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TMI Blog2017 (4) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... difference arose as it was in different accounts appearing in the books at the exchange rate prevailing on the first day of the accounting year were translated in Indian Rupees at the closing date. The difference was adjusted in the accounts of foreign currency translation difference. The amount of this difference was notional debit/credit and did not represent any loss or income for the purpose of computing the taxable income under the Income-Tax Act. The entries on this account were made only for balancing the books. Therefore, this exercise was merely done on account of incorporating the trial balance appearing in the Iraqi branch in the Head Officer books in Indian currency. Since no actual gain accrued to the assessee, there was no question of taxing this amount. We, accordingly, confirm the order of the ld. CIT(A) following the precedent and in view of aforementioned discussion X X X X Extracts X X X X X X X X Extracts X X X X ..... missing the departmental appeal in respect of additions of ₹ 52,01,960/- and ₹ 51,29,658/- on account of disallownaces of manufacturing expenses and miscellaneous expenses respectively in P & L account, without appreciating the facts of the case and the material brought on records. 6) Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was justified in dismissing the departmental appeal in respect of additions of ₹ 1,12,05,26,953/- on account of disallowances of deduction u/s 801A, without appreciating the facts of the case and the material brought on records." 5. No separate questions of law have been accepted for adjudication in this appeal, but by order dated 20th January, 2016, this appeal was directed to be connected with Income Tax Appeals No. 23 of 2007, 24 of 2007, 35 of 2007, 87 of 2008, 88 of 2008, 111 of 2008, 112 of 2008, 150 of 2008, 33 of 2009, 40 of 2010 and 96 of 2007. Income Tax Appeal No.87 of 2008, involving similar questions of law, has already been decided vide judgment dated 24.1.2017 and the appeal has been dismissed. Order passed by this Court in Income Tax Appeal No. 87 of 2008 is rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t interest in following were not charged. Sl. No PARTY NAME OPENING BALANCE CLOSING BALANCE NET PAYMENT DURING THE YEAR ADD OPENING BALANCE AMOUNT WHICH INTEREST DISALLOWED Non-Interest Bearing Advances (Average Interest Rate 12.50%) 1. Friends Construction Corp. 2.50 2.50 0.00 0.00 2.50 2. Sequence Estate Pvt. Ltd. 30 30.00 0.00 0.00 30.00 3. Radiant Portifolio Funds 1596.08 1,596.08 0.00 0.001 596.08 4. HMG Time India Ltd. 430.81 430.81 0.00 0.00 430.81 5. Progressive Consultants Ltd. 25.00 25.00 0.00 0.00 25.00 6. Manvi Finance 469.31 469.31 0.00 0.00 469.31 7. Dewan Automibile 9.00 9.00 0.00 0.00 9.00 8. Sharma Associate 12.50 12.50 0.00 0.00 12.50 9. Black Stone Mining Pvt. Ltd. 20.00 20.00 0.00 0.00 20.00 10 Nipjiv International 5.00 5.00 0.00 0.00 5.00 Total 2,600.20 2,620.20 - - 2,620.20 It is thus clear that on one hand the assessee company is borrowing money from Banks and financial institutions and paying interest during this financial year on other hand it has given interest free advances to the parties without transacting any business whatsoever. Total expenditure incurred on interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2001-02. Accordingly, the AO worked out the proportionate interest @ 12.5% which amounted to ₹ 3,25,03,000/-. 8. It has been argued by the Ld. Counsels of the applicant that the disallowance relates to the balances in business accounts and is liable to be deleted as the same is contrary to the accepted past decision as no disallowance of such interest was made in any of the past assessments. The Assessing Officer made the disallowance of interest without showing any nexus between the interest bearing funds and loans and advances and without giving any substantive basis as to how the said loans and advances are stated to be for non business purposes. The Assessing Officer has not appreciated the fact that the appellant had substantial non interest bearing funds of its own. The addition on similar account was made in the block assessment of the company for the period 1.4.89 to 2.7.99 where the said disallowance has been fully deleted in appeal by the CIT (Appeals) with a finding that the assessee company has not diverted any interest bearing funds for any non business purpose. It was also argued that during the year no new advances have been taken. Further my atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 30.3.2017 involved similar questions of law which have been answered against Revenue and appeal has been dismissed. The order passed by this Court in Income Tax Appeal No. 111 of 2008 is reproduced as under:- "1. Heard Sri Alok Mathur, for appellant and Sri Namit Sharma, Advocate, for respondents. 2. This appeal under Section 260-A of Income Tax Act, 1961 (hereinafter referred to as "Act, 1961") has been filed challenging the judgment and order dated 31.12.2007 passed by Income Tax Appellate Tribunal, Lucknow Bench 'A', Lucknow (hereinafter referred to as "Tribunal") in Income Tax Appeal No. 416/Luc/2004, relating to Assessment Year 2003-04. 3. Following substantial questions of law are formulated in this appeal: "(i) Whether on fact and in the circumstances of the Income Tax Appellate Tribunal was right in dismissing the departmental appeal in respect of addition of ₹ 3,43,864.00 made on account of deprecations on Iraqi assets without appreciating the material brought on records and the facts of the case. (ii) Whether on the facts and in the circumstances of the Income Tax Appellate Tribunal was right in dismissing the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was notional debit/credit and did not represent any loss or income for the purpose of computing the taxable income under the Income-Tax Act. The entries on this account were made only for balancing the books. Therefore, this exercise was merely done on account of incorporating the trial balance appearing in the Iraqi branch in the Head Officer books in Indian currency. Since no actual gain accrued to the assessee, there was no question of taxing this amount. We, accordingly, confirm the order of the ld. CIT(A) following the precedent and in view of aforementioned discussion." 5. The aforesaid finding having not been shown to be incorrect or contrary to record, we answer Question-(i) against Revenue. 6. So far as Questions-(ii) and (iv)are concerned, it is purely a question of fact and do not give rise to any substantial question of law, hence need not be answered. 7. So far as Question-(iii) is concerned, counsel for parties states that it is squarely covered by judgment of this Court dated 24.01.2017 passed in Income Tax Appeal No. 87 of 2008 (Commissioner of Income Tax Vs. M/S Jai Prakash Industries Pvt. Ltd.) wherein similar question was answered against Revenue an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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