TaxTMI 
TaxTMI 
2008 (9) TMI 1010
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....ive and only to book losses? 2. The relevant facts arising in the present appeal are as under: i) M/s Agrima Projects Engineering and Consultancy Services Ltd. (Agrima) was 100% subsidiary of the assessee company. By an order of this Court, Agrima was amalgmated with the assessee company with effect from 1st January, 1983. Prior to its amalgamation, Agrima, inter alia, carried on business of a financer. During the accounting year ended on 31st December, 1980 Agrima's total advances to various parties amounted to Rs. 2,90,74,994/- besides the loan of Rs. 15,00,000/- advanced to Maharana Mills Ltd. The interest income of Agrima for the said year was Rs. 24,70,785/- The assessee company also had business dealings with Maharana Mills. It had supplied cotton and yarn worth Rs. 3.22 crores over a period of time and had received payments towards the same aggregating to Rs. 3 crores. The balance amount of Rs. 22,43,489/- was outstanding since the year 1979. The assessee company together with Agrima had to recover a total amount of Rs. 37,43,489/- from Maharana Mills as on 31st July, 1980. Maharana Mills which was a profit earning concern earlier had financial problems due to the da....
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....00,000/- to SCCIL and improve the prospects of recovery of its own loan and to protect and preserve its assets in the form of a loan so advanced. iv) In the circumstances, Agrima issued a guarantee dated 31st July, 1980 to SCCIL under which Agrima agreed to pay Rs. 50,00,000/- with interest to SCCIL in case Maharana Mills did not repay the said loan with interest to SCCIL. v) It is the case of Agrima that even thereafter i.e.in the year 1980 and in subsequent years the Banks and financial institutions continued to advance additional loans to Maharana Mills as shown below. vi) As stated above, Agrima stood amalgmated with the assessee Company with effect from 1st January, 1983. As a result of this amalgamation, there was a complete fusion of the assets and liabilities of Agrima with that of the assessee. vii) In March, 1984, SCCIL addressed a letter to Maharana Mills demanding repayment of the aforesaid loan of Rs. 50,00,000/- and advanced by it along with the agreed rate of interest. As Maharana Mills failed to repay the aforesaid loan and interest thereon, SCCIL in August, 1985 called upon the assessee to make good the payment of loan of Rs. 50,00,000/- with interest t....
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.... assessee before the CIT(A) narrated facts and advanced submissions on the lines set out in clauses (i) to (vii) above and also relied upon several judgments of this Court as well as the Hon'ble Supreme Court of India. x) The Assessee also submitted before the CIT(A) that the Assessing Officer has overlooked all the facts pertaining to the case though they were fully and exhaustively explained to him including the fact that the whole project put forward by Maharana Mills for modernising the Mill was critically examined by IDBI, Reserve Bank of India and Finance Ministry. The Assessee also submitted that it is most pertinent to note that the Assessing Officer has not at all doubted or disputed any of the facts stated before him nor has he doubted or disputed the fact that the loans were actually given by IDBI and SCCIL and from the said loans plant and machinery were in fact purchased by the Maharana Mills. It was submitted that the Assessing Officer has not commented on the scheme and the combined package offered to Maharana Mills by IDBI, ICCIL and Agrima which was examined and approved by the Reserve Bank of India and the Finance Ministry. The assessee submitted that the Asses....
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.... the normal course of its business to Maharana Mills. xii) Agrima, relying on the decision in Sasoon Vs.CIT reported in 118 ITR 261 (SC) contended before CIT(A) that Agrima though not under any legal obligation, voluntarily and with the object of preserving and protecting its assets, namely, loan advanced by it to Maharana Mills stood as a surety. It was for Agrima to decide whether it was in the interest of its own business to do so. Since it stood as a surety out of the commercial and business considerations and to preserve and protect its assets, the loss suffered by it as a consequence thereof was a loss incidental to carrying on of its business and permissible deductions. xiii) The assessee relying on the decision in J.K.Commercial Corporation Limited Vs. CIT reported in 72 ITR 296 (Allahabad) pointed out before the CIT(A) that the test of allowability is not what a prudent man would do in similar circumstances. That the assessee did not act like a prudent man is entirely irrelevant in determining the question whether the expenditure ought to be allowed as deduction. xiv) CIT(A) by his order dated 17th October, 1996 after considering the facts available on record and ....
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....anies were under the control and management of the same group of persons which fact warranted the applications of principles enunciated by the Hon'ble Supreme Court in McDowel's case reported in 154 ITR 148. xvii). The Appellate Tribunal by its order dated 14th September, 2000 has, inter alia, observed that the facts set out in paragraphs 5.2 to 5.12 of the order of CIT(A) are not refuted by the revenue. The Tribunal has recorded that CIT (A) has discussed the decisions relied on by the Assessee and has come to the conclusion that the said decisions render assistance to the assessee in claiming the impugned loss. The Appellate Tribunal further recorded that on appraisal of material on record the CIT(A) has recorded a finding of fact that the act of Agrima giving guarantee to SCCIL was genuine. The Appellate Tribunal has held that this finding of fact could not be challenged by the revenue by bringing on record any adverse material. The Tribunal, therefore, declined to interfere with the order passed by CIT (A) and dismissed the appeal of the revenue. 3. Being aggrieved by the order of the Appellate Tribunal dated 14th September, 2000 the Revenue impugned the same before this C....