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of <h1>Revenue's Appeal Partly Allowed in Tax Case; Deletions Upheld, Remand for Fresh Consideration</h1> <h3>Asstt. Commissioner of Income Tax, Circle-16 (1), New Delhi Versus M/s The Narang Industries Pvt. Ltd.</h3> The Revenue's appeal was partly allowed for statistical purposes in a case involving deletion of additions on account of bad debts written off and ... - Issues Involved:1. Deletion of addition on account of bad debts written off.2. Deletion of addition on account of interest and financial charges.3. Deletion of addition on account of gratuity payable.Summary:Issue 1: Deletion of addition on account of bad debts written offThe Revenue challenged the deletion of Rs. 1,13,05,316/- made by the AO on account of bad debts written off. The AO disallowed the claim as the bad debts included advances for capital goods and staff advances, which were not shown as income in earlier years and were not related to the assessee's business of money lending. The CIT(A) allowed the claim under Section 37(1) of the Act, stating that the payments were made wholly and exclusively for business purposes. However, the Tribunal found that the CIT(A) did not verify the details and basis of the advances and restored the matter to the AO for fresh consideration under Section 28/37(1) of the Act.Issue 2: Deletion of addition on account of interest and financial chargesThe Revenue contested the deletion of Rs. 1,59,28,955/- made by the AO on account of interest and financial charges. The AO disallowed the claim, alleging that the transaction of transferring the distillery business to a subsidiary was a colourable device and the interest liability should have reduced. The CIT(A) found that the interest was related to earlier borrowings for business purposes and allowed the claim. The Tribunal upheld the CIT(A)'s decision, stating that the sale of the distillery business did not affect the interest on earlier borrowings and the AO's reasons were irrelevant.Issue 3: Deletion of addition on account of gratuity payableThe Revenue appealed against the deletion of Rs. 65,62,103/- on account of gratuity payable. The AO disallowed the claim under Section 43B(b), stating that gratuity is allowable only if actually paid. The CIT(A) allowed the claim, noting that the liability was discharged and adjusted against the sale consideration. The Tribunal found that the CIT(A) did not verify whether the gratuity was transferred with the employees' consent and whether it was in the nature of retrenchment compensation. The matter was restored to the AO for fresh adjudication, considering the provisions of Sections 40A(7) and 43B.Conclusion:The appeal by the Revenue is partly allowed for statistical purposes, with matters on bad debts and gratuity payable remanded to the AO for fresh consideration.
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