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TMI Blog2016 (4) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... I 82 - SUPREME COURT ). The Revenue does not refer to any evidence on record rebut both these factual findings. We find no reason to interfere with the CIT(A)’s order directing to delete the impugned interest disallowance - Decided in favour of assessee Disallowance of claim for bogus/expired and damaged goods - CIT(A) deleted the addition - Held that:- As decided in assessee's own case it is practice in the pharmaceuticals business that some products have to be expired or damages and all the retailers are not able to sell the goods within expiry of date, even branded goods some time expired. The appellant had shown expiry of goods’ percentage more than 4%. During the year, goods expired was ₹ 7,94,441/- and goods replaced at ₹ 1,46,60,484/- which is 2.46%, is reasonable. Keeping in view the past history of the assessee, the ld. A.O. had not brought on record any evidence that the appellant had made sale outside the books. Even, no evidence during the course of search were found, which was relevant to A.Y. 2005-06. The Settlement Commission also accepted the assessee’s disclosure of further any additional disclosure on this issue. Thus, we do not find any reason to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also considered the decisions relied upon by the Ld. Counsel. The Assessing Officer had not examined this issue in the proper perspective. The outcome of the decision in the case of S.A. Builders 288 ITR 1 (SC) is not at all applicable in the facts of this case. It was held by the Hon'ble Supreme Court in the case of S.A. Builders 288 ITR 1 (SC) that interest on borrowed funds cannot be disallowed if the assessee has advanced interest free loan to sister concern as a measure of commercial expediency. What is to be seen is business purpose and what the sister concern did with the money advanced. This is not a case of interest free loan to sister concern. The appellant had made investment of ₹ 500.00 lakhs in the share capital of the subsidiary company M/s Corned Pharmaceutical Ltd. The Assessing Officer had also mentioned in his order that the provisions of sec. 14A can also be attracted as the investment would also fetch tax free income but the interest was not disallowed u/s 14A of the Act. Even if, it was a interest free loan to sister concern, the case of S.A, Builders 288 ITR.1 (SC) was in favour of the assessee because in that case a measure of commercial expedie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were from the interest free funds available. The Assessing Officer had not examined this issue in the proper perspective. He had not tried to examine the issue properly though sufficient material was available on record. As per the audited accounts, the loan funds of ₹ 1711.90 lakhs were available as on 31.03.2006 which rose to ₹ 1971.32 lakhs as on 31.03.2007. Thus, there was an increase of ₹ 259.42 lakhs in the loan funds. I have gone through the details of loan raised by the assessee during the year under consideration. On examination, it was noticed that during the previous year relevant to the A.Y. 2007- 08, the appellant had raised Term Loan for R D equipment from Karnataka Bank, the closing balance of which was for ₹ 1,85,60,780/-. This loan was for specific purposes of R D equipments and the same was not available to the assessee for investment. The another loan was also taken from the same Karnataka Bank for cash credit limit, the closing balance of which was for Rs, 1,94,26,221/-. There is no increase in the unsecured loan and the increase may be on account of accrued interest. The Assessing Officer had not given any finding that this cash credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual findings. We find no reason to interfere with the CIT(A) s order directing to delete the impugned interest disallowance of ₹ 45,81,105/- in question. This first substantive ground fails. 5. The Revenue s next substantive ground challenges the CIT(A) s order deleting disallowance of claim for bogus/expired and damaged goods amounting to ₹ 44,07,572/-. Both parties are in agreement that tribunal s in assessment year 2006-07 ITA 2642/Ahd/2009 decides the very issue in assessee s favour as under:- 2. The assessee is engaged in the business of manufacturing and trading of drugs and pharmaceuticals. The A.O. observed that on verification of p l account, it is transpired that the assessee had debited ₹ 7,94,441/- under the head expired goods . However, for the goods replaced worth ₹ 1,46,60,484/- does not appear in the p l account. Therefore, the assessee was asked to explain the accounting treatment of the said ₹ 1,46,60,484/-. The appellant had stated that the same had been included in the purchase cost, hence, the same was no where reflected in the p l account. The A.O. found that accounting treatment of goods reflected is contrary to the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts were not properly maintained. In the present case, no nexus with the seized material was established for making the estimate nor books of accounts were rejected u/s 145. Keeping in view of above facts and circumstances of the case, the addition is hereby deleted. The second ground of appeal is allowed. 4. Now the Revenue is before us. The ld. CIT D.R. filed paper book which includes copy of statement of Shri Shri Kirit C. Patel, Shri Subhashchandra B. Bhavsar, copy of ledger account and confirmation of M/s. Saffroys and copy of settlement etc. Ld. CIT D.R. vehemently argued that the appellant himself admitted before the Settlement Commission that he had obtained bogus purchase/expenses, bogus sales and unaccounted purchase. On that basis, he had made disclosure of additional income from A.Y. 1999-2000 to 2005-06. Thus, she requested to confirm the addition. 4.1 At the outset, ld. Counsel for the appellant has drawn our attention on the settlement petition where the percentage of goods damaged/expired varied from .75% in 1998-99 to 4.3% in 2003-04. It was argued that when new product is launched, it takes some time to get the product accepted by the market an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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