TaxTMI 
TaxTMI 
2011 (8) TMI 780
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....larity, we dispose of both these appeals and cross objections by this consolidated order as issues are common. 2. The first common issue in revenue's appeal in ITA No 1470/K/2009 for Assessment Year 2006-07 and assessee's appeal in ITA No.1275/K/2010 for Assessment Year 2007-08 is as regards to computation of income u/s. 1 15JB of the Act for both years. For this, assessee as well as revenue have raised following grounds: "Grounds in Assessee 's appeal in ITA No 1275/K/2010: 1.0. Confirming the action of Assessing Officer in determining the Book Profit u/s. 115JB of the Act for the year under appeal at Rs.1823380456 as against Rs. 'Nil' declared in the return on the alleged ground that there was no Brought Forward Business loss & Depreciation as per books of account available for reducing from the net profit as shown in the profit and loss account under clause (iii) of Explanation 1 to Sec. 115JB(1). 1.1. Holding that the adjustment of Rs.381.55 cr. being the loss incurred by the appellant company in the earlier years, against the Share Premium account/Revaluation Reserve, pursuant to scheme sanctioned by the High Courts is not in contravention to the provisions of Comp....
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.... Rs.56,25,04,996/- Net effect (-) Rs.56,25,04,996/- Balance i.e. adjusted Book Profit u/s. 115JB NIL Tax payable u/s. 115JB ....
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....depreciation, as per Books of A/C of the assessee. There is no provision in Section 115JB either to resort to any provision of the companies Act, so far as the reduction as per clause (iii) supra is concerned. As regards the claim of the assessee that the Net profit is to be recalculated as provided in Sub-section(2) of section 115JB is also not tenable since the accounts of the assessee company are audited and certified by the Auditors and the same has been adopted by the general meeting. In this respect, decision of the Hon 'ble Supreme Court in the case of CIT Vs. Apollo Tyres Ltd. [2002] 255 ITR 273(SC) is relied upon. Regarding the assessee's claim of computation of Book Profit u/s.115JB for A.Y.2005- 06 and loss/depreciation brought forward as per reworking, there is no provision for brought forward of any loss or unabsorbed depreciation if any determined u/s.115JB, and this year's assessment for Block period is separate and res-judicate is not applicable. Besides, any error in earlier assessment can be subjected to remedial measures. In fact, remedial measure is being taken for the A. Y. 2005-06." 4. Aggrieved against action of AO, assessee preferred appeal before C....
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....ied out as per the Orders of the said High Courts, implementation whereof is binding on the Company." This was further noted in Notes Accounts No. 1: "Pursuant to the Scheme sanctioned by the Hon 'ble High Courts of Orissa and Gujarat, debit balance of Profit and Loss Account as on 30th September 2000 amounting to Rs. 381 55 crores transferred to Balance Sheet and stands adjusted to the extent of Rs. 281.55 crores against Share Premium Account and Rs.100.00 crores against Revaluation Reserve. These adjustments have been carried out as per the Orders of the said High Courts, implementation whereof is binding on the company." The compromise is an agreement with the creditors, with statutory backing Nevertheless, it was remarked that the compromise provision was "not in line with the generally prevailing accounting practices". This is contemporary evidence of the view taken by the auditors about the accounting treatment of debit balance as on the date of compromise by orders of the High Court. 6.4. Thereafter, item 5 of Notes on Accounts , Part B in Schedule 19 of Auditors Report for financial year 2006-07 refers to provision for taxation including the MAT as follows....
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....igh Court order and the availability of such artificially adjusted loss in financial year 2005-06 and 2006-07 in computation of book profit for determination of the MAT liability. The Assessing Officer cannot revise the auditors' version of Profit & Loss Account. But the auditor himself has proposed two sets of Profit & Loss A/c : one incorporating the directions of the order of the High Court u/s 391(2) of the Companies Act and the other without such directions but under normal accounting practice. The auditors report that the latter must be adopted for the purpose of profit u/s 115JB. The Assessing Officer would not revise the audited accounts following the Supreme Court judgment. But according to the assessing officer, following the same judgment the auditor also would not he permitted to comment on the Profit & Loss A/c prepared by it. In my opinion, the Supreme Court judgment denies the right of rewriting the accounts to the Assessing Officer even on the ground that they are not in conformity with Parts II & III of Schedule VI of the Companies Act since auditors are expected to take care of this. But the judgment does not deny the auditors the right to observe that certain adj....
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....brought forward (Rs.2, 72,15,34,810/-) or unabsorbed depreciation (33,43,00,127/-) is the amount of brought forward loss. It is not NIL. It is based on the certificate of statutory auditors as per books of Account. The auditor's certificate is reproduced here: 'T() WHOMSOEVER IT MAT CONCERN We Lodha & Co. Chartered Accountants, the Statutory Auditors of J K Lakshmi Cement Ltd., formerly J K Corp. Ltd. (the Company) have checked up books of accounts and other documents of the Company. Based on our checking we certify chat the Company had debit balance of Rs.381.55 crores as on 30.09.2000 in Profit and Loss Account of the Company, which Pursuant to the Scheme of Compromise and/or Arrangements sanctioned by the Hon 'ble High Courts of Orissa and Gujarat was transferred to Balance Sheet and stood adjusted against balance in Share Premium Account and Revaluation Reserve. We have been asked by the Company to work out status of losses and unabsorbed depreciation without considering above adjustment, adjustment of Debit Balance in Profit & Loss Account made against balance available in General Reserve, transfer of other reserves as available to/from profit & loss account and Defer....
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....55 ITR 273). 7.3. In my view this is not exactly a çase where this judgment is required to be pressed into service, In that judgment, the Assessing Officer is precluded from rewriting P & L A/c when auditors have done their job. In the present case, it is auditors who point out that there is a profit & loss A/c not prepared "in line with the generally accepted accounting practices" in F.Y 99-2000, which they had certified in implementation of a High Court order. The auditors further certify to the assessing officer in A.Y. 2005-06 that there is brought forward loss available for set off in A.Y. 2005-06 if the P & I. accounts of AY. 2000-01 to 2005-06 are recast in accordance with normal accounting principles & practices. The view in .the case of the: Apollo Tyres is that the profit & loss Account certified by the auditors cannot be revised by the assessing officer since it is presumed that auditors prepare the annual accounts in conformity with Part II & III Schedule VI of the Companies Act. But auditors themselves testify that a certain profit and loss Account in the earlier assessment year incorrectly removed the debit balance from the profit & loss account. It was nece....
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....r AY 2007-08, held as under: "8. I have carefully considered the fact of the case and the submission of the Ld. A. r. There cannot be two opinion that section 391 is a complete code in itself and any scheme sanctioned under this section will have over riding effect. Further if any of the conditions or directions stipulated in the scheme was prejudicial to the interest of any party it could have been put up for reconsideration before the Hon 'ble Courts itself. However once the scheme is approved it is binding on all concerns and has to be implemented in totally Further whether the scheme of sanctioned by the Hon "ble High Courts of Orissa and Gujarat was in accordance with the provision of the Company Law or not is not at all relevance for determining the issue in question. Once the effect to the High Court order has been given and necessary adjustments has been made in the books of accounts maintained as per requirement of Company Law, the book profit of the Company for the purpose of section 115JB of the Act has to be calculated on the basis of the Balance sheet and P& L a/c subsequently prepared on the basis of the relevant books of accounts. 8.1 The decision of the Apex C....
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.... of accounts and other documents of the Company. Based on our checking we certify chat the Company had debit balance of Rs.381.55 crores as on 30.09.2000 in Profit and Loss Account of the Company, which Pursuant to the Scheme of Compromise and/or Arrangements sanctioned by the Hon 'ble High Courts of Orissa and Gujarat was transferred to Balance Sheet and stood adjusted against balance in Share Premium Account and Revaluation Reserve. We have been asked by the Company to work out status of losses and unabsorbed depreciation without considering above adjustment, adjustment of Debit Balance in Profit & Loss Account made against balance available in General Reserve, transfer of other reserves as available to/from profit & loss account and Deferred Tax Credit, accordingly the position of losses and unabsorbed depreciation as on 31-3-2004 is as under:- Financial Year (April-March) Asstt. Year Losses CriRs. Unabserbed Dep. Cr./Rs. Total CriRs. 1997-98 1998-99 34.07 45.58 79.65 1998-99 1999-00 114.02 61.81 175.83 1999-00 2000-01 - 63.99 63.99 2000-01 2001-02 111.22 48.62 159.84 2001-02 2002-03 12.84 ....
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....id two companies by transfer of paper undertaking of assessee to Central Pulp Mills Limited. Clause 10 of Part II of the sanctioned scheme provided that debit balance in the Profit and Loss Account as on September 30, 2000 of the assessee shall stand adjusted against Share Premium Account and/or Revaluation Reserve Account and for this relevant financial year was 2000-01. Accordingly, in financial year 2000-0 1 relevant to assessment year 200 1-02, debit balance of Rs.381.55 crore in assessee's Profit and Loss Account as on September 30, 2000 was adjusted to the extent of Rs.281.55 crore against Share Premium Account and remaining Rs.100 crore was adjusted against Revaluation Reserve with appropriate disclosure in the accounts including by way of Notes on Accounts. In final accounts of assessee company in respect of said adjustment, statutory auditors in their report dated September 29, 2001 to the shareholders of the assessee, stated as under:- "Regarding adjustment of debit balance in Profit and Loss Account, attention is invited to Note 1 - Schedule 20, according to which the debit balance in Profit and Loss Account has been adjusted against Share Premium and Revaluation Rese....
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....eduction of brought forward losses of Rs.272.15 crore, which was lower than unabsorbed depreciation. AO considered statutory auditor's certificate dated December 3, 2007, which is to the effect, that without considering adjustment made on September 30, 2000 of debit balance in the Profit and Loss Account against Share Premium Account and Revaluation Reserve, brought forward loss as on March 31, 2004 was Rs.272.15 crore and unabsorbed depreciation was Rs.33 1.43 crore. For assessment year 2006-07 issue involved herein, that assessee persisted with same stand and in its computation of book profit, adjusted the profit after depreciation of Rs.56.25 crore by identical amount claiming it to be an adjustment in terms of clause (iii) of Explanation to section 115JB(2) of the Act on account of brought forward loss. The assessee claimed that brought forward loss was Rs.246.53 crore which was lower than the amount of unabsorbed depreciation and as such the profit of Rs.56.25 crore for the assessment year 2006-07 was correctly reduced by brought forward loss. In support of its stand, assessee drew attention of AO to qualified auditors' report in respect of accounts as on September 30, 2000 wi....
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.... AO for two years and order of CIT(A) for assessment year 2007-08. He argued that the scheme was sanctioned by Hon'ble High Courts and was binding on all concerned and book profit under section 115JB of the Act could not be computed contrary to orders passed by Hon'ble High Courts as that would amount to contempt of court. He further stated that books of account did not show any brought forward loss and no adjustment in terms of clause (iii) of the Explanation to section 1 15JB(2) of the Act was called for. He heavily relied on decisions of Hon'ble Supreme Court in the case of Apollo Tyres (supra) and also in the case of Malayala Manorama Co. Ltd. Vs. CIT (2008) 300 ITR 251 (SC) and stated that AO had only power of examining whether the books of account were certified by the authorities under Companies Act as having been properly maintained in accordance with Companies Act. He stated that in instant case, books of account were so certified and as such, AO had no jurisdiction to go beyond the net profit shown in Profit and Loss Account or to make any adjustment not provided for by Explanation to section 115JB(2) of the Act. Ld. Counsel Shri M. P. Agarwal cited several decisions in s....
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....d Revaluation Reserve. The statutory auditors of assessee had clearly mentioned in their report to shareholders that the adjustment, though made as per orders of Hon'ble High Courts, was not in accordance with generally accepted accounting practices. He argued that accounting standards did not permit adjustment of debit balance in Profit and Loss Account against Revaluation Reserve or Share Premium Account. For this argument Ld. Counsel drew attention to Guidance Notes issued by Institute of Chartered Accountants of India on treatment of reserve created on revaluation of fixed assets and Accounting Standard 10 relating to "Accounting for Fixed Assets". He elaborated that according to sub-section (1) of section 78 of Companies Act, 1956, provisions relating to reduction of share capital were applicable in respect of Share Premium Account as if Share Premium Account were paid up share capital of the company. According to him, scheme of arrangement neither provides for reduction of share capital of assessee nor provisions of Companies Act, 1956 in that behalf followed and further, assessee' s case did not fall within any of exceptions specified in sub-section (2) of section 78 of Comp....
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....ng of the Companies Act, 1956. Since adjustment in terms of clause (iii) was to be made in respect of losses/depreciation for past period, it was incumbent upon AO to take into consideration accounts for the past period. If any adjustment in the accounts of an earlier year affecting the amount of loss or depreciation had been stated to be not as per generally accepted accounting practices by the statutory auditors, it was incumbent upon AO to determine correct amount of loss/depreciation for the purposes of reduction in terms of clause (iii) of Explanation on the basis of statutory auditors' opinion. In terms of sub-section (6) of section 211 of the Companies, 1956, the Balance Sheet and Profit and Loss Account included notes thereon and documents annexed thereto and such notes and documents could not be ignored by AO in computing book profit under section 115JB. Ld. Counsel Sh J.P. Kaithan placed reliance on judgment of Hon'ble Delhi High Court in CIT v Sain Processing and Weaving Mills P Ltd (2010) 325 ITR 565 (Del) and on the decision of Mumbai Bench of Tribunal in DCIT v Bombay Diamond Company Ltd (2010) 33 DTR 59(Mumbai) (Trib) in support of proposition that where accounts wer....
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....) Whether, in the given facts and circumstances of the case, assessee is entitled to deduction of brought forward losses for the purpose of computation of book profit u/s. 115JB of the Act in relevant assessment year 2006-07 as adjusted by AO in assessment year 2005-06, even though the losses have been liquidated by adjusting debit balance against share premium and revaluation reserve pursuant to scheme of compromise sanctioned by Hon'ble High Courts of Orissa and Gujarat as on September 30, 2000 in the normal computation of profit as per Profit and Loss Account of assessee. (ii) Whether, in the given facts and circumstances of the case, for the purpose of computation of book profit adjustment under Explanation (iii) of section 115JB of the Act books of account are to be adjusted as per additional information in accordance with the provisions of Part II & III of Schedule VI of Companies Act, 1956. The provisions enacted in Chapter XII-B i.e special provisions relating to certain companies are that if the assessee be a company and its total income determined under the Act in respect of previous year is less than specified book profit, fictionally it will be deemed that t....
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....on 115JB must take note of it and appropriately adjust book figures. The statutory auditors' report would naturally mention the fact since such accounting would be contrary to generally accepted accounting practices. We are of the view that assessee would be fully within provision of law to take note of auditors' report and adjust book figures so that they are in conformity with the accounting standards and provisions of Companies Act and to determine the correct amount of loss. Even Hon'ble Supreme Court in the case of Apollo Tyres (supra), has laid down the principle that whether books of accounts are certified by authorities under Companies Act as having been properly maintained in accordance with Companies Act. Hon'ble Supreme Court in Apollo Tyres (supra) at page 280 of 255 ITR held as under: "Therefore, we are of the opinion, the Assessing Officer while computing the income under section 115J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter has the limited power of making increases and reduction....
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....reflected in books of account for relevant previous years under consideration before AO. Fact that auditors' qualification is not repeated in their reports in respect of accounts for relevant previous years under consideration before the AO cannot be a reason for ignoring it particularly when it reflects upon the correctness of the amount of loss/unabsorbed depreciation appearing in books of account for relevant previous years. No doubt, in the instant case, assessee wants the AO to take into account the auditors' opinion in the earlier year for obtaining a tax advantage for itself. That however cannot make the principle to be applied any different irrespective of who stands to gain, if auditors' opinion in an earlier year reflects upon correctness of amount of loss/unabsorbed depreciation appearing in the books of account of a subsequent year, the AO must take into consideration such opinion and determine correct amount of brought forward loss/unabsorbed depreciation in computing the book profit of such subsequent year. 12. Another facet of argument is as regards the effect of orders of Hon'ble High Courts sanctioning the scheme of compromise/arrangement which provided for adju....
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....ount. Hon'ble Court noted that though profit was not impacted, depreciation as the head of account was impacted and by interplay of Balance Sheet items with P&L Account items, assessee had sought to project the loss as profit. Hence, Hon'ble Court ruled that as the amount of revaluation reserve had not gone to increase the book profit at the time it was created, reduction sought by assessee under clause (i) to Explanation u/s. 1 15JB(2) of the Act in respect of depreciation had rightly been rejected by AO. Hon'ble Supreme Court in Indo Rama Synthetics (I) Ltd (supra) held as under:- We agree with the Assessing Officer. Under the provisions, as they then existed, certain adjustments were required to be made to the net profit as shown in the profit and loss account. One such adjustment stipulated that the net profit shall be reduced by the amount(s) withdrawn from any reserves, if any such amount is credited to the profit and loss account. Thus, if the reserves created had gone to increase the book profits in any year when the provisions of section 115JB were applicable, the assessee became entitled to reduce the amount withdrawn from such reserves if such withdrawal is credited t....
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....count are to be adjusted in view of loss liquidated by adjusting debit balance against share premium and revaluation reserve in accordance with provisions of Part II & III of Schedule VI of Companies Act, 1956. Tribunal in the case of Bombay Diamond Co. Ltd. (Supra) in similar circumstances has held as under: "16. We have considered the rival submissions made by both the sides, perused the orders of the AO and the C1T(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee in the impugned assessment year has earned gross profit of Rs. 10,38,13,765 on account of sale of its rights in an immovable property. There is also no dispute to the fact that this income has not been passed through the P&L a/c but has directly been taken to the balance sheet as capital reserve. According to the AO since the assessee has not prepared its accounts in the manner provided in Part II and Part III of Sch. VI to the Companies Act, therefore, the amount of Rs. 10,38,13,765 having not routed through the P&L a/c has to be added to the book profit for the purpose of provisions of s. 115JB. It....
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.... ....." 18. From a bare reading of the above it is clear that the P&L a/c of a company shall disclose every material feature including credits or receipts and debits or expenses in respect of non-recurring transactions or transactions of exceptional nature also. Further the company is also required to set out the various items relating to the income and expenditure of the company arranged under most convenient heads and disclosing profit or loss in respect of transactions of a kind not usually undertaken by the company or undertaken in circumstances of exceptional or non-recurring nature in amount. 19. However, in the instant case we find although the assessee has earned a profit of Rs.10,38,13,765 from the sale of rights in an immovable property the same has not been routed through the P&L a/c and has directly been credited to the balance sheet. Therefore, in our opinion, accounts are not prepared in *accordance with the manner provided in Part II and Part III of VI to the Companies Act. 20. The various decisions relied on by the learned counsel for the assessee are not applicable to the facts of the present case. In the case of Apollo Tyres Ltd. (supra)....
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....d methods. Further the issue before the Hon 'ble High Court was under the provisions of s. 1 15J of the Act. However, in the instant case the assessee has bypassed the provisions of Part II and Part III of Sch. VI of the Companies Act and directly credited the profit to the reserve account. Therefore, the decision of the jurisdictional High Court is also not applicable to the facts of the present case. Similarly the decision of the Co-ordinate Bench of the Tribunal in the case of Orson Trading (P) Ltd. (supra) is also distinguishable and not applicable to the facts of the present case since it relates to the provisions of s. 115JA and it has not been held that even if the accounts are not prepared in the manner prescribed as per Part II and Part III of Sch. VI of the Companies Act, 1956, the AO has no power to disturb the book profit declared by the assessee. 24. The various other decisions relied on by the learned CIT(A) in his order are also not applicable. In none of the case it has been held that even where the accounts are not prepared in the manner provided as per Part II and Part III of Sch. VI to the Companies Act, 1956 the AO has no power to go beyond the book pro....
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....n deleting disallowance of Rs.12,25,190/- made u/s. 40A(9) when the assessee has failed to specify its business interest by making said donations. ii) That the Ld. CIT(A) has not considered that the assessee intended to diverse its profit by making such donation to school and the schools are run by the same group for making profit." 16. Since facts are identical and grounds are common except variance in amount, we deal the issue by taking the facts in Assessment Year 2006-07. The brief facts leading to the above issue are that assessee made contribution to clubs and also contributed to school funds in running school which was included in employee's welfare expenses. The details of such expenses are as under: 1. Expenses & Subsidy to Staff Workers Club at Jaykaypura Rs. 1,35,1 70 2. Expenses & subsidy to Ladies Club at Jaykaypuram, Sirohi Rs.32,105 3. Expenses for running school at Jaykaypuram Rs.10,25,370 Rs.11,92,645 17. The assessee before Assessing Officer contended that major payment to school was in the nature of subsidy to employees as the school is run being near to assessee' s cement manufacturing unit at Jaykaypuram, Rajasthan. Accor....
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....ssment Years is allowed for statistical purposes. 9. First issue in assessee's C.O. for Assessment Year 2006-07 is as regards to the order of CIT(A) upholding the action of Assessing Officer in adding notional interest. For this, assessee has raised the following ground no.1: "1. On the facts and in the circumstances of the case Ld. CIT(A) erred in upholding Ld. Assessing Officer's unjustified action in adding notional interest of Rs.3,82,500 and Rs.5,00,000 and treating it as income of the appellant." 20. We have heard rival contentions and gone through facts and circumstances of the case. We find that Assessing Officer while making addition of notional interest of Rs.3,82,500/- and Rs.5,00,000/- have listed following facts and reasons: "The Assessee Company had made deposit of Rs.40 lacs. The assessee has submitted that "this represents deposit of Rs. 1500000 given to M/s Oswal Food Limited which carried interest rate of 25.5% and Rs.2500000 to M/s HMG Financial Services Limited which carried interest rate of 20%. The two parties defaulted in repayment of the amount deposited and the legal case was filed by us. In view of the fact that principal deposit amount recover....
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....ides that where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of any receipt, revenue recognition is to be postponed to the extent of uncertainty involved. The case facts clearly demonstrate that in view of legal cases pending it was uncertain whether the interest on the said inter- corporate deposits would ultimately be received or not. Therefore, there is no justification for bringing to the tax the notional interest as an income for the previous year relevant to the Assessment year 2006-07. Since the assessee follows mercantile system of accounts the interest of Rs.382500/- on ICD of Rs.15 lacs given to M/s Oswal Food Products Ltd. and Rs.500000/- on ICD of Rs.25 lacs given to M/s H.M.G.financial Services Pvt. Ltd. definitely accrued at the year-end especially because assessee had legal right in enforcing the collection of accrued amount. As such interest of Rs. 882500/- is treated as income on accrual basis." We find that this issue is squarely covered in favour of assessee and against the revenue by Tribunal's decision in earlier four years in assessee's appeal starting from Assessment Years 2001-02 to 2005-06 in ITA No759....
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....tial to such treatment, Assessing Officer has consistently allowed depreciation on such expenditure as per Rules upto Assessment Year 2005-06 in orders passed u/s 143(3) of the Act. However, for AY 2006-07, instead of allowing depreciation on W.D.V as on 3 1.03.2005 as per assessment order for AY 2005-06, Assessing Officer erred in allowing depreciation as per return which does not factor the above mentioned treatment of interest capitalization. Hence, Ld. Counsel stated that suitable directions may be given to the Assessing Officer to rectify the depreciation amount in assessment order for AY 2006-07. We are of the view that opening WDV for A.Y 2006-07 (i.e. as on 3 1.03.06) has necessarily to be the closing WDV of the immediately preceding year (i.e. As on 01.04.06) which the A.O. in his order dated 19,12,2007 for A.Y 2005-06 has recorded at Rs.1557645289. The A.O will recompute the depreciation allowable for A.Y 2006-07 by adopting the opening WDV at Rs. 1557645289. Accordingly, this issue of the assessee' s appeal is allowed for statistical purposes. 23. The next common issue in this C.O. and ITA No.1275/K/2010 of assessee is against the order of CIT(A) upholding the action ....
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....on the application of section 115J / 115JA of the Act in the regular assessment and interest under section 234B of the Act of the Act is payable on failure to pay advance tax in respect of tax payable under section 115JA of the Act. Similar is the view in respect to chargeability of interest u/s. 234C of the Act. Respectfully following the aforesaid decision of Hon'ble Apex Court in the case of Rolta India Ltd. (supra), we do find infirmity in the order of CIT(A) and the same is hereby upheld. Grounds of Appeal and C.O. of assessee are dismissed. 25. The next issue in this CO of assessee is against the order of CIT(A) in not allowing credit available for earlier years u/s. 115JAA of the Act. For this, the assessee has raised following ground no.4: "4. On the facts and in the circumstances of the case Ld. CIT(A) erred in not directing the Assessing Officer that the tax computed as payable u/s. 115JB in the impugned order dt. 05.12.2008 passed u/s. 143(3) should have been quantified as available for credit u/s. 115JAA of the Act and is to be carried forward/set off in accordance with provisions of Sec. 115JAA of the Act." 26. We have heard rival contentions and gone through ....
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....nancial straits and the debtor-companies had also stopped claiming deduction of interest. Further, the fact that the assessee had been paid interest by the debtor-companies for a few years could not by itself and without anything more justify the inference that there was some agreement between the parties for payment of interest. Hence, the Tribunal was justified in holding that no interest accrued to the assessee in the assessment year 1974-75." Hon'ble Rajasthan High Court in the case of CIT vs. Banswara Fabrics Ltd. [267 ITR 398] confirmed the order of the Tribunal in which C.I.T.(A) found in favour of the assessee that both the parties, in whose names the debit bàlances were shown in the books of account of the assessee, had incurred losses and cases were pending before the BIFR suggesting that both the parties had negative net worth of capital. The Ld. Commissioner (Appeals) came to the conclusion that when the recovery of principal itself was in doubt, the waiver of interest could be considered to be in the interest of business and not conferring any favour by transferring profits to the debtors. The departmental appeal was dismissed. Hon 'ble Delhi High Court in th....
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....e not only in the assessment year in question but in subsequent assessment year also, therefore, assessee was justified in not declaring interest income in the assessment year in question having regard to principle of real income. Our findings are supported by various decisions referred to above. 8. In this view of the matter, we do not justify action of the authorities below in sustaining the additions in the hands of the assessee. We, accordingly, set aside the orders of authorities below and delete the entire addition on this issue. As a result, ITA No.1759 (Kol)/2007 is allowed." Since the issue is covered by Tribunal's order exactly on same facts, we confirm the order of CIT(A) deleting the addition of notional interest. This issue of revenue's appeal is dismissed. 29. The next issue in this appeal of revenue in ITA No.1417/K/2010 is regarding the order of CIT(A) allowing deduction u/s. 35(1)(ii). For this, revenue has raised following ground no.3: "3. i) That, the Ld. CIT(A), C-1, Kol has erred in allowing deduction claimed u/s. 35(1)(ii) by the assessee on account of donation made to Pushpawati Singhania Research Institute (PSRI). ii) T....