Vs. Messrs. Shoorji Vallabhdas and Co. 41 ITR 144 (Se) had held that mere book keeping entry cannot be determinative of the actual nature of the transaction. Further Hon'ble-Apex Court in the case of Tuticorin Alkali Chemicals and Fertilizers Limited Vs. CIT 227 ITR 172 (SC) had held that principles of accountancy do not override provisions of taxing statute. From the above, it is evident that accounting treatment given by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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