TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 865
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....outset submitted that on assessee's instruction he would not like to press ground No. 4, accordingly, ground No. 4 is dismissed as not pressed. Therefore, the only surviving issue as raised in ground Nos. 2 & 3 relates to disallowance of an amount of Rs. 28,80,338 towards repayment of gold loan to SBI. Assessee has also raised the following additional ground: "Alternatively the amount of Rs. 43,32,189 is allowable in the hands of the appellant company as it is the cost of the loan of Rs. 98,54,661 to the appellant company." As the additional ground raised by assessee is also ancillary and incidental to the issue raised in ground Nos. 2 & 3, the same will be decided along with ground Nos. 2 & 3. 3. Briefly the facts as emanating fr....
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.... was bound to claim such difference in respective years in same manner as foreign exchange fluctuation are being debited in the case of foreign currency transactions. AO also observed that firm has valued the gold rate incorrectly, which has resulted in increasing interest burden. AO observed that assessee is not correct in taking over the unbooked liability of partnership firm , hence, he proposed to disallow the interest attributable to the period prior to 31/03/2006. Though, assessee objected to such disallowance, AO did not find any merit in the same. He noted that assessee company was formed only on 01/04/06, hence, loans relating to prior period of the firm could not be claimed as deduction at the hands of the company in the current A....
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....d the disallowance by observing as under: "5.2 I have considered carefully the facts and evidence and I find that the facts provided by the AO are not controverted at all. There is no doubt about the fact that the terms and conditions of the gold metal account were very clear to the appellant and the liability of interest had been ascertained every year. The value of gold at the end of the year was known and it was clear to the appellant that the difference in value had to be debited as interest on charges to be paid to the bank. I agree with the AO that as per the mercantile system of accounting the liability pertaining to an earlier year cannot be debited in the current year. Therefore, I find no hesitation in confirming the addition." ....
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....ed Phosphorus Ltd. Vs. JCIT, [2002] 81 ITD 553 (Ahd.) 5. Ld. DR, on the other hand, strongly supporting the reasoning of AO and ld. CIT(A) submitted, deduction claimed by assessee is not at all allowable as it is not interest, but, an extra cost incurred by assessee on account of appreciation of gold value on the date of repayment. Therefore, the excess payment/loss arising on that account cannot be taken to P&L A/c. Ld. DR submitted, only because it is termed as current account, it cannot be linked to the trading account of assessee. Ld. DR submitted, assessee neither during assessment stage nor before ld. CIT(A) brought relevant materials like agreement with bank to the notice of the department, hence, it cannot be allowed to produce suc....
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..../s KLN Jewellery amalgamated with assessee company on 31/03/06 and as per the terms of agreement assessee took over not only the business of firm as a going concern but also all the assets and liabilities of erstwhile firm including the liability relating to gold loan. Though, at the time of availing gold loan, the value was Rs. . 98,54,661, but, when the account was closed, assessee had to pay an amount of Rs. 1,41,86,851 due to appreciation in the value of gold. Assessee claims the excess amount paid as finance charges on the loan availed. The issue to be decided is whether deduction claimed can be allowed as a revenue expenditure. There is no doubt to the fact loan as per the scheme was not in terms of cash but in terms of gold. Therefor....