TaxTMI 
TaxTMI 
2012 (10) TMI 775
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....e case are that the assessee company is a limited company and is engaged in the business of import and sale of pulses. It filed its return of income for the assessment year 2007-08 on 20.11.2008 declaring an income of Rs.78,46,861/-. The case was selected for scrutiny and necessary details as required by Assessing Officer from time to time were filed by the assessee. During assessment proceedings, the Assessing Officer noted that company had granted loans to various entities and the amount outstanding at the close of year was Rs.7,29,50,089/-. It was observed by A.O. that some of these loans were interest free loans. The Assessing Officer further noted that company had incurred interest burden of Rs.1,46,81,869/- whereas it has earned total interest on advances amounting to Rs.29,96,937/-. The Assessing Officer further noted that granting of interest free loans and advance has not resulted into anything which might have helped the business of assessee company and therefore relied upon the provisions of section 36(1)(iii) of the Act wherein interest on borrowed capital is allowed only if the amount borrowed is utilized for the purpose of business or profession of the assessee. The A....
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....n in the international market. b) Explaining the difference between speculative business transaction and normal business transaction, the ld AR of the assessee relied upon the judgment in the case of Bhandari Rajmal Kushalraj v. CIT 96 ITR 401 wherein it was held that a contract can be settled only during the subsistence of the contract and if a breach occurs due to non performance of the contract and thereafter, if the parties to the contract settle the dispute by paying the difference between the contract price and the market price that will not amount in law to settlement of a contract but a case of settling damages consequent upon the breach of contract. He further relied on the case law of CIT v. Shanty Lal Pvt. Ltd. 144 ITR 57 (SC) wherein the Hon'ble Supreme Court confirmed the judgment of Hon'ble Mysore High Court's case and held that a contract settled mean a contract settled before breach of contract and after breach of contract the cause of action is no longer based on the contract itself but on its breach. Therefore, in view of the above, the Ld AR argued that amount of damages thus paid and suffered by it due to breach of contract, would not be classified as a specula....
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....est so earned was much more than the interest paid to bank on over draft limits. Reliance was placed on the judgment of Hon'ble Bombay High Court in the case of CIT v. Reliance Utility & Power Ltd. 18 DTR 1. Reliance was also placed in the case of S.A. Builders Ltd. V. CIT 158 Taxmann 74 (SC) wherein the Apex Court had held that transfer of the borrowed funds to a sister concern is to be seen from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits. The Ld CIT(A) after going through the submissions made by ld AR deleted the addition made by the Assessing Officer on this account also. 9. Aggrieved, the revenue filed appeal before this Tribunal. 10. At the outset, the Ld DR argued that no delivery of pulses was taken and contracts were cancelled and hence in view of provisions of section 43(5) it was a speculative loss. Our attention was invited to page 16 of paper book where clause containing arbitration in respect of agreement with foreign supplier was placed and he argued that there is no evidence that there was some dispute between the parties and had there been any dispute the matter would have been refer....
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.... squarely covered by the case of assessee's sister concern M/s Orient Overseas Pvt. Ltd. wherein similar disallowances were made under the similar facts and circumstances and Hon'ble Tribunal vide its order dated 28.2.2011 had set aside the matter to the office of Assessing Officer and assessee had taken the matter to Hon'ble Delhi High Court and Hon'ble Court had held that appropriate application before the Tribunal u/s 254(2) of the Act may be filed by assessee. The assessee then filed Misc. Application before ITAT which as per ld. AR was still pending. However, based upon Hon'ble Tribunal's order, the ld. Commissioner by order dated 24.11.2011 deleted the disallowance made by the Assessing Officer. Therefore, the Ld AR argued that the matter is covered by the above order of Hon'ble Tribunal in which Tribunal had set aside the file to the office of A.O. 12. As regards second disallowance of Rs.30 lacs, the ld. AR argued that if interest on credit and debit balances of sister concerns was to be paid or received then the assessee would have to pay net interest o fRs.1,02,207/-. He further invited our attention to page 26 of paper book wherein the break-up of total loans of Rs.7,29....