Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2011 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2011 (2) TMI 1460 - ITAT AHMEDABADAssessment done u/s 143(3) - Claim u/s 41(1) - HELD THAT:- the circular dated 22.4.1999 issued by the CBDT allowing tax payers not to be taxed u/s 41(1) if they are BIFR Companies is a beneficial circular and is binding on the Income Tax Authorities. Here, admitted facts are that the assessee has written off the liabilities u/s.41(1) of the Act and it is not the case of the Revenue that he has introduced back this amounts in this very year. we uphold the order of CIT(A) and this issue of Revenue’s appeal is dismissed. In this appeal Revenue is against the order of CIT(A) in deleting the addition made by AO on account of unexplained credits amounting to ₹ 2,73,501/-. the assessee has failed to substantiate its claim and failed to prove the genuineness of the credit entry and onus is on the assessee to prove the genuineness of each and every entry appearing in its books of account with necessary evidence to the satisfaction of the AO. Accordingly, AO made addition of ₹ 2,73,501/-. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) deleted the addition made by AO on the ground that the creditors are old in respect of which purchases were made in earlier years and, therefore, if the creditors are bogus, the same can be added only in the year in which they are introduced by reopening the assessment of the relevant year. With regard to cessation of liability, application of Section 41(1) of the Act the basis on ‘non-service of notice u/s 133(6) is not enough. Aggrieved, Revenue came in appeal before the Tribunal. HELD THAT:- Considering the facts and circumstances of the case. We find that, admittedly, creditor are old and pertains to earlier years. In the eventuality of the creditor are bogus the same can be added only in the year of arisen not in any other year. We find the findings of CIT(A) quite reasonable and uphold the same. This issue of revenue’s appeal is dismissed. Next issue in this appeal of Revenue is against the order of CIT(A) in deleting the addition made by AO on account of interest liability on ‘term loan’ amounting to ₹ 5.82 lakh - According to facts and circumstances of the case. We find that the claim of the assessee is that entire financial restructuring pertains to converting 10% cumulative redeemable preference shares of ₹ 100/- face value to term loan/NCD and it was done for the purpose of business as it would substantially reduce liability of the company. The CIT(A) allowed the claim by holding that 10% preference shares also puts a liability on assessee company to give a fixed amount of dividend every year failing which, if the preference shareholders are not given fixed amount of dividend continuously for two years then preference shareholders get voting right equal to equity shares. That means the assessee had actually reduced its liability and this issue is covered by the decision of Hon’ble Apex Court in the case of India Cements Ltd. (supra), wherein it is held that if loans are used for the purpose of business consequential interest is to be allowed. We find that the assessee has carried out financial restructuring due to the reason that there will be substantial reduction of interest liability and that has been done with the business concern in mind. Accordingly, we fully agree with the view of CIT(A) and we uphold the same. Issue regarding cash discount - HELD THAT:- We find from the findings of CIT(A) as well as AO and the arguments of both the sides that sales in respect of which discount was given pertains to assessment year 2004-05 and this discount was due to prompt payment of cash, this discount cannot be allowed in the present a i.e. 2005- 06. Accordingly, we agree with the findings of CIT(A) and this issue of assessee’s appeal is dismissed. Disallowance of expense including depreciation - HELD THAT:- We direct the AO to disallow the expense relating to growing of saplings through clonal routes which are non-agricultural operation expenses. Whether the upfront fee and syndicate fee paid to the banks is capital or revenue expenditure - HELD THAT:- the facts of the present case that the syndicate fee is paid for the restructure of financial liabilities and this is one time additional payment of syndicate fee and upfront fee in connection replacement of high cost loans with low cost loan pertaining to earlier years and the assessee has not derived any benefit of enduring nature and even there is no capital asset came into existence, which give enduring benefit to the assessee. The upfront fee and syndicate fee paid by the assessee to the bank, as one time payment, is nothing but bank charges and same cannot be construed as ‘capital expenditure’. Accordingly, the upfront fee and syndicate fee paid by the assessee to various banks for implementing restructuring plant for replacement of high cost loans with low cost loans, even though pertaining to earlier years which are crystallized during the year, is allowable as revenue expenditure. Accordingly, this issue of assessee’s appeal is allowed. Payment allowable u/s.37((1) - HELD THAT:- According to facts of the case that the assessee has made payments prepayments of loans in the current year but even the consent of financial institutions and banks to the assessee’s proposal was received during the current year and therefore the liability has been crystallized, i.e. for the payment of one time payment of additional interest, during the year under consideration. We find that the said payment incurred by assessee-company was purely for business purposes and by incurring the said expenditure no capital asset was created. The said payment is fully allowable u/s.37((1) it being a revenue expenditure incurred fully and exclusively for the purpose of appellant’s business and not for creating any capital asset. we allow the claim of assessee and this issue of assessee’s appeal is allowed. deduction under Explanation to Sec. 115JB(2) - HELD THAT:- The fact that Section 10, 11, and 12 are mentioned in clause-f of Explanation, but not Section 14A even though they deal with similar type of expenditure i.e. relating to exempted income, gives clear indication that legislatures have not intended to disallow and consequently add to the book profit, expenditure relating to exempted income, and debited in profit and loss account prepared as per Companies Act. But in the present case neither AO nor CIT(A) has examined explanation to Section 115JB of the act with the facts of this case, hence this require verification at the level of the AO. Accordingly, we set aside this issue to the file of the AO. This issue of assessee’s appeal is allowed for statistical purposes.
|