TaxTMI 
TaxTMI 
2011 (1) TMI 1223
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....n as well as minimum alternate tax credit under section 115JA. The assessee filed a revised return of income on February 5, 2001 declaring loss of Rs. 32,46,645. This return was processed under section 143(1) on March 26, 2002. Thereafter, a notice under section 148 of the Act was issued on March 27, 2007 to the assessee and the assessee-company filed a reply on April 5, 2007 requesting the Assessing Officer to consider the return of income already filed on February 5, 2001 as that which was filed in response to notice under section 148. The assessee sought reasons for reopening and the Assessing Officer communicated the same. The assessee raised objections. The Assessing Officer disposed of these objections in the assessment order itself. He assessed the income of the assessee at Rs. 7,84,98,560, inter alia, making addition of income under section 41(1) amounting to Rs. 7,42,36,020 being loan written by M/s. Syndicate Bank in pursuance of an order of the Debt Recovery Tribunal, Mumbai and addition of Rs. 76,16,250 on account of wreck removal charges. Aggrieved, the assessee carried the matter in appeal before us. The first appellate authority granted part relief. Further, aggri....
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....vy of interest on the appellant under section 234B Rs. 1,75,76,120 and section 234D Rs. 2,75,547 respectively. Learned counsel for the assessee Shri Sanjiv M. Shah submitted that the reopening of the appeal is bad in law for the following reasons : (a) The amount was offered to tax for the assessment year 2004-05 and it was assessed on substantive basis and hence the reasons recorded was wrong. (b) The order for the assessment year 2004-05 was passed under section 143(3) on October 13, 2006 and thereafter on March 27, 2007 notice of reopening has been given and that no reopening can be made on protective basis. For the proposition that reopening cannot be made in the realm of doubt, he relied on the following case law : M. P. Ramachandran v. Deputy CIT [2011] 8 ITR (Trib) 655 (Mumbai) ; 32 SOT 592. That once a substantive addition is made reopening cannot be made on protective basis (c) The reasons for reopening are perverse as the Assessing Officer wanted to tax the same income twice. (d) The objections for reopening were not separately disposed of but were dealt with only within the assessment order and hence illegal. (e) The reasons for reopening was wrong....
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....ed counsel for the assessee. He submitted that reopening is correct in law. He pointed out that the return of income was processed under section 143(1) and no opinion has been formed. He pointed out that the note given, i.e., Note No. 2(e) to the balance-sheet is misleading and the Assessing Officer was right in entertaining a reasonable belief that the income escaped assessment. He refuted various contentions of the assessee and relied on the order of the learned Commissioner of Income-tax (Appeals). He further relied on the recent judgment of the hon'ble High Court in the case of Multiscreen Media P. Ltd. v. Union of India [2010] 324 ITR 54 (Bom) for the proposition that the material found in the subsequent assessment proceedings can form the basis for reopening the assessment. On the issue of bringing to tax the amount written off by Syndicate Bank in this year, the learned Departmental Representative relied on the order of the Assessing Officer. In regard to ground No. 7, he submitted that the same may be set aside to the lower authorities. As regards the ground No. 8, he agreed that the same is consequential in nature. Rival contentions heard. On a careful conside....
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....aring No. 0105025755 for Rs. 1,30,00,000 issued by the New India Assurance Company Limited on November 18, 1985. The claim sanctioned under the above policy by the insurance company, or award/decree passed for payment of claim is solely payable to defendant No. 1 Messrs Maini Shipping Private Ltd. (emphasis supplied). Paragraph 2 of the above decree makes it clear that in the event of the assessee committing a default in payment of any instalment the consent terms shall lapse. From the above, it is clear that, only on fulfilling certain conditions which is spread over a period of time, the assessee would derive the benefit. The payments to be made by the assessee are spread over a period of three years. Only on completion of payments, the assessee shall get a concession and not otherwise. Only on October 18, 2003, the bank vide letter dated October 18, 2003 at paragraph 4 stated as under : "Our claim against you in the above matter stands fully satisfied under OTS and we do not have any further claim against you under this case." This letter was given only after all the instalments were paid by the assessee to the bank, which was in the assessment year 2004-05. Thus, in&nb....
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....f Income-tax (Appeals) erred in confirming the disallowance of bad debts of Rs. 26,25,000 claimed by the appellant-company under section 36(1)(vii) of the Income-tax Act, 1961 by holding that the date under consideration is not related to an amount which has been taken into account in computation of income of the appellant-company and also erred in holding that unless it can be held that the appellant-company is engaged in money lending business, the bad debts claimed by the appellant-company cannot be allowed as per the provisions of section 36(2) of the Income-tax Act, 1961. 2. That the learned Commissioner of Income-tax (Appeals) erred in not allowing the claim of Rs. 26,25,000 as expenditure under section 37(1) of the Income-tax Act, 1961 being incurred wholly and exclusively for the purposes of business of the appellant-company. 3. That the learned Commissioner of Income-tax (Appeals) erred in confirming the interest charges under sections 234B and 234C of the Income-tax Act, 1961. The assessee has raised two additional grounds which read as follows: "1. The Assessing Officer be directed to exclude the sum of Rs. 7,42,36,024 from the total income of the asse....
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....assessment years, the Assessing Officer has passed orders under section 143(3) to assess the income as income from business. He referred to the profits and loss account for the year ended March 31, 2004 which is at page 124 of the assessee's paper book, wherein "Income from finance activity" was given under that head. He submitted that even under the Companies Act, the income is being shown as "income from finance activity". Even in the financial year ended March 31, 2002 at page 176 of the paper book, the interest from finance activity is shown. He relied on the following case law : (i) Poysha Oxygen P. Ltd. v. Asst. CIT [2008] 19 SOT 711 (Delhi) (TM) ; and (ii) CIT v. Omega Forwarders P. Ltd. [2009] 316 ITR 342 (Mad). The sum and substance of his submission is that the assessee was offered interest income as part of its business activity nor of the earlier years as well as this year and that the write off of bad debt should be allowed following the decision of the hon'ble Supreme Court in the case of T. R. F. Ltd. v. CIT [2010] 323 ITR 397 (SC). On ground No. 2, he submitted that this is an alternative ground that bad debt in question is to be allowed un....
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....at there is no document to demonstrate what part of the debt is taken into account on the loan written off. He submitted that the loan was given during the current financial year and the borrower has not been charged with any interest. He pointed out that the borrower died within six months and the entire transaction shows that this was not for the purpose of profit. Thus, he submitted that the requirement of section 36(2) is not fulfilled. On the decision cited by the assessee, he distinguished the same by submitting that there is no dispute in those cases that the assessee was in the business of banking or money lending. On ground No. 2, he relied on the order of the Commissioner of Incometax (Appeals). On ground No. 3, he submitted that the same is consequential. On additional ground No. 2, he submitted that similar issue arises in the Departmental appeal and they may be disposed of together. After hearing the rival contentions, on the first issue of bad debts, we hold that the assessee is not in the business of banking or money lending. The amounts advanced in this case, in our considered opinion, cannot be considered as having been lent in the ordinary course of busin....
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....00 50,093.00 - - - - Bad debts recovered - - - 1,06,236.18 13,96,018.78 31,28,363.00 33,39,218.00 59,46,556.88 (Bad debts w/off) - - - - 26,25,000.00 - - - Income from badla - 1,84,068.87 - - - - - - Total 34,93,611.72 21,64,997.45 42,69,356.48 6,89,353.17 30,78,853.38 31,58,171.00 33,41,475.53 59,46,556.88 From the assessment orders passed under section 143(3), it can be seen that the entire interest income for the assessment year 2000-01, irrespective of the fact that interest was received from bank and that interest was received from the debentures, were assessed under the head "Income from business" as offered by the assessee. There is no discussion on the issue. In our considered opinion, in a case where the assessee's business is discontinued, ....
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....res has been advanced which is stated to be at 9 per cent. interest. In this case, there was an opening debit balance. The third advance is to a relative of the said director, Gita Maini, who is also a shareholder, the amount of advance is Rs. 2,50,00,000 and no interest has been charged. The last is the amount under consideration, to one Brita Maini, the amount being Rs. 26,25,000 claimed to be at 9 per cent. although no interest has been shown as received. 3.4 Two conclusions follow from here. First that out of the total advance of Rs. 8,86,19,000, 98 per cent. advances are to related persons and, second that in two out of the three related persons no interest has been charged by the appellant. Further as far as the case of Brita Maini is concerned, the appellant has contended that the person is not related to the directors of the company nor has any interest in any of the group companies. This person is no more alive and it has been informed that there are no known legal heirs also. Therefore, direct enquiries are not possible. However, as the name suggests, this persons should be related, even though remotely, to the directors of the company. Another feature of the loan in t....
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.... as to qualify it to become a business activity. I am, therefore, of the considered opinion that the money lending activity of the appellant is not a business activity. Consequently, the latter part of section 36(2)(i) does not make the bad debt allowable to the appellant." Mere mention in the memorandum of association under the head "Incidental or ancillary" to the entitlement of the main objects does not permit the company to become a non-banking financial company without permission from the Reserve Bank of India. Coming to the decisions relied upon by the learned counsel for the assessee, the case of CIT v. Omega Forwarders P. Ltd. [2009] 316 ITR 342 (Mad), the Tribunal has recorded a finding that the assessee has been engaged in the business of money lending and under those circumstances, the hon'ble Madras High Court held that the conditions laid down under section 36(2) stands satisfied. In the case in hand, we have given a factual finding that the assessee is not in the business of money lending. Thus, the judgment does not apply to the case of the assessee. Similarly, in the case of Poysha Oxygen P. Ltd. [2008] 19 SOT 711 (Delhi) (TM) the Tribunal held that the asses....