2018 (3) TMI 2017

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....thout considering legal principles that allowability of expenditure under the Act is not conditional upon the earning of the income as upheld by Hon'ble Supreme Court in case of CIT vs. Rajendra Prasad Moody (1978) 115 ITR 519? 3. Whether in the facts and circumstances of the case, the Ld CIT(A) is legally justified in deleting the addition of Rs. 30,93,336/- on account of interest on "interest free loan to sister concern" ignoring the fact that the assessee had not discharged its onus that interest free loan was given to its sister concern out of interest free surplus fund available to the assessee and that interest free loan was given for the purpose of the business? 4. Whether in the facts and circumstances of the case, the Ld. CIT (A) is legally justified in deleting the disallowance of Rs. 57,19,974/- on account of write off loan to sister concern ignoring the fact that no amount corresponding to bad debts was booked as revenue in earlier years in accordance with provision of section 36(2) (i) of the Income Tax Act and also ignoring the fact that the assessee is not a banking company.? 5. That the appellant craves leave to add, amend, alter or forgo any ground(s) ....

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....Bench of this Tribunal for assessment year 2009-10 and 2010-11 in ITA No. 2949 and 2950/Del/2014 which is placed at page 51-65 of the paper book. Ld.AR relied upon page 54 of paper book where in this issue has been discussed at length. 3.7. We have perused the submissions advanced by both the sides in the light of the records placed before us. The factual observations by Ld.CIT(A) based on which he has deleted the addition are as under: "c. The ld.AO had made a disallowance to the extent of Rs. 30.93 lacs from the claim of interest by the assessee u/s 36(1)(iii) on the ground that the assessee has diverted its interest bearing funds to its related person and accordingly interest @ 10.75% on interest free loans is disallowed. d. The following undisputed facts emerge: The advance/loan were given by the assessee to a company COED, which was formed to promote its business in India. 2. The assessee company had 50% stake in the said company COED, with the balance 50% held by CBPL. 3. Loan/Advance of Rs. 285.99 lacs was given by the assessee. Similarly, Loan/advance of Rs 292.34 lacs were given by the other joint venture partner i.e CBPL, till March 31, 2012. 4. The....

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.... act. The authorities must not look at the matter from their own view point but that of a prudent businessman. As already stated above, we have to see the transfer of borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits. Respectfully following the principles laid down by Hon'ble Supreme Court in SA Builders case, and in view of the fact that on the same facts, my predecessors had allowed the appeal, I hold that the loan was given for commercial expediency and allow the appeal. Accordingly, the disallowance of Rs. 30,93,336/- is deleted." 3.8. Further on perusal of the decision of this Tribunal in assessee's own case for assessment year 2009-10 and 2010-11 (supra) it is observed that the issue has been decided as under: "6.1. Considering the above submission, we find that the Ld.CIT(A) has deleted the disallowance on the basis that nexus between interest bearing funds and interest free advance as well as adequacy of interest free fund available with the assessee, have not been analysed by the A.O. during the assessment proceedings, nor the explanation given by....

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....legal proceedings against the joint venture company for recovery of their dues. The other joint venture partner is in liquidation. The chances of recovery of such loan from joint venture company is almost negligible given the above position. Respectfully following the decision of Gujarat High Court in case of Mahendra Shah, as it is a genuine loss, it should rightly be allowed as a business loss u/s 28. Accordingly, the addition of Rs. 57,19,947/- is deleted." 4.3. Ld.DR submitted that assessee has claimed the said amount as a write off to be bad debts before Ld.AO while before Ld.CIT (A) the said amount has been claimed as business loss. He also submitted that assessee is not in the business of advancing loans. Ld.DR further submitted that the said amount cannot be considered differently before different authorities by assessee. He thus placed reliance upon order of Ld.AO, and submitted that assessee has failed to comply with conditions laid down in section 36 (2). 4.4. At the outset Ld.AR submitted that assessee company advanced loan to its sister concern, which is evident from financial statements of the sister concern. Further it is submitted that the sister concern has....