TaxTMI 
TaxTMI 
2017 (4) TMI 252
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.... the case and in law, the id. CT (A) was justified in deleting corresponding Notional interest of Rs. 1,81,81,940/- on loans due from VCCL Ltd without appreciating the fact that the advances to subsidiary companies cannot be construed as for the purpose of the business within the meaning of section 36(i)(iii) of the Act and the assessee has huge borrowed funds on which interest liability has been claimed as against interest free loan advanced." 3. "Whether on the facts and circumstances of the case and in law, the Id. CIT (A) was justified in deleting Notional interest on debts due from Esslon Synthetics Ltd of Rs. 1,13,40,000f- without appreciating the fact that the interest is due on receivable from Esslon Synthetics Ltd." 4. "The appellant prays that the order of CIT (A) on the above ground be set aside and that of the Assessing Officer be restored" 5. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 2. Briefly stated the facts of the case are that the assessee company which is engaged in the business of manufacturing and sale of two wheelers had e-filed its return of income on 30.09.2009 declaring loss of Rs. 39,4....
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....Ltd. as on 31.03.2009, it was submitted by the assessee:- 1. Disallowance out of Interest: "The assessee, in its Note No. 8 to Notes to Accounts has stated as under: The company is a promoter of VCCL Limited. The outstanding debts advances (Net) due from VCCL Limited as on 31.03.2009 is Rs. 1515.16 (As at 31.03.2OO8 Rs. 1512.18 Lakhs). As per the latest available audited accounts, the net worth of VCCL Limed is negative and the said Company's manufacturing operations continued to be suspended as in the past The Management is pursuing the matter of recovery of above due from VCCL. Limited, inter alia, by way of use/acquisition/ disposal of its assets. Adjustment for loss if any, which may arise in respect of the said outstanding will be made on it determination". The issue has been discussed in previous assessment years. The assessee is having substantially borrowings on which interest expenses are being allowed. In this year also the advance to subsidiary company cannot be construed to be for the purpose of business and hence proportionate interest allocable to loan of Rs. 1515.16 lakhs calculated at 12% disallowed. Hence an amount of Rs. 1,81,81,940/- is disallowed....
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.... case of Phalton Sugar Work Ltd. [208 ITR 989] as no applicability. In This regard we rely on the following decisions: Calico Dyeing & Printing Works Vs. CIT (34 ITR 265) (Bom.). Amna Bal Hàjee Issa Vs. CIT (51 ITR 835) Mad.) Ram Kishan Oil Mills Vs. CIT (56 ITR 186) (MP.) CIT Vs. Bombay Samachar (74 ITR 723) (Bom) D & H Secheron Electrodes (P) Ltd V. CIT (142 JTR 528) (M.P.) CIT Vs. Hotel Savera (239 ITR 795) (Mad)/l02 Taxmen 247. Oswal Industries Vs. ACIT, 109 Taxman 279 (Mum. Trib.) (SMC-IV) Dy. CIT Vs. Shivalik Agro Poly Products Ltd (108 taxmann 219) (Chd. Trib.) Smt. Tara Devi Vs. ITO 68 TTJ (Jod, Trib.) 361 Dy. CIT Vs. Ganesh Chhababhai Valabhai Patel Family Trust, 108 Taxman 78 (Ahd. Trib.) It is respectfully submitted that the notional interest disallowed by the Ld. AO ought to be deleted for the following reasons. The disallowance is purely made on conjecture and surmise. No disallowance was made for earlier years i.e. A. Y. 1992-93 to 1996-97 on amount of loan/advances given to VCCL Ltd. in course of its ordinary business. For A. V. 1997-98 to 1999-2000 the disallowance was made only in respect of payments made during t....
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....vable from Esslon Synthetic Ltd. As per the Note-6 & 7 to Notes to Accounts in the Balance Sheet, an amount of Rs. 945/- 1akhs was advanced to ESSLON Synthetic. This issue has been discussed in details in previous years and the view of the fact that The facts remain the same, and amount of Rs. 113.40/- lakhs being 12% of Rs. 945/- lakhs is disallowed and added to the total income. Unquote With a view to appreciate the issue in tolality we briefly narrate the facts relating to the matter contained in note no. 11, The company was incorporated in the year 1972 as a private Limited company. Upon its incorporation the company engaged itself into an engineering business of manufacturing textile machinery. In the year 1978-79 the company further diversified its activity by engaging itself into the business of processing synthetics yarn. The company farther diversified its activity by manufacturing of nylon 6 chips during the calendar year 1983 and also promoted a company for setting up the spinning unit. The aforesaid activity of the company as a vertical integration in the manmade fiber industry. Simultaneously, the company also persuade its scooter project in technical....
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....Takeover by and Transfer of liabilities Rs.(in crores) To purchase of loans payable to the Institution/Bank upon execution of Deed of conveyance 29.99 In cash upon execution of deed conveyance 14.00 In cash not later than 31st Match, 1992 9.45 In cash in 28 equal quarterly installment Beginning from 1st April, 1991 17.59 71.03 It was provided that, a sum of Rs. 9.45 crores shall not carry any interest and in the event of re-payment of the said account or in part thereof being made before 31st March, 1992 the purchaser was entitled to a reduction in the said amount by way of discount calculated @ 16.5% per annum on the amount of such early re-payment. It was provided that, the balance sum of Rs. 17.59 crores was to carry an interest @ 12.5% on the On-paid purchase price to be paid within 28 quarterly installment of the principle amount. The company in its books of account credited the interest on above referred amount as per the details given hereunder: Period Int. on 1759 lacs Sub Total Interest on 945 lacs total Normal Compounding Int. due as on 31.3....
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....sale of undertaking which has been credited as a profit on sale of undertaking to the Appellant's Profit & Loss Account. b. The relevent amount of Rs. 9.45 crores has been shown as recoverable from M/s Esslon Synthetics Ltd., and it is not assigned to M/s Perfect Polycons Ltd. as alleged. d. Sum of Rs. 17.59 crores was provided for provisions for bad and doubtful debts for the year 1997-98 which was assigned to M/s Perfect Polycons Ltd., during the year. f. No interest could be accrued on the amount of Rs. 9.45 crores since what was guaranteed was only a principle sum and no interest payment was agreed by the guarantor. g. In respect of Rs. 17.59 crores which represents unpaid purchase price representing the profit on sale of undertaking event though interest was payable since the company has been ordered to be wound up by BIFR and the relevant provisions having been made in respect of bad and doubtful of recovery no issue can be raised about disallowing interest relating to an asset which is written off. The above referred issue has been decided by CIT(A) in favour of Assessee. We rely on the order for 2000-01 since there is no change in the facts of the case ....
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.... Corporation (2014) 41 taxmann.com 100(Gujarat). That on the other hand the Ld. Authorized Representative (for short A.R) for the assessee therein rebutting the aforesaid contention of the Ld. A.R therein submitted that though the deposit of the employee's contribution towards PF and ESIC by the assessee involved a delay in the backdrop of the dates prescribed therein, but the same had been deposited before the 'due date' of filing of the return of the return of income by the assessee company under Sec. 139(1) as stand of the 'Act', therefore the CIT(A) rightly appreciated the facts in light of the settled position of law had rightly concluded that no disallowance was called for in the hands of the assessee. The ld. A.R in support of his aforesaid contention placed reliance on the judgment of the Hon'ble High Court of Bombay in the case of CIT-4, Mumbai Vs. Hindustan Organic Chemicals Ltd. (2014) 48 taxmann.com 421(Bombay). 8. We have heard the representatives of both the parties, perused the orders of the lower authorities as well as the material placed before us. We have given a thoughtful consideration to the facts of the case and are of the considered view that with effect f....
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....by way of tax, duty, cess or fee, if paid by the Assessee even after the closing of the accounting year but before the date of filing of the return of income, the Assessee would be entitled to the deduction under section 43B on actual payment basis and such deduction would be admissible for that accounting year. This proviso however did not apply to contributions made by the Assessees to the Labour Welfare Funds. In view thereof, by the Finance Act 1988, the second proviso came to be inserted which read as under:- "Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid during the previous year on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36." Thereafter, the said second proviso was further amended vide Finance Act 1989 With effect from 1st April 1989 which read as under:- "Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in t....
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....re brought about by the Finance Act, 2003 are retrospective in nature, we find that the 1TAT was fully justified in deleting the addition of Rs. 1,82,77,138/- on account of delayed payment of Provident Fund of employees' contribution. We therefore find that no substantial question of law arises on this count as sought to be contended by Mr. Malhotra on behalf of the Revenue. 9. Even otherwise, we fail to understand how this deduction could have, been disallowed to the Assessee - Admittedly, the Assessment Year in question is 2006-07. The second proviso to section 43B quoted above was deleted with effect from 1st April 2004 and simultaneously the first proviso was also amended bringing about a uniformity in deductions claimed towards tax, duty, cess and fee on the one hand and contribution to the employees' provident fund, superannuation fund, and other welfare funds on the other. These deductions being claimed in the return of income filed for the Assessment Year 2006-07, the amendments to Section 43B which came into force with effect from 1st April 2004 would have clearly applied to the Assessee's case. In this view of the matter also, we find that the ITAT was full....
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....rs viz. A.Y. 2000-01, 2001-02 to 2005-06, 2006-07, 2007-08 and 2008-09, and nothing had been draft on record before the lower authorities not before us which could go to persuade us that either the facts or issue involved therein were distinguishable as against those involved in the aforesaid preceding years, we are unable to persuade ourselves to subscribe to the view of the ld. DR that despite from being no shift from the facts which were involved in the said preceding years, the reasoning and the view adopted therein be liable to be dislodged. We are thus of the considered view that in light of our aforesaid observations we find no reason to take a view different from that arrived at by the CIT(A). Thus, in the backdrop of the aforesaid facts now when it emerges from the records that in the backdrop of the fact that the disallowance of interest pertaining to the amounts by the assessee company to VCCL Ltd. in order to facilitate the latters one time settlement (OTS) obligation with banks and financial institution as carried out by the AO while framing the assessment in the hands of the assessment company for A.Y. 1997-98, 1998-99 and 1999-2000 was substantially modified of appea....