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TMI Blog2017 (4) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... n Plant and machinery and other assets due to closure of factory." 3.1 The only issue involved in this appeal is against deleting the addition of Rs. 55,10,113/- made by the Assessing Officer by disallowing the claim of depreciation on plant and machinery and other assets due to closure of factory. 4. The assessee has claimed depreciation of Rs. 55,10,113/- and the Assessing Officer show caused the assessee and asked as to why the depreciation claimed by it may not be disallowed as the company was closed from 03/6/1998 to 19/06/2000 i.e. the whole year under consideration and he disallowed the claim of the assessee. 5. Being aggrieved, the assessee is in appeal before the ld. CIT(A), who after considering the submissions deleted the addition by observing as under:- "2. The Company remained closed during the period from 03.06.1998 to 19.06.2000 and the company was under the purview of Honorable BIFR. The Honorable BIFR sanctioned the Scheme on 8.5.2000 and changed the management from Mr. Rajesh Jain to Capt K S Solanki Group. During the closure period the Company was under the control and charge of M/s Rajasthan Industrial Investment Corporation Ltd. (RIICO) Jaipur (Rajasthan) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an.Com 41(Delhi). Depreciation is an allowance which has to be given, even if, the factory has been closed for some reason, as it depreciates both by usage and with the passage of time. In view of these facts, I find that the AO was not justified in not allowing the depreciation on the plant and machinery. Accordingly, I delete the addition of Rs. 55, 10,113 made by the AO under this head." 6. We have heard both the sides on this issue and perused the material available on the record. We find that the ld. Sr.DR was not able to controvert the finding given by the ld. CIT(A). The assessee's factory was closed on the account of liquidity problem and the matter was pending before the BIFR for revival of the business. The Hon'ble Delhi High court in the case of CIT Vs. Laxmi Sugar Mills Ltd. (supra) has held as under:- "Assessee claimed depreciation in respect of machineries installed in its sugar mill - Assessing Officer disallowed claim of depreciation on ground that sugar mill had stopped functioning and was not in operation - Lower authorities found that mill remained closed because of fact that company had become sick due to lack of fund and efforts were made by company for its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the facts and circumstances of the case. This interest forms part of total interest of Rs. 65,00,000/- which has been provided, as per the direction given by the honorable BIFR in scheme sanctioned on dated 08/05/2000, on the various credit facility availed by the company from the bankers. 8. The first ground of appeal is against sustaining the addition of Rs. 58,80,646/- on account of disallowance of writing off sundry creditors M/s Nam Nam Dhaka. During the year the assessee write off Rs. 58,80,646/- in the name of M/s Nam Nam Dhaka. The assessee was asked to produce approval/permission of RBI to write off this amount. The assessee had not filed approval in this regard. The assessee applied to RBI for permission on 20/01/2003 and therefore, the write off was not allowed. 8.1 The ld CIT(A) confirmed the action of the Assessing Officer by holding that the case laws relied upon were different from the facts of the assessee and not applicable in assessee's case. He also noted that the Hon'ble Supreme Court Constitution bench in its order passed in 2012, wherein it was held that a provision made by the NBFCs in their books of accounts in accordance with the instructions/guide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account. Hence, this condition also stood fulfilled in the case of the assessee. In view of the aforesaid facts and discussions, the assessee was entitled to grant of deduction of a sum of Rs. 11,46,432 claimed as bad debt in the year under consideration." 9. It is a settled law that when the assessee arrives at a decision that certain debts have become bad and accordingly writes off the same in the books of accounts, section 36(1)(vii)of the Act provides for a deduction. Further, section 41(1) of the Act provides that if such bad debts written off is recovered during the subsequent assessment years, it shall be treated as income of that year. From the facts and circumstances of the case, we are of the considered view that the assessee is justified to claim deduction u/s. 36(1)(vii) of the Act with respect to the unrealized bills from export turnover to the tune of Rs. 1,94,99,064." 9.1 The Hon'ble Supreme Court in the case of T.R.F. Limited Vs CIT, Ranchi in Civil Appeal No. 5293 of 2003 with 5294 of 2003 order dated 09/02/2010 has held as under:- "This position in law is well settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces which are not recoverable of Rs. 1,47,62,069/- has been written off at in the line of provision of the sanctioned scheme". I have gone through the reply filed by the assessee and found the same not convincing. The assessee was asked to produce details of loans/advances, their breakup and the nature of the advance and efforts made for the recovery etc. But the assessee has filed a vague reply in place of giving the above details/correspondence regarding the advances written off. No reasons or correspondence with the defaulting parties have been furnished. It clearly shows that assessee has no reasonable cause for writing off the above loans and advances. In view of the same a sum of Rs. 1,47,62,069/- is disallowed. 12. After hearing both the sides, we find that by the BIFR, a scheme was sanctioned for rehabilitation of the scheme. As per scheme, assets and liabilities would be limited to what was shown in the sanctioned scheme. In view of this scheme, the balance sheet for financial year 1999- 2000 was recasted. Only those items were shown in recasted balance sheet, which were taken by the new management. Only those assets and liabilities were shown, which were recoverable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details the claim of the assessee is not acceptable and Rs. 1,20,80,155/- is disallowed. Since, this sum includes the above discussed amounts written off regarding fixed assets, sundry debtors, loans and advances etc. therefore, no separate additions are being made on their account. 14. After hearing both the sides, we find that these were the assets missing and the same were written off in the books of account. In our considered view, this was not the proper way to deal with these missing assets as these assets were already forming part of the block assets. There was no need to writing off the same in the books of account as these were merged in block of assets and depreciation was allowed. Since no details are filed, hence, we find no merit in the ground. Therefore, we confirm the order of the ld. CIT(A) on this issue and dismiss this ground of appeal of the assessee. 15. The 4th ground of the appeal is against confirming the disallowance of interest amount of Rs. 35,00,000/-. This interest forms part of total interest of Rs. 65,00,000/- which has been provided, as per the direction given by the BIFR in scheme sanctioned on dated 08/5/2000. 15.1 The ld. CIT(A) has dealt the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he working capital was Rs. 5,17,52,067, which is verifiable from the balance sheet as on 31/3/2000. Further the assessee company has charged interest of Rs. 6.50 lacs only in the P&L account, which is a net effect of 90% of the interest payable. As per the scheme of the BIFR, the balance amount has been credited to extra ordinary income. Keeping in view of these facts and circumstances, we find no merit in this addition and direct to delete the same. Accordingly the appeal of the assessee is partly allowed. In the result, the revenue's appeal is dismissed and the appeal of the assessee is partly allowed. 17. The ld AR of the assessee has submitted an application for admitting additional grounds, which is read as under:- "6. That the A.O./CIT(A) has erred in law and on facts, in nor reducing the assessable income by Rs. 6,04,98,043/-, which is included in the Profit and Loss account as extraordinary income and the same is not taxable in view of the scheme sanctioned by the BIFR. The A.O. is bound to assess the correct income under the law. 7. That, in view of the facts and circumstances of the case, the extraordinary item of Rs. 6,04,8,043/- has been wrongly and illegally includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. During the assessment year 1978-79, the assessee had deposited its funds which were not immediately required on short-term deposits with banks. Interest received on such deposits during the previous year relevant to the assessment year 1978-79 amounted to Rs. 22,84,994. This was offered by the assessee for assessment and the assessment was completed on that basis. Before the Commissioner of Income-tax (Appeals), a number of grounds were taken by the assessee challenging the assessment. However, the inclusion of this amount of Rs. 22,84,994 was neither challenged by the assessee nor considered by the Commissioner of Income-tax (Appeals). From the order of the Commissioner of Income-tax (Appeals), the assessee filed an appeal before the Tribunal. The inclusion of the said amount of Rs. 22,84,994 was not objected to even in the grounds of appeal as originally filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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