TaxTMI 
TaxTMI 
2023 (9) TMI 375
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is delay of 03 days in filing of the appeal by the assessee for which the ld. AR of the assessee filed an application for condonation of delay with following prayers: "Sub: Application for condonation of delay of 3 days in filing of appeal. The above appeal is preferred against the order of Ld. CIT(A)-1, Jodhpur. 2. The appeal ought to have been filed on 30/10/2018. But as the CA appeared before CIT(A) and received order, erroneously intimated last date of filing as 09/11/2018 (date of receipt erroneously taken as 10/09/2018 instead of 30/08/2018), and due to engagement of professionals in Income Tax Audits the correct date was not examined in due course and the appeal could not be preferred within the statutory period. Hence a delay of 3 days is caused in filing the appeal. The said delay is not due to wilful default. It is prayed that the ITAT Bench may be pleased to condone the delay of 3 days in filing the appeal." 4. During the course of hearing, the ld. DR did not objected to assessee's application for condonation of delay and prayed that Court may decide the issue as deem fit in the interest of justice as delay is of three days only. 5. We have heard the contentio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... submissions of the appellant that as per balance sheet of the assessee on 31st March 2004, Rs. 51.70 lacs was net profit of appellant. However, the appellant wanted that Rs. 23.05 lacs also be added back to its profit, in arriving at the profit for the year, because this amount was debited for claiming the depreciation, which otherwise was not an outgo in real terms. AO rightly declined the claim of the appellant stating that though, depreciation is not an actual expenditure and hence it is not an outflow of funds but as per the Income Tax norms depreciation is to be claimed and allowed compulsorily if the assessee is eligible to get it. If there remains unabsorbed depreciation in the case of any assessee than it is carried forward until it becomes nil by reducing its amount from income of any subsequent year. In this way it is outflow of fund. I do concur with the view of the AO. In the case of Bombay Sales Corporation [2017] 86 taxmann.com 9 (Ahmedabad - Trib.) held that, since no interest free own funds were available at disposal of assessee, disallowance of proportionate interest expenses was justified. 5.2.2 Assessing Officer accepted the contention of the assessee that i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....42.55 lakhs and as on 31.3.2004 of Rs. 325.74 lakhs which covered the lending to SIL of Rs. 141.52 lakhs and Rs. 122.46 lakhs on those dates respectively. In these circumstances, we deem it fit to restore the issue to the file of the AO to examine the balance sheet of the assessee on those dates and decide the issue afresh in accordance with law. The AO while deciding the issue should keep in mind the ratio of the decision of the Jurisdictional High Court in the case of CIT v. Reliance Utilities & Power Ltd., (313 ITR 340) Referring the above observation of the ITAT and drawing out attention to the order which is under attack before us. As it is evident the assessee in the first round contended the assessee is saving sufficient free funds and based on that ITAT has set a side the issue to verify a fresh but we note from the order of the assessing passed in the second round of litigation where in he has considered the profit of the assessee after the depreciation at Rs. 51,69,579/- calculated on that the assessee entitled to a relief of Rs. 3,10,175/- [ Amount relief= 51,69,579 *12 %= Rs. 6,20,350/- (Rs. 6,20,350/- was averaged out considering that the profit is earned over a perio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ef i.e. Rs. 3,10,175/-)]. The assessee pleaded that the fund advanced to SIL was historical in nature. The assessee firm was charging the interest on such advances till 31.03.2000 which is not under dispute. Thereafter SIL was declared sick company on 20.05.2000 w.e.f. 30.09.1999 (APB18-26). Based on these facts the assessee has stopped charging the interest on the debit balance of SIL. The ld. AO without appreciation of this fact and the direction of the ITAT that the assessee is having interest free funds or not the ld. AO has given only part relief. The assessee also filed a detailed submission based on the facts of the assessee the assessee is having sufficient interest free funds. The relevant part of the written submission made before the ld. CIT(A) is reiterated here in below: "i. The assessee had advanced loan of Rs 12245671.90 as on 31 March 2004 which was approximately 40% of capital of M/S Sunil and Company which stood at 32570408.00 as on 31 March 2004. Thus, it was the need of the hour to advance funds to the Synco Industries otherwise such sum of Rs 12245671.90 would have become irrecoverable and would have to be written off. As the things stands now. M/S Synco Indu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title" is an expenditure Incurred for the purpose of business: As can be evident from the facts above, the advances by the assessee to the sister concern were historical in nature and fresh advances were given to protect the interest of the assessee and the funds already advanced by the assessee. M/S Synco Industries Limited had become a sick Industry and no banking or financial Institution was ready to fund the concern. Thus, it was imperative for the assessee to protect the funds already advanced by it from becoming bad debts that M/S Synco Industries to continue it's working. Smooth working of M/S Synco Industries could only have been ensured with the availability of the funds which nobody was ready to lend them. Therefore, assessee in the best interest of protecting the funds advanced by it from becoming bad debts, decided to fund afresh to Synco Industries. It was purely a matter of business expediency or commercial expediency and for the purpose of business. l. It was further held by Hon'ble Delhi High Court in CIT v. Dalmia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n set of circumstances protecting the principal was the permanent consideration and its recovery to the extent of Rs. 19,06,165/- during the year is evidence enough of the prudent handling of containing the probable loss of principal outstanding with no normal legal recourse of recovery in foreseeable future. In the light of the above submissions, the position of law becomes clear as being settled on the point that where an interest free loan in extended to a sister concern, even it were out of an interest bearing fund, no notional interest income or charges can be created or otherwise no deduction of interest can be disallowed, without recording a specific finding that there was no commercial expediency in extending interest free loan to the sister concern. In the instant case commercial expediency is very well exist in the form of protecting its principal outstanding with sister concern and there is no other recourse is available to the assessee to recover the same. In the alternative and without prejudice to anything contained above, learned assessing officer has erred in not considering the fact that the depreciation does not entails outlay of cash fund and therefore, it ca....