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2014 (7) TMI 758 - AT - Income TaxNon-payment of interest liability on sugar development fund loan u/s 43B – Held that:- It is the Government of India which is the principal and that being so, its agent, IFCI, according to Section 182 of the Indian Contract Act, 1872, cannot be taken to be a person employed to do any act as such principal - the IFCI did not receive any interest - The interest was on the SDF loan taken from the Government of India - As per the terms and conditions of the SDF loan, the charge on the immovable and movable properties of the company operates as security, inter alia, for due payment by the company to the President of India for term loan together with interest, additional interest, liquidated damages and all other monies payable by the company to the President of India - the AO obviously went wrong in concluding that the SDF loan was from IFCI and not from the Government of India - CIT (A) has duly taken into consideration all these facts while rightly deleting the disallowance/addition – Decided against Revenue. Cane cess and bonus payable u/s 43B – Held that:- The assessee had paid ₹ 6 lacs towards cane cess payable and ₹ 18,59,947/- towards bonus liabilities - Both the liabilities pre-existed on the first day of the previous year - the assessee filed vouchers as evidence for payment of bonus and challans showing payment of cess - the entire amount is an allowable expenditure under the provisions of Section 43B of the Act, according to which, a deduction otherwise allowable under the Act shall, notwithstanding anything contained in any other provision of the Act, be allowed in computing the income referred to in Section 28 of the Act, of that previous year, in which such sum is actually paid by the assessee. In the Tax Audit Report of the assessee, both these amounts have duly been reported as allowable expenditure - CIT (A) correctly allowed the payment on account of cane cess and bonus paid during the year by the assessee out of pre-existing liabilities – Decided against Revenue. Income taxed twice – Held that:- The Profit & Loss Account, the depreciation chart, the computation of income and all the other connected documents were duly taken into consideration by the CIT (A) and it was on the basis of this documentary evidence, that the CIT (A) arrived at the opinion that the amount had been taxed twice - the AO was rightly directed to reduce this amount from the assessee’s business income – Decided against Revenue. Advances paid out of internal generation of funds – Held that:- The working capital created had also been deployed in inventories, debtors and liquid assets in an appropriate manner – assessee contended that the interest on the debit balance of the directors for the years ended 31.3.03 and 31.3.04, amounted to ₹ 19.34 lacs only – This was inclusive of the tentative impact of interest @ 6% per annum, of 9.6%, for the year ended 31.3.04 - even after setting off the debit impact of interest for the years ended 31.3.03 and 31.3.04, the assessee company had a benefit of more than ₹ 124 lacs – Relying upon Munjal Sales Corporation vs. CIT [2008 (2) TMI 19 - Supreme Court] - where opening balance of profit and loss account and the profits are sufficient to cover the loans given, such loan is to be treated as given out of the assessee’s own funds and no disallowance of the interest paid on borrowed funds for business, is called for – thus, the grievance of the assessee is justified – Decided in favour of Assessee.
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