9911796707
TMI Blog2008 (9) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... morandum of Articles of Association is a comprehensive clause and in view of that clause Agrima cannot give any guarantee without security. We are of the view that according to clause 13 of the object clause Agrima could guarantee the performance of any contract or obligation/payment of money of or by any person or company or Corporation. In addition to this, the said Object clause 13 also allows Agrima to secure any guarantee in such a manner as the company may think fit and in particular by the mortgage pledge or other security upon all or on any other properties of the company. This would not mean that Agrima cannot give guarantee without security. Contention of the revenue that the three concerns/companies were under the control and management of the same group of persons and, therefore, warranted application of principles initiated in Mc Dowel s case, we are of the view that such a contention in the absence of any material in support thereof should be outright rejected. It is argued by the assessee before all the authorities that the said three companies are independent and acted as such at arm s length. Infact, SCCIL is a listed company. This contention of the assessee is acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects Engineering and Consultancy Services Ltd. (Agrima) was 100% subsidiary of the assessee company. By an order of this Court, Agrima was amalgmated with the assessee company with effect from 1st January, 1983. Prior to its amalgamation, Agrima, inter alia, carried on business of a financer. During the accounting year ended on 31st December, 1980 Agrima's total advances to various parties amounted to ₹ 2,90,74,994/- besides the loan of ₹ 15,00,000/- advanced to Maharana Mills Ltd. The interest income of Agrima for the said year was ₹ 24,70,785/- The assessee company also had business dealings with Maharana Mills. It had supplied cotton and yarn worth ₹ 3.22 crores over a period of time and had received payments towards the same aggregating to ₹ 3 crores. The balance amount of ₹ 22,43,489/- was outstanding since the year 1979. The assessee company together with Agrima had to recover a total amount of ₹ 37,43,489/- from Maharana Mills as on 31st July, 1980. Maharana Mills which was a profit earning concern earlier had financial problems due to the damage caused to the Mill by cyclonic storms and consequent closure of the Mill for a long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of its own loan and to protect and preserve its assets in the form of a loan so advanced. iv) In the circumstances, Agrima issued a guarantee dated 31st July, 1980 to SCCIL under which Agrima agreed to pay ₹ 50,00,000/- with interest to SCCIL in case Maharana Mills did not repay the said loan with interest to SCCIL. v) It is the case of Agrima that even thereafter i.e.in the year 1980 and in subsequent years the Banks and financial institutions continued to advance additional loans to Maharana Mills as shown below. vi) As stated above, Agrima stood amalgmated with the assessee Company with effect from 1st January, 1983. As a result of this amalgamation, there was a complete fusion of the assets and liabilities of Agrima with that of the assessee. vii) In March, 1984, SCCIL addressed a letter to Maharana Mills demanding repayment of the aforesaid loan of ₹ 50,00,000/- and advanced by it along with the agreed rate of interest. As Maharana Mills failed to repay the aforesaid loan and interest thereon, SCCIL in August, 1985 called upon the assessee to make good the payment of loan of ₹ 50,00,000/- with interest thereon upto 23rd August, 1985, aggregatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) narrated facts and advanced submissions on the lines set out in clauses (i) to (vii) above and also relied upon several judgments of this Court as well as the Hon'ble Supreme Court of India. x) The Assessee also submitted before the CIT(A) that the Assessing Officer has overlooked all the facts pertaining to the case though they were fully and exhaustively explained to him including the fact that the whole project put forward by Maharana Mills for modernising the Mill was critically examined by IDBI, Reserve Bank of India and Finance Ministry. The Assessee also submitted that it is most pertinent to note that the Assessing Officer has not at all doubted or disputed any of the facts stated before him nor has he doubted or disputed the fact that the loans were actually given by IDBI and SCCIL and from the said loans plant and machinery were in fact purchased by the Maharana Mills. It was submitted that the Assessing Officer has not commented on the scheme and the combined package offered to Maharana Mills by IDBI, ICCIL and Agrima which was examined and approved by the Reserve Bank of India and the Finance Ministry. The assessee submitted that the Assessing Officer merely r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its business to Maharana Mills. xii) Agrima, relying on the decision in Sasoon Vs.CIT reported in 118 ITR 261 (SC) contended before CIT(A) that Agrima though not under any legal obligation, voluntarily and with the object of preserving and protecting its assets, namely, loan advanced by it to Maharana Mills stood as a surety. It was for Agrima to decide whether it was in the interest of its own business to do so. Since it stood as a surety out of the commercial and business considerations and to preserve and protect its assets, the loss suffered by it as a consequence thereof was a loss incidental to carrying on of its business and permissible deductions. xiii) The assessee relying on the decision in J.K.Commercial Corporation Limited Vs. CIT reported in 72 ITR 296 (Allahabad) pointed out before the CIT(A) that the test of allowability is not what a prudent man would do in similar circumstances. That the assessee did not act like a prudent man is entirely irrelevant in determining the question whether the expenditure ought to be allowed as deduction. xiv) CIT(A) by his order dated 17th October, 1996 after considering the facts available on record and the various decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the control and management of the same group of persons which fact warranted the applications of principles enunciated by the Hon'ble Supreme Court in McDowel's case reported in 154 ITR 148. xvii). The Appellate Tribunal by its order dated 14th September, 2000 has, inter alia, observed that the facts set out in paragraphs 5.2 to 5.12 of the order of CIT(A) are not refuted by the revenue. The Tribunal has recorded that CIT (A) has discussed the decisions relied on by the Assessee and has come to the conclusion that the said decisions render assistance to the assessee in claiming the impugned loss. The Appellate Tribunal further recorded that on appraisal of material on record the CIT(A) has recorded a finding of fact that the act of Agrima giving guarantee to SCCIL was genuine. The Appellate Tribunal has held that this finding of fact could not be challenged by the revenue by bringing on record any adverse material. The Tribunal, therefore, declined to interfere with the order passed by CIT (A) and dismissed the appeal of the revenue. 3. Being aggrieved by the order of the Appellate Tribunal dated 14th September, 2000 the Revenue impugned the same before this Court by filin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
