TaxTMI 
TaxTMI 
2023 (7) TMI 903
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.... 'the Act') by the ACIT, Circle, Karnal (hereinafter referred as the Ld. AO). 2. The facts in brief are that assessee filed return declaring income of 14,77,580/- which was processed u/s 143(1). Subsequently, the case was selected under CASS and notice u/s 143(2) was issued on 12.03.2018. During assessment proceedings books of account were produced and test checked with reference to bills / vouchers produced for verification. The assessee is a public listed company and engaged in the business of manufacturing & trading leather and non-leather footwear it has manufacturing units in Karnal, Kutil, Gharunda, Rourkela and Dehradun. 2.1 Ld. AO had considered the fact that assessee has incurred interest liability to the tune of Rs. 11,16,86,938....
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.... with PPJL to Yes Bank for the credit facilities granted. Since due to higher operational cost and love volume of business in comparison to envisaged plans, FMPJL went into losses and ultimately expressed its inability in payment of its dues towards Yes Bank vide letter dated January 16, 2012 (copy enclosed). On receipt of the same Yes Bank initiated its recovery proceeding with the guarantee by giving notice for invocation of the Corporate Guarantee to both the guarantors vide letter dated January, 17,2002(copy enclosed). The company initially challenged such invocation vide its letter dated January 24, 2012 but latter on discharging of the said, liability by the PRIL, the other promoter & guarantor, initiation of the legal proceedings....
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....vt. Ltd. is an independent entity and there was no compulsion upon the assessee to fulfill liability of a separate entity. Ld. AO also concluded that there is no reason from which it can be ascertained that the liability of an entity should be adjusted against the assets of the other entity. Ld. AO made observation that the amount written off on account of payment to YES bank is a contingent liability and relying the judgment of Hon'ble Supreme Court in Indian Molasses Company Pvt. Ltd. vs. CIT 1959 (37) ITR 66 held that being contingent liability same is not allowable. 3. Ld. CIT(A) has however deleted the addition and the Revenue is in appeal raising following grounds :- "1. Whether on the facts and in the circumstances of the case, th....
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....udice to above, whether on the facts and in the circumstances of the case, the CIT(A) has erred in ignoring the that that section 37 of the I.T. Act is not applicable to the payment of Rs. 3,19,49,856/- claimed as 'Debt Written off' in the Profit & Loss Account, as the said payment made by the assessee due to its 49% Shareholding in the JV was a payment on capital account, and not on revenue account, and also as the said expenditure was not laid out or expended wholly and exclusively for the purposes of the business of the assessee. 6. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in merely giving a bald and unsubstantiated finding that payment of Rs. 3,19,45,898/- was a business expenditure of the assess....
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....und was disallowed and order of ld. CIT(A) was upheld. Thus, the Bench is inclined to not interfere in the findings of Ld. CIT(A). Consequently, ground is determined against the Revenue. 6. Ground nos. 2 to 8; These grounds arise out of common questions of facts and law therefore are taken up together for determination. Ld. AR has heavily relied Joint Venture tri-partite agreement available at page no. 58 to 84, minutes of the meeting resolution with regard to Corporate Bank Guarantee available at page no. 85 to 86, Copy of letter dated 16 Jan, 2012 by FMRIL expressing of inability in payments of its dues towards the YES Bank available at page no. 36 to 37, Copy of Notice dated January 17, 2012 issued by the YES Bank, on receipt of the let....
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....e had a backing of the assessee and its partners. Ld. CIT(A) has relied the judgment in CIT vs. Delhi Safe Deposit Company Ltd. (1982) 133 ITR 756 (SC) and ACIT, Circle 3 Chennai vs. WS Industries India Ltd. ITAT, Chennai, 2011, 128 ITD 98 which was distinguished by ld. AO. 9. The case of assessee is that in order to create dominant position in the retail market the joint venture was incorporated and being promoters the corporate guarantees were extended for the credit facilities received for the joint venture company. It appears that Ld. AO had fallen in error in not appreciating the fact that although, the joint venture was a separate entity it was promoted by the assessee along with his partners and they had direct interest in the suste....