TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 242
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.... Rs. 100000 (g) Sales Tax Rs. 393368 (h) Misc. other expenses Rs. 15323 2. The C.I.T.(Appeals) erred in upholding the disallowance of interest of Rs. 23,54,592/- as made by the Assessing Officer. 3. The C.LT.(Appeals) erred in upholding the decision of the Assessing Officer in assessing the insurance claim received of Rs. 30,443/- and sundry balance written off of Rs. 14,054/- under the head "income from other sources" instead of under the head "income from business". 3. In ITA No.1872/Ahd/2010 for Asst. Year 2097-98 - 1. The C.I.T.(Appeals) erred in upholding the disallowance of business expenses of Rs. 17,93,439/- made by the Assessing Officer consisting of- (a) Depreciation Rs. 79647 (b) Interest paid to bank Rs. 19251 (c) Interest paid to others Rs.1601916 (d) Misc. other expenses Rs. 92625 4. These two appeals are time barred by 345 days. Ld. AR has requested for condonation of delay in filing these appeals before the Tribunal. The ld. AR has referred to the affidavit dated 31st May, 2010 submitted on 7/6/2010 with the Registry. From going through this affidavit we find that Accountant of assessee's business affairs namely Digant Upad....
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....paid to bank Rs. 218635 (c) RTO Tax Rs. 9766 (d) Interest paid to others Rs.1534307 (e) Bad debts written off Rs.3047240 (f) Misc. Services Rs. 100000 (g) Sales Tax Rs. 393368 (h) Misc. other expenses Rs. 15323 Out of the above referred 8 items totaled to Rs. 54,29,508/- we will deal with 7 items excluding bad debts written of Rs. 30,47,240/-. Matter relating to bad debts will be dealt later on. 11. The ld. AR of the assessee submitted that during the year under appeal assessee has taken over the business of M/s Labh Enterprise which was running as a partnership firm upto end of Asst. Year 1995-96 and in that partnership firm assessee was also a partner and after the retirement of second partner the business under the name and style of M/s Labh Enterprises was taken over by the assessee as a sole proprietor from 1st April, 1995 relevant to Asst. Year 1996-97. The ld. AR submitted that the business of Labh Enterprise was of dealing in real estate, developer and running business with its existing assets and liabilities was taken over by the assessee which is verifiable from the dissolution deed placed on record. The ld. AR of assessee submitted that in th....
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....97 and they have observed as follows :- "6. We have heard the rival submissions of both the parties. Looking to the facts and submissions of the case, we find that the Assessing Officer was of the view that the assessee's business was not continuous and activities with the object of making income or profit were stopped. In case of proprietorship concern M/s Labh Enterprises have only booked one unit and a sum of Rs. 1.68 were collected by way of Members' receipt during the year. The project has booked 339 premises before the beginning of the previous year. We find that the assessee has made collection and the partnership was continuous. We find that the original partnership deed was dt.30.4.9. A copy of the partnership deed is placed on page 1 to 8 of the paper book. The partnership was dissolved on 1.4.1995 and the partnership becomes proprietorship concern of the assessee, wherein entire assets and liabilities of the firm were transferred to the assessee and on 29.2.96 assessee and Samrajya Co-op. Housing Society there was dispute which was settled by the settlement thereof. In the AY 1995-96 the assessee had no income on construction but the income was from hiring the trucks. ....
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....ent showing the source and application of the funds. Therefore, we set aside the order of CIT(A) on all the issues and restore to the file of Assessing Officer to decide the same afresh as per law, after giving reasonable opportunity of hearing to the assessee." 16. From going through the decision of co-ordinate bench in assessee's own case, we find that the issue relating to the fact that whether assessing was carrying on business or not during Asst. Year 1996-97 and 1997-98, has been dealt elaborately by the co-ordinate bench, wherein they have given a finding that assessee has carried out the business activity during the year under consideration and has also held that legitimate expenses which have been incurred for carrying on the business activity during the year under appeal may be allowed subject to examination on merits by the ld. Assessing Officer and the issue was restored to the file of Assessing Officer for deciding the same afresh as per law as the same was not dealt by ld. Assessing Officer in proceedings u/s 143(3) r.w.s. 144 of the Act. 17. Now during the course of assessment proceedings u/s 143(3) r.w.s. 254 of the Act the assessee has submitted various details a....
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....debt of Rs. 30,47,240/-. During the course of assessment proceedings u/s 143(3) r.w.s 254 of the Act assessee in reply to the objection raised by the assessing officer in regard to the claim of bad debt of Rs. 30,47,240/- replied as below :- "The facts relating to writing off of this amount are that due to certain litigations with the society on whose land M/slabh Enterprise acted as developer the amount was agreed to be not recoverable under the terms of settlement arrived with the party. The outstanding amount recoverable as on 31/3/1996 was Rs. 62,01,859/-. Against this, stock of flat valued at Rs. 8,53,600/- was on hand with Labh Enterprise and therefore net recoverable amount was Rs. 53,48,259/-. Out of this, an amount of Rs. 23,Q1,019/~ was consented to be paid by the society as per the settlement terms arrived and recorded in written agreement. Balance amount of Rs. 30,47,240/- being not recoverable by any means was written off and claimed as business loss / bad debts" 19. Ld. Assessing Officer was not convinced with this reply and disallowed the claim of assessee and eve on appeal before ld. CIT(A) the disallowance made by the Assessing Officer was confirmed. 20. Aggri....
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.... there is no justification and detail for this increase irrespective of the fact that there was no revenue shown by M/s Labh Enterprise in the profits & loss a/c during FY 1995-96 except some minor insurance claim and sundry creditor written off. 23. We have heard rival contentions and perused the material on record. The issue for adjudication before us is about the genuineness of bad debt claimed by assessee at Rs. 30,47,240/- which has emanated out of the recoverable bad debts in the hands of erstwhile partnership firm which has been taken over as sole proprietary concern by the assessee. Looking to the aspect of the allowability of bad debts in the hands of assessee arising out of the debts shown in the books of previous year owner i.e. partnership firm we agree with the submissions made by ld. AR to this effect and also to the law laid down by the Hon. Supreme Court in the case of CIT vs.T. Veerabhadra Rao K. Koteswara Rao & Co. (1985) 155 ITR 152 (SC) referred and relied on by the ld. AR wherein their Lordships have held as below :- It seems to us that even if the debt had been taken into account in computing the income of the predecessor firm only and had subsequently been....
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.... In our view, looking to the facts and circumstances of the case, when assessee's case has travelled to the Tribunal in the second round and assessee had sufficient opportunity to prove the genuineness of the claim of bad debt of Rs. 30,47,240/- and then also he has been unable to satisfy the lower authorities and even before us, during the course of hearing, we do not find any reason to accept the contentions and claim made by the assessee in this ground relating to disallowance of bad debt of Rs. 30,47,240/- in the given circumstances and we dismiss the same and uphold the order of ld. CIT(A). In nut shell in the ground no.1 raised by assessee towards disallowance of business expenses at Rs. 54,29,508/- we delete the addition of Rs. 23,82,268/- and sustain the remaining part at Rs. 30,47,240/-. This ground is partly allowed. 27. Now we take up ground no.2 raised by assessee against the action of ld. CIT(A) in upholding the disallowance of interest of Rs. 23,54,592/-. 28. From going through the records, we find that this disallowance is in lieu of interest claimed by assessee against interest income shown under the head income from other sources. Ld. Assessing Officer has dealt ....
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....on account interest payment, we are of the opinion that assessee has carried out the business activities and the assessee has borrowed the money which is utilised to repay the earlier unsecured loans. The assessee has also furnished the fund flow statement showing the source and application of the funds. Therefore, we set aside the order of CIT on all the issues and restored to the file of Assessing Officer to decide the same afresh as per law after giving reasonable opportunity of hearing to the assessee". 12.3 After careful consideration of the assessee submission it is found that the assessee has not submitted any factual details but reproduce the finding of Hon'ble ITAT. Since, it was established in original order that the interest expense was related to personal expenses. Further, the assessee has paid interest on the borrowings taken/accepted during the year, which was utilised for the purpose of repayment of old borrowings of the partnership firm, of which the assessee became proprietor due to dissolution, the payment of interest for such old partnership borrowings was not related to current business of the assessee, the expenditure of interest was not for the purpose....
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....r, which was utilized for the purpose of repayment of old borrowings of the partnership firm, of which' the 'assessee became proprietor due to dissolution, the payment of interest for such old partnership borrowings was not related to current business of the assessee, the expenditure of interest was not for the purpose of business of the assessee i.e., construction business as claimed by the assessee. The payment of interest is to pay off old liabilities, which are not pertaining to the business of the assessee as claimed, on the contrary the payment is towards old liabilities, which can be said as of personal nature, as the assessee as accepted the liabilities on his head, without looking to the commercial aspect and the expenses to pay off such liabilities cannot be said as for the purpose of business, therefore, the interest payment is purely of personal nature, for which the assessee has taken conscious decision by taking ownership of loss making firm in dissolution." 10.4 Since, the Ld.A.R. has not provided complete details for interest expenses to prove their business expediency, I do not find any reason to interfere in the findings of the A.O: at this stage. Th....
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....t income which has been declared u/s 56 of the Act and rather we find force in the observation made by ld. Assessing Officer that the amount of interest of Rs. 2354592/- has been paid on loans taken has actually been diverted towards investment in shares and other non-interest bearing investment and this gets further support by the fact that assessee has earned long term capital gains of Rs. 13260055/-. In these circumstances, we are unable to accept the contention made by ld. AR of assessee about the allowability of interest expenses at Rs. 2354592/- under the head income from other sources and we uphold the order of ld. CIT(A) and accordingly dismiss this ground of assessee. 36. Ground no.3 of assessee's appeal relates to insurance claim received of Rs. 30,443/- and sundry balance written off of Rs. 14,054/- We have heard the rival contentions and perused the material on record. The only issue in this ground is that the insurance claim of Rs. 30,443/- and sundry balance written off at Rs. 14,054/- has wrongly been held as income from other sources instead of income from business by ld. CIT(A). We are of the view that in the light of decision of the co-ordinate bench in assessee'....