AI Drafter 
TaxTMI 
TaxTMI 
2016 (5) TMI 242
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.... 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 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, 2....
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....round no.1 in which ld. CIT(A) has confirmed the disallowance of business expenses of Rs. 54,29,508/- consisting of - (a) Depreciation Rs. 110869 (b) Interest 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 ....
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....Rs. 15323 Excluding (e) Bad debts written off Rs. 3047240/-. 15. We find that co-ordinate bench in ITA No.38/Ahd/2001 & 2100/Ahd/2001 has dealt with the specific issue as to whether the assessee was carrying on business activity during the Asst. Year 1996-97 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 liabi....
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....,592/- on account of expenditure on account of interest payment, we are of the opinion that assessee has carried out the business activities and assessee has borrowed the money which is utilized to repay the earlier unsecured loans. The assessee has also furnished the funds flow statement 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 ....
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....rdingly we allow the expenses of Rs. 23,82,268/- as business expenses out of the total disallowance of Rs. 54,29,508/- as mentioned in ground no.1 of the appeal and for the remaining amounts of bad debts of Rs. 30,47,240/- we will discuss the same in the following paragraphs. 18. Now we take up the issue regarding disallowance of bad 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....
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....sp; (2,721,435.00) Ld. DR submitted that this MOU is dated 29th February, 1996 but surprisingly in the above clause date mentioned is 31.3.1996 with reference to M/s Labh Enterprise, which is completely contradictory and secondly the debit balance of M/s Samrajya Co-op. Housing Society at Rs. 14,80,458.55 in the books of M/s Labh Enterprise as on 31.3.1995 has increased to a figure of Rs. 62,01,858.92 and 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 agr....
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....ajya Co-op. Housing Society has shown Rs. 14,08,458 and the same has increased by Rs. 4721440.37 to arrive at Rs. 62,01,858.92 in a peculiar situation when there is no revenue booked in the current year. Bad debts in relation to sundry debtors can be claimed only if sales/revenue has been booked in the books of account which does not happen to be so in the case of assessee referring to the financial statement relied on by the assessee. 26. 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....
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....nditure. Further the assessee has not given the details in respect of the payment of interest of the payment 12.2 In support of the claimed, the assessee has simply mentioned in this respect of claiming of expenses are as under:- " The assessee has carried out the business, therefore, CIT (A) is not justified in disallowing the claim of the assessee amounting to Rs. 54,29,508/- and disallowance on the ground that no business activity was carried out during the year of Rs. 23,54,592/~ on account of expenditure 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....
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....the submissions of the Ld.A.R. carefully. I find there is no improvement in the appellant's ci.se during the appellate proceedings. The A.O. while making the disallowance has made the following observations: "12.3 After careful consideration of the assesses submission it is found that the assessee has not submitted any factual details but reproduce the finding of Hon'b'e 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 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 ....
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....f section 57(iii) of the Act nexus has to be proved that the same has been incurred for earning the income shown under the provisions of section 56 of the Act i.e. the income from other sources. Applying these provisions to the facts of the case, we find that assessee has declared interest income of only Rs. 534557/- and has claimed interest expenses of Rs. 4554551/- Out of total interest claimed at Rs. 4554551/- Assessing Officer has already allowed the claim at Rs. 2199959/- and for the balance amount of interest of Rs. 2354592/- nothing was placed on record by the assessee to prove that it has been spent to earn interest 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 he....