TaxTMI 
TaxTMI 
2020 (2) TMI 103
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....dvance received from Kenil- worth Investments Limited was without any st1pulation as to payment of interest and therefore the appellant could not have provided interest in the earlier years and thereby erred in confirming disallowance out of interest of Rs. 1,73,24,918/-. lb. On facts and in Law, the CIT(A) erred in confirming disallowance out of interest of Rs. 1,73.24,918/- on the ground that such disallowance was confirmed by him in another case without appreciating the fact that the facts in both the above cases were clearly distinguishable. lc. On Facts and in Law, the CIT(A), erred in confirming disallowance out of interest of Rs. 1,73,24,918/- without appreciating the fact that the liability to pay interest arose for the first time on basis of order of the Special Court and as the appellant was following Accrual Method of Accounting the entire interest was allowable expenses for the year. The appellant, therefore, prays that the order of the CIT(A) be set aside and the Assessing Officer be directed to delete the disallowance of interest of Rs. 1,73,24.918/-. 2a. The CIT(A) erred in Facts and in law in confirming disallowance of Rs. 72,321/- out of bad debts in re....
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....ch assets were in existence in the previous year and also been put to use. The appellant, therefore, prays that the Order of CIT(A) be set aside and the Assessing Officer be directed to allow depreciation of Rs. 17,15,727/-. 6a. On Facts and in Law, the CIT(A) erred in confirming disallowance of Rs. 41,87,500/- out of depreciation in respect of lease to Prakash Industries Limited on the same reasons mentioned while disallowing depreciation In respect of lease agreement with Kores India Limited. 6b. On Facts and in Law, the CIT(A) erred in holding that the finding made in assessment for Assessment Year 1995-96 can said to have reached finality as the appellant had filed application under Kar Vivad Samadhan Scheme and thereby confirming disallowance of Rs. 41,87,500/- out of claim of depreciation. 6c. On Facts and in Law, the CIT(A) erred in not allowing depreciation even after treating the lease agreement with Prakash Industries Limited as a Financial arrangement. The appellant, therefore, prays that the order of the CIT(A) be set aside and the Assessing Officer be directed to allow the claim of depreciation of Rs. 41,87,500/- in respect of lease agreement with Prakas....
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....CIT(A) confirmed the action of Assessing Officer by referring that the similar controversy was in a appeal of Smt. Aditi Dalal which was decided against the assessee by ld. CIT(A) vide his order dated 25.081999. 4. The ld. AR of the assessee submits that the assessee received Rs. 2.88 crore as interest free loans from Kenilworth in earlier years. As per the order of Special Court dated 05.07.1995, the assessee to repay the principle amount + interest @ 20% p.a. for the period starting from 25.03.1992 (from the date of receipt of advance). Thus, the interest liability of Rs. 2,30,84,918/-, which includes Rs. 1,73,24,918/- for earlier years was paid by the assessee. The ld. AR of the assessee submits that there was no stipulation on interest in the agreement while taking advance and therefore, no interest had accrued in earlier years. The Assessing Officer erroneously relied on the order of Massore Tobacco Company Ltd. vs. CIT [115 ITR 698 (Kar.)] and Saraya Sugar Mills P. Ltd. vs. DCIT [117 ITR 344]. The ld. AR of the assessee further submits that in assessee's group concern i.e. Cifco Ltd., the ld. CIT(A) allowed the interest in Assessment Year 1996-97 vide order dated 04.03.2004....
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....te that the loan was advanced by Shri Bhupendra C. Dalal to the assessee, interest free because as per the affidavit of Shri Bhupendra C. Dalal is appearing on page No. 32 of the paper book. It is specifically mentioned by him that there is no interest chargeable to her i.e. assessee, In view of this, it is apparent that there was no liability in earlier years for making payment of interest on account of t his loan from Shri Hupendra C. Dalal. The liability has arisen on 07.06.95 by the order of the Special Court. We find that in the case of Brihan Maharashtra Sugar Syndicate Ltd. (supra) it was held by the Hon'ble jurisdictional High Court that in order to be allowable as a deduction under Maharashtra Agricultural Income Tax Act, 1992, expenditure in question must be incurred in the relevant previous year. Again expenditure must be one which is incurred for the purpose of deriving agricultural income from land and must not be in the nature of capital expenditure or personal expenditure. There is nothing in the section, which would impose a condition that in order to be allowable as a deduction, the expenditure must have been incurred in order to earn the income of the relevant pre....
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....AR further submits that similar relief on account of bed debts, was allowed to the assessee by the Tribunal for Assessment Year 1992-93 in ITA No. 2541,2765/Mum/1996 vide order dated 17.10.2008 and again in AY 1993-94 in ITA No. 5437/Mum/1997 dated 17.10.2008 and again for AY 2005-06 in ITA No. 678/Mum/2009 dated 12.03.2010, however, no order for order giving effect to the order of ld. CIT(A) is passed by Assessing Officer. The ld. AR submits that in the business of finance advances were given in the regular course of business. The interest income was taxed on accrual basis. The recovery of interest income had become time barred. As per commercial expediency, board of Direct of the assessee decided to write off the said amount. In support of his submission, the ld. AR of the assessee relied upon the DBDT Circular No. 551 dated 23.01.1990 and the decision of Hon'ble Supreme Court in TRF Ltd. vs. CIT (323 ITR 397) and the Circular No. 12 of 2016 accepting the ratio of decision of Hon'ble Supreme Court (supra). In alternative, the ld. AR of the assessee claimed as business loss. 9. On the other hand, the ld. DR for the revenue relied upon the order lower authorities. 10. We have c....
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....oncluded that no agreement is furnished. The ld. CIT(A) confirmed the action of Assessing Officer and upheld the disallowance of 21% of interest. The ld. AR submits that the assessee wanted to diversify its travel business and the subsidiary has taken agency of Modiluft Archana Airways. The ld. AR for the assessee submits that advance was given in February 1996 and received back in September 1997. Regarding Cifco Property, the ld. AR submits that advance was given for purchase of property at Beena Complex, Andheri, the plan did not materialised and the amount was recovered. The ld. AR submits that the assessee has sufficient interest free funds to give advance to its subsidiaries. The Assessing Officer has not established the nexus of interest bearing funds and advances. In alternative and without prejudiced submission, the ld. AR submits that the disallowed rate of interest is highly excess, the interest paid between 15% to 21%, funds were not used for entire period. The assessee has applied for rectification vide application dated 07.04.2000, the Assessing Officer considered it in his order giving effect to CIT(A) order and no appeal is filed by department. In past no such disall....
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....ancial agreement. The ld. AR of the assessee submits that assessee claimed depreciation on lease hold asset installed at Kores India Ltd. The assessee claimed 50% of depreciation in AY 1995-96. The Assessing Officer disallowed by taking view that the machinery was not put to use and were installed on 08.05.1995. For the year under consideration, the Assessing Officer simply followed the order of AY 1995-96 by taking view that no new material was furnished. The Assessing Officer considered the financial charges at 24% of Rs. 7,42,147/-. However, the lease rent offered was Rs. 7,23,600/-. The difference of Rs. 18,574/- added as a finance charges, no depreciation was allowed. The ld. CIT(A) upheld the action of assessing officer holding that disallowance in assessment order for AY 1995-96 attains finality. The ld. CIT(A) directed that lease rental of Rs. 7,23,600/- to be bifurcated into principle and financial charges by the Assessing Officer and financial charges only to be taxed. 18. The ld. AR of the assessee submits that matter for AY 1995-96 was settled under Kar Vivad Samadhan Schme (KVSS) and it did not take away the right of assessee for adjudication of issue on merit in oth....
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....nd No.5d relates to depreciation-earlier year assets. The ld. AR of the assessee submits that Assessing Officer disallowed depreciation on assets which is disallowed in earlier years. The Assessing Officer disallowed by taking view that similar disallowances was confirmed by ld. CIT(A), therefore, based on the assessment order for AY 1995-96 disallowed deprecation of Rs. 17,15,727/-. The ld. CIT(A) allowed the depreciation for earlier years and directed the same should be allowed after verification that assets were in existence and put to use in the Assessment Year. The ld. AR of the assessee submits that the Assessing Officer while passing the order giving effect allowed depreciation in case of leases with LML Ltd., Aplab Ltd. and Precision Capsule Ltd. The ld. AR further submits that in appeal for AY 1994-95, the Tribunal restored the matter back to the Assessing Officer to decide the issue afresh in the light of decision for AY 1989-90 relying on the order of AYs 1991-92 and 1993-94. For AY 1989-90 the Tribunal set-aside the issue to the file of ld. CIT(A). 23. On the other hand, the ld. DR for the revenue though supported the order of lower authorities. However, on our query ....
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....to use before 31.03.1995 and/or there was mismatch in year of make, machine number, location and place of installation. The assessee was only financer, even if purchase to be accepted as genuine. The ld. CIT(A) rejected the contention raised by assessee, however, directed the AO to bifurcate lease income of Rs. 20,10,000/- into principle and financial charges and tax only financial charges. 27. The ld. AR for the assessee submits that the assessee has furnished the complete details of lease agreement, transportation, installation, confirmation, photographs of lease equipments and submits that similar lease was made to Kores India Ltd. and that he adopts the same argument as made for allowance of depreciation on lease asset to Kores India Ltd. 28. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 29. We have considered the submission of both the parties and perused the record including various documentary evidence furnished in respect of lease asset including lease agreement, transportation, installation, insurance policy and photographs of leased equipments. We have further noted that this issue is similar to the ground taken in Ground No....
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....r. In our considered view, the action of ld. CIT(A) is reasoned one. There is no adverse treatment of the profit shown on sale of shares either by Assessing Officer or by First Appellate Authority. Therefore, we do not find any justification for interfering with the finding of ld. CIT(A). In the result, this ground of appeal is dismissed. 33. In the result, appeal of the assessee is partly allowed. ITA No. 4080/Mum/2001 (AY 1996-97) by revenue 34. The revenue in its cross appeal has raised the following grounds: 1 a) directing to delete the disallowance of Rs. 17, 10,771/- made on account of write off of accounts in respect of debit balances in the cases of Andhra Sintex Ltd., Swastik Surfactants Ltd., Indage India Ltd; b) not considering the fact that the claim of deduction made by the assessee was not on account of 'bad debts' written off but was in respect of 'accounts' written off; c) ignoring the fact that the assessee company had not claimed deduction of write offs under the head bad debts; d) applying the provisions of Sec.36(l X vii) read with Sec.36(2) of the Act to the claim of write off of accounts even though the aforesaid provisions ar....
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....e rental income receivable for the entire lease period for this purpose and exclude there from the principal amount of lease finance in arriving at the income from financial charges for the entire lease period c) ignoring the fact that claim of depreciation at 100% on the leased assets was made by resorting to manipulate methods and therefore income as financial charges on the amount financed was also structured taking into account the benefits of 100% depreciation availed off by resorting to such fraudulent methods; d) not taking into account that such a direction may lead to absurd results in as much as the return to the assessee on the amounts financed amounted to only 4% (approx.) even though admittedly loans at bearing interest @ 15% to 21 % were taken by the assessee; e) not appreciating the tact that in such structured and collusive transactions, the return could have been negative also depending on the benefits availed off by the assessee on account of various deductions; f) not taking into account the fact that the direction given would reduce the income declared as lease rent as per the return of income filed and therefore would result in the assessee being as....
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....of Hon'ble Supreme Court in TRS Ltd. Vs CIT (supra) and Circular of CBDT No. 12 of 2016 dated 03.05.2016. The ld. AR in alternative claimed the write off may be allowed as business loss. 37. We have considered the submission of both the parties and gone through the orders of lower authorities. We have noted that the Assessing Officer disallowed the claim of write off by taking view that no evidence to show the effort to recover the amount of write off. Before the ld. CIT(A), the assessee categorically stated that the assessee has offered the interest on advances to tax in earlier years and that the advances given to the parties have become time barred. The assessee also placed on record the affidavit of Managing Director of assessee, wherein the assessee stated that no sufficient time was granted to assessee to prove its contention by the Assessing Officer. On the contention of assessee, a remand report was sought from the Assessing Officer. The Assessing Officer furnished his remand report vide letter dated 05.12.2000. In the remand report, the Assessing Officer has stated that no evidence was produced during the assessment proceeding, the assessee was given full opportunity to ....
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....s. 177 lakhs to Oceanic Investment Ltd. on seeking explanation the assessee explained that advance was made for purchase a property in Delhi and Pune and lateron plans were abandoned. Oceanic Investment Ltd. could not repay the balance after paying Rs. 66.50 and no interest was charged. The Assessing Officer not accepted the contention of assessee. The Assessing Officer concluded that interest waiver was totally one sided and the company have huge investment in share and owned property in New Delhi. The Assessing Officer disallowed the interest @ 21%. On appeal before the ld. CIT(A), the assessee made detailed submission as explained before us and also explained that no disallowance was made in earlier year. The ld. CIT(A) accepted that no disallowance of interest was made in earlier year and in view of the decision of Hon'ble Karnataka High Court in CIT vs. Sridev Enterprises [192 ITR 165 (Kar.)]. The ld. CIT(A) directed the Assessing Officer to grant the relief to the assessee to the extent of disallowance of interest related to the debit balance carried over from the preceding year. No contrary fact or law is brought to our notice to take the different view. Therefore, we do not....