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TMI Blog2021 (7) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... d put to use - HELD THAT:- Similar issue was a subject matter of the assessee s appeal [ 2019 (4) TMI 1990 - ITAT CHANDIGARH] the matter is required to be restored to the file of the Assessing officer to duly consider the aforesaid contention of the assessee, examine the details of the finances available with the assessee vis-a-vis amount capitalized by the assessee and decide the issue afresh in the light of the decision in the case of CIT (LTU) Vs. Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] - The orders of the lower authorities are set aside and the matter is remanded to the Assessing officer to decide the issue afresh as per the observations made above. In the result, the appeal of the assessee is treated as allowed for statistical purposes. Addition invoking the provisions of Section 41(1) - sundry creditors were outstanding for more than three years, so it was liable to be taxed under section 41(1) of the Act as cessation of liability - HELD THAT:- In the present case it appears that the facts that payments were made in certain cases after passing of the assessment order and few were written back as per the practice of the assessee company were not brought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n funds to M/s G. Drugs and Pharmaceuticals Ltd. (GDPL) its associated concern, the balance on the last date was ₹ 2,06,24,284/- which was shown in other debtors. The A.O. asked the assessee to explain as to whether any interest had been charged on the funds given out and that as to why the interest on funds diverted for non business purpose should not be disallowed. In response the assessee submitted as under: "Regarding your query about disallowance of interest on loan to G Drugs and pharmaceutical Limited (GDPL), it is submitted that GDPL has been merged with the assessee company with retrospective effect from 01.04.2010 as per BIFR order dated 15.03.2012. Hence, question of disallowance of interest on loan to GDPL does not arise. Copy of order is enclosed for your kind reference." 4.2 The A.O. after considering the submissions of the assessee observed that only copy of order of BIFR was furnished and no copy of amalgamation order from the Hon'ble Punjab & Haryana High Court had been furnished, therefore the submission of the assessee were not acceptable. Accordingly the disallowance of ₹ 26,81,157/- was made under section 36(1)(iii) of the Act which was work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it in the submissions of the assessee and sustained the disallowance by observing in para 3.4 to 3.6 of the impugned order which read as under: 3.4 I have carefully considered the appellant's submission. I have also gone through the assessment order. I have also carefully considered case laws relied upon by the appellant. I have also considered the earlier orders in the case of assessee company by the CIT appeal -4, while considering identical addition made in earlier years , the same have been deleted. However disagreeing respectfully with the decision of my predecesser CIT appeal-4, I find that the assessee has completely failed to explain the commercial expediency for which the amount of loan extended to its sister concern without interest, whereas , at the same time the assessee had been paying hefty interest on loan taken by it. Assessee has also failed to explain the huge advances given by it, to its sister concern M/S G. drugs and pharmaceuticals Ltd. It is an admitted fact, that the assessee had been using mixed funds , wherein the interest free funds and interest-bearing funds both have been merged. Considered the explanation of appellant of having interest free fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Counsel for the Assessee reiterated the submissions made before the authorities below and further submitted that the debit balance was on account of payment made to the third parties by the assessee on behalf of the M/s G. Drugs and Pharmaceuticals Ltd. It was further submitted that the payment was made through cheques, sale proceeds as well as interest free amount were also received / credited by the assessee in the account of the said company. It was also submitted that the assessee was having sufficient interest free funds available which could be said to have been used in making such advances to cover the interest free advances to M/s GDPL. Reliance was placed on the judgment of the Hon'ble Supreme Court in case of Hero Cycles Limited reported in 379 ITR 347. 8. In her rival submissions the Ld. CIT DR strongly supported the order of the authorities below and further submitted that it is not clear that as to whether the assessee was having interest free advances which were utilized to give the advances to the sister concern, therefore, this issue may be set aside to the A.O. for verification. 9. We have considered the submissions of both the parties and perused the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 13% on asset put to use i.e. ₹ 1,80,694/- is disallowed and added to the total income. Penalty proceedings u/s 271 (1)(c) are initiated on this point for submitting in accurate particular income. 11.2 The A.O. also observed that the assessee had shown capital work in progress to the extent of ₹ 61,76,82,251/-. He asked the assessee to explain as to why the interest on working capital should not be capitalized. In response the assessee submitted as under: "Detail of capital work in progress is enclosed herewith for your reference. Further, the assessee company has the policy to capitalise the interest tut the date the asset is put to use and the same is also evidenced by the below mentioned notes to the accounts:- (A) Borrowing costs Borrowing costs that are attributable to acquisition or construction of a qualifying asset are capitalised as part of cost of such assets. Qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are recognised as expenses in the period in which they are incurred. (B) Fixed Assets Fixed assets are stated at cost (net of CENVAT) less accumu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m part of the assets and depreciation would be allowed accordingly when the asset is put to use. Penalty proceedings u/s 271(l)(c) of the I.T. Act are initiated on this point for furnishing inaccurate particulars of income. 12. Now the assessee is in appeal. 13. The Ld. Counsel for the assessee at the very outset stated that this issue has been adjudicated by the ITAT in assessee's own case, in ITA Nos. 1450 & 1451/Chd/2018 for the A.Y. 2013-14 & 2014-15 vide order dt. 22/04/2019, copy of the said order was furnished which is placed on record. 14. The Ld. CIT DR although supported the orders of the authorities below but could not controvert the aforesaid contention of the Ld. Counsel for the Assessee. 15. We have considered the submissions of both the parties and perused the material available on the record. It is noticed that a similar issue was a subject matter of the assessee's appeal in ITA No. 1450 & 1451/Chd/2018 (supra) wherein vide order dt. 22/04/2019 the issue has been set aside to the A.O. and the relevant findings have been given in para 8 of the order which read as under : 8. Considering the above submissions of the assessee, in our view, the matter is required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: Addition of ₹ 35,60,870/- n/s 41(1) on account of sundry creditors balances outstanding for the last 3 years and has not been paid till now, therefore, it is being brought to Tax u/s 41(1) of the Income Tax Act, 1961 as cessation of liability. It is submitted that as a matter of practice, the appellant company review such creditors/old outstanding credit balances periodically by the Board of Directors for writing back. A chart showing the present status of credit balance which have been added by the Ld. Assessing officer is enclosed. The perusal of the chart reveals that some payments were made after passing of assessment order and some of them have been written back as per the practice of the appellant company. In two cases, the appellant company has also filed legal suit against the parties, the orders of which are still awaited as on date. Thus in these circumstances the question of taking the balances as a cessation of liability as per the provisions of section 41(1) of the Act and this ground of appeal may kindly be adjudicated accordingly. 19.1 The Ld. CIT(A) after considering the submissions of the assessee sustained the addition by observing in para 8.2 & 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in sustaining the addition made by the A.O. It was further submitted that certain payments were made after passing of the assessment order and amounts of few had been written back as per practice of the assessee company, in two cases the assessee had filed legal suit against the parties and the orders for which were still awaited, therefore the addition made by the A.O. and sustained by the Ld. CIT(A) was not justified. 22. In her rival submissions the Ld. CIT DR submitted that the fact narrated now by the Ld. Counsel for the Assessee that few of the balances were written back and the payments were made in certain cases were not brought to the knowledge of the A.O. therefore this issue may be set aside to the A.O. for verification. 23. We have considered the submissions of both the parties and perused the material available on the record. In the present case it appears that the facts that payments were made in certain cases after passing of the assessment order and few were written back as per the practice of the assessee company were not brought to the knowledge of the A.O. and the Ld. CIT(A) is also silent on those facts. We therefore deem it appropriate to set aside this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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