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TMI Blog2023 (6) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to extend the business activities of the Store and protect the interest of consumers, the Management of Super Bazar had decided to function as Multi State Cooperative Society and finally registered under the Multi-State Cooperative Societies (MSCS) Act, 1984 (amended in the year 2002) with its area of operation being the entire country since 22nd January, 1966. The Union of India (through Ministry of Consumer Affairs) was holding equity of 72.00% in the Store. On account of the co-operative society running into huge losses running into hundreds of crores of rupees, the same was ordered to be liquidated vide an order dated 05-07-2002 passed by the Central Registrar acting under the Multi- State Cooperative Societies Act, 2002. On a petition filed before the Hon'ble Supreme Court by the employees union, the Hon'ble Supreme Court passed various orders for revival of the Cooperative society and inter alia directed; In terms of our order dated 7th May,2008, an amount of Rs.54.31 crore being arrears of wages upto 31st December,2007, was directed to be disbursed by the highest bidder Rs.55 crores stands deposited by highest bidder. The sum of Rs. 20 crore out of Rs.55 crore which li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tile basis, allowance must be granted in the year in which the liability is incurred, irrespective of the question whether the disbursement has been made or not. Accordingly, the expenses amounting to Rs 573,802,128 were disallowed and added to the income of the assessee u/sec 37. 3.2 Further Ld. AO took the Notes to accounts, and observed that the assesseee has during the year written off the outstanding Govt. loan of Rs 68.51 cr, and the interest there of, amounting to Rs 83.20 cr. The assessee was asked to justify why the said amounts may not be added to its income. The assesse vide its letter dated 15.01.2014 submitted; "In accordance with the scheme of revival, the assesse has written-off the outstanding Government loan of Rs.68.51 crore and interest thereon of Rs.83.20 crore as appeared in the books as on 31.03.2010. The interest expenses as booked in last 10-12 years were already added back in computation of income whjle filing the income tax returns of the last years." 3.3 Further, assessee had furnished details of the amounts of interest written off on this account in earlier years vide its letter dated 21.01.2014. The reply of the assessee was considered, but was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowable in view of the following judicial pronouncements: 1. CIT v/s Nagri Mills Co Ltd. 33 ITR 681 (Bom) 2. Gujrat High Court judgment in the case of Saurashtra Cement 213 ITR 523 where their lordship held that though the expenditure relates to prior period if the liability has accrued during the year then the expenditure has to be allowed as deduction. 3. CIT vs. Vishnu Industrial Gases ITA no. 229/1998, New Delhi 4. Kellogg India Pvt. Ltd. V. ACIT 2012 (12) TMI 664-ITAT MUMBAI On the basis of such contentions it was argued that the claim made by the appellant in respect of discharge of liabilities, which crystallised during the year as per court order be allowed. 5.2.4 I have carefully considered the matter. From the legal position as enunciated by Hon'ble Courts and also the principle of accountancy, when the assessee is following mercantile system of accounting, deduction for liability can be allowed only when the year in which it arose or only in the year to which it pertained or during the year when it was crystallized or quantified or determined. The principle of following a particular system which is not as per the provision of accountancy and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he loan sanctioned by the Govt was for the purpose of Business. The appellant on the contrary says that it is for capital purpose. The copies of loan agreements has not been submitted before me. The judgments in the case of Tosha International, logistronics and others from jurisdictional HC (following Mahindra and Mahindra case) holds that the waiver of loan for trading purpose is taxable, while that for acquiring capital assets is not taxable. [The latest decision from Madras HC says in case of Ramaniyam is in apparent conflict with the same holding that it is taxable irrespective of whether it is for trading purpose or for capital purpose.] Since the basic facts need to be investigated, the AO may examine the nature of loan before granting relief as per law. 5.3.22 The ground is disposed off in the light of the above observation." 6. The Revenue is in appeal raising following grounds :- "1. Whether the Ld. CIT(A) has erred in issuing directions to the AO that, subject to verification, entail providing relief on the claim made by the assessee of prior period expenses amounting to Rs. 57, 38,02,128/- when Mercantile method of accounting was being followed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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