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TMI Blog2017 (7) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... l charges are utilised for the purpose of business only. We are prima-facie satisfied that the financial charges cannot be disallowed. However, AO has not given any finding whether the funds are really diverted to sister concerns, out of the funds availed due to discounting of bills. Therefore, for the limited purpose of verification, the issue is restored to the file of the AO. Appeals of assessee allowed for statistical purposes. - ITA No. 1459/Hyd/14, ITA No. 1460/Hyd/14 - - - Dated:- 31-1-2017 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER, AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri P. Murali Mohan Rao, AR For The Revenue : Smt U. Minichandran, DR ORDER PER B. RAMAKOTAIAH, A.M. : These two a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance was considered by the CIT u/s. 263 in AY. 2008-09 and further he relied on the orders for AY. 2008-09. His order in AY. 2006-07 is as under: 5. I have carefully considered the submissions of the appellant, remand report of the AO and comments of Addl.CIT and the assessment order. The appellant s submissions that since identical issue was dealt in the A.Y.2008-09 and the amount of expenditure incurred towards the financial charges was allowed as business expenditure cannot be accepted since the assessment proceedings for each year are independent. The asst. order or the decision taken with respect to AY 2006-07 or AY 2007-08 should not have any impact or relation with the asst. order for the A.Y. 2008-09. Though the AO had not su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the explanations and submissions made by the appellant company. 5. The learned CIT (A) erred in not considering the fact that the net proceeds of the discounted LCs were utilized for payment to the creditor parties only. 6. The learned CIT (A) ought to have appreciated the fact that special audit u/s 142(2A) was conducted in the case of assessee for the year under consideration and no adverse finding was made by the special auditor. Hence, no addition can be made to the income of the appellant. 7. The learned CIT (A) ought to have appreciated the orders of Hyderabad ITAT in the case of Bartronics India Limited vs. ACIT 1(3) wherein it is held that no addition can be made to the income of the assessee if no adverse finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the expenditure. The ITAT vide its order dt. 26-03-2014 in ITA No. 1099/Hyd/2013 has considered that M/s. MBB transactions are not third party transactions but multibranch bank transactions and on that basis, proceedings are held to be bad in law, thereby it was submitted that there was no disallowance of financial charges in either earlier years or in later years and disallowance of 50% of financial charges on adhoc basis for the impugned years is not correct. 4. It was further submitted that the Co-ordinate Bench in the case of M/s. Bartronics India Ltd., in ITA No. 2188/Hyd/2011 dt. 31-05-2012 held that when there is a special audit in the particular year and special auditor has not reported any disallowance, AO is not correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen from the orders in earlier years and also in AY. 2008-09 and 2009-10, the financial charges are allowed as such in scrutiny proceedings, that too in post search proceedings in AYs. 2004-05 and 2005-06. This means that the financial charges are utilised for the purpose of business only. We are prima-facie satisfied that the financial charges cannot be disallowed. However, AO has not given any finding whether the funds are really diverted to sister concerns, out of the funds availed due to discounting of bills. Therefore, for the limited purpose of verification, the issue is restored to the file of the AO. In case assessee has not diverted any of the funds so obtained for advancing interest free to its sister concerns, no amount of fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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