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TMI Blog2012 (8) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. 2. First, let us deal with ITA No. 1774/Hyd/2011 filed by the Revenue. Revenue has raised four grounds. Ground Nos. 2 and 3 are effective grounds. Ground No.2 relates to the decision of CIT (A) allowing bad debts written off of Rs. 52.85 lakhs. 3. Briefly the facts are, the assessee is a PSU of the Central Government working under the Ministry of Steel. Initially, assessment was completed u/s 143(3) of the Act in case of the assessee. Subsequently, finding that there was escapement of income to the tune of Rs. 3,53,30,050/- assessment was reopened u/s 147. In course of the reassessment proceeding the AO asked the assessee to explain why the bad debts written off of the amount of Rs. 3,53,30,050 being the advances given should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT (A) found that the assessee in assessment year 2004-05 also had advanced similar loan to another of its 100% subsidiary M/s NAM India Mineral Development Corporation, Nambia and the loan became irrecoverable on account of lack of proper operations by the subsidiary. The CIT (A) in that case allowed the claim of bad debt. Following the order passed for the assessment year 2004- 05 the CIT (A) allowed the claim of the assessee in writing off the advance as bad debts. 4. The ld. DR supporting the disallowance made bythe AO submitted that the claim of bad debt written off being in the nature of capital loss should not have been allowed as an expenditure by the CIT (A). 5. The learned AR submitted that the assessee having advanced the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 600 on 24-9-2003 and paid the tax on dividend on 3-10-2003. The AO while completing the assessment held that in the profit & loss a/c.,the proposed dividend of Rs. 39,64,71,600/- has been shown as 'profit available for appropriations'. Since accounts have been prepared on 31-3- 2003 the declaration of dividend must be deemed to have been decided on 31-3-2003. The approval of the Board is only a formality. On the above finding the AO levied interest amounting to Rs. 41,88,097 u/s 115P of the Act. 9. The assessee challenged the levy of interest in appeal before the CIT (A). The CIT (A) held that declaration of dividend is a specific decision to be taken by the Board and cannot be equated with finalisation of accounts. Dividend declaration is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 050/- being capital in nature should not be treated as capital loss. The assessee explained that clause 24 of the Memorandum of Association authorises the assessee to invest any money, which is not required for time being in such investments not being shares or stocks in the company. Therefore, the assessee has parked the temporary surplus fund in intercorporate loans to sister PSUs and as deposits with banks. The AO did not accept the explanation and disallowed the bad debt written off as capital loss. The CIT (A) while deciding the appeal held so far as loan of Rs. 3 crores to FCI is concerned, it is not a subsidiary of the assessee and the loan is also not part of the business operations of the assessee and also not in ordinary course of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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