TaxTMI 
TaxTMI 
2013 (9) TMI 437
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....374 and Rs. 58,541 was made by the A.O. on account of provision for doubtful debts / loans and advances. The CIT(A) deleted the addition of Rs. 5,82,265 out of total addition mentioned above. The assessee is objecting for confirming the addition and department is objecting for deleting the addition. Since both the grounds are inter-linked, therefore, they are disposed off together. 5. During the course of assessment proceedings the A.O. noticed that assessee had claimed in the profit and loss account a sum of Rs. 13,52,374 as provision for doubtful debts / loans and advances. This provision for doubtful debts and advances was net of withdrawal of provisions made in the earlier years of Rs. 58,541 no longer required. Accordingly the A.O. noticed that the assessee had actually claimed doubtful debts / loans and advances of Rs. 14,10,915. It was explained that the assessee had in reality offered an amount of Rs. 58,541 as income of the year being excess provision made in earlier years. This means the assessee had written back provisions made in earlier years of certain expenses claimed by it amounting to Rs. 58,541. The Assessing Officer after examining the issue and perusing other....
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....e Bombay High Court in the case of Oman International and Star Chemicals (supra). In the case of the appellant, the main ground of disallowances by the Ld.AO was that the appellant had failed to show that the debts have become bad. Secondly, the claim of the appellant that these are the amounts which are given as advances to parties from time to time during the business dealings cannot be entertained as these are not bad debts and thirdly, the appellant have not actually written off the bad debts. It was further stated by the Ld.AO that the Hon'ble CIT(A) has confirmed the disallowances of provisions for doubtful debts in the AY 1995-96 by his order dated 24/3/1999 on the ground that the conditions of sec.36(2) are not satisfied. The facts of the appellant case revealed the different picture altogether. The trade advances only amounts to Rs. 8,28,650 as is evident from the details submitted by the appellant to Ld.AO. The appellant had given remarks in respect of the other two parties as stated supra that these have become sick. Therefore, the appellant made a honest judgement that the debt has become bad and written off the same in the books of account by squaring the individual de....
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....tten submission placed in the paper book at pages 220 to 268. On the other hand the learned Departmental Representative placed reliance on the order of A.O. to the extent to which the additions were deleted and placed reliance on the order of the CIT(A) to the extent to which the CIT(A) has confirmed the addition. 8. After considering the orders of A.O. and CIT(A), we found that the CIT(A) was justified in holding that neither provisions of section 41(1)(a) nor provisions of section 28(iv) are attracted in the facts of the case. The department has also not challenged the action of the CIT(A) in holding that these provisions are not applicable on the facts of the present case. 9. We are also of the view that the CIT(A) was justified in deleting the addition of Rs. 5,82,265 on account of bad debt written off as they are in consonance with the decision of the Hon'ble Supreme Court in the case of T.R.F. Limited Vs. CIT [(2010) 323 ITR 397 (SC)]. Accordingly, we confirm the action of the CIT(A) on this issue as the finding of the CIT(A) remained uncontroverted. 10. However regarding the issue involved in appeal of assessee, which is in respect of addition confirmed at Rs. 8,28,....
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.... interest free advances / loans. Therefore, he disallowed at the rate of 20% on Rs. 76,11,833 and Rs. 1,92,50,000 which has resulted into an addition of Rs. 53,72,376 as interest paid for the purpose other than business as well as for earning exempt income and hence not allowable u/s 36(1)(iii) or 57(iii) of the Act. The A.O. also placed reliance on various case laws. It was explained before the CIT(A) that all the money given by the assessee-company which has been treated as interest free advances by the A.O. In fact the same was given as share application money. All the money was given to the subsidiary of the assessee-company or related company of the assessee- company. The investment has been made out of profit of the company and no borrowed funds have been utilized for making this investment. It was also submitted that these moneys were given in earlier year and no disallowance has been made in earlier year. It was explained that the subsidiary company of GTC could not allot the shares in view of the restriction imposed by the Income-tax department. A copy of the prohibitory order was also enclosed. Accordingly it was submitted that no disallowance was warranted. In respect of....
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....e. The finding of the CIT(A) remained uncontroverted that the Assessing Officer failed to prove the nexus between borrowings and subsequent advancing of loan to subsidiary company, therefore, the decision of the Apex Court in the case of S.A.Builders (supra) is fairly applicable on the facts of the present case. Various other case laws relied upon by the CIT(A) has also applicable on the facts of the present case. In view of these facts and circumstances of the case and in view of the detailed reasoning given by the CIT(A), which remained uncontroverted, we confirm the order of the CIT(A) in this respect also. 15. Now we will take up the appeals of the assessee and department for assessment year 2007-2008. 16. In the appeal of department, the first issue is against deleting the addition of Rs. 1,98,749 on account of depreciation on leased assets. The Assessing Officer disallowed depreciation by observing that the assessee has not used this asset itself but has given on lease, therefore, the depreciation is not allowable to the assessee. The contention of the assessee was not accepted by the A.O. that one of its business activities was to give assets on lease. The assessee ....
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....A.O. noticed that the assessee has unutilized Modvat credit of Rs. 69,17,652 which was not added back to the value of closing stock as per the provisions of section 145 of the Act, hence the assessee was required to explain as to why the unutilized Modvat credit should not be added to the value of the closing stock. In reply it was stated that the assessee had purchased goods from its suppliers for a price and amount paid or incurred by the assessee for such purchases is the purchase price thereof, notwithstanding the fact that such purchase price may include certain statutory levies such as sales tax and excise duty which are the liability of the supplier but which are merely recovered by the supplier from the assessee as a part of the purchase price. However, the explanation of the assessee was rejected by the A.O. and made addition of Rs. 69,17,652. Fuirther the A.O. observed that an addition of Rs. 96,32,471 made to the closing stock in the immediately previous year i.e. assessment year 2006-2007 hence net addition of Rs. 26,94,819 was made to the total income. Detailed submission was made before the CIT(A), which has been recorded in page 4 of his order. Thereafter the CIT(A) ....
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....irection of the CIT(A). The Assessing Officer is bound to follow the direction of the CIT(A), therefore, he is advised to follow the direction of the CIT(A) in accordance with the directions of the CIT(A). We order accordingly. 23. Ground no.2 is against confirming the treatment of A.O. for interest earned of Rs. 1,53,69,775 being taxable as income from other sources as against business income offered by the assessee. 24. During the assessment proceedings the A.O. noted that the assessee has received interest of Rs. 1,53,69,775 which was claimed by the assessee as business income. The assessee was required to explain as to why the interest should not be treated as Rs. income from other sources' instead of Rs. business income'. In response to which the assessee stated that the interest is earned out of deposits given to various banks as margin money for executing various Government contracts, letter of credit to the supplier etc. The assessee has earned this interest income on the said deposits in the normal course of business and hence the same is treated as business income. This explanation was not accepted by the A.O., and accordingly, he treated interest income as income f....