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2017 (8) TMI 610 - HC - Income TaxBusiness expenditure - Deduction of royalty on Bamboo exploited at revised rate - contingent liability or ascertained liability - allowed at rates other than those specified in the 1968 and 1947 agreements drawn with the Government of Maharashtra - claim of the Respondent-Assessee at ₹ 115/- per ADMT under both the 1947 and 1968 Agreement - Held that:- Apex Court in Kedarnath Jute Manufacturing Co. Ltd. (1971 (8) TMI 10 - SUPREME Court ) has laid down the text to ascertain whether the amount is a debt by holding that “ a liability depending upon a contingency is not a debt in presenti or in futuro till the contingency happened. But if there is a debt, the fact that the amount is to be ascertained does not make it any less a debt if the liability is certain and what remains is only quantification” Applying the above text, the amount @ ₹ 115/- per ADMT is a debt. The aforesaid observations of the Apex Court would apply to the facts of the present case. In the present facts, the State Government had already by its communication dt.19.3.1983 decided to enhance the rate of royalty to ₹ 230/- per ADMT less discount at the prescribed rates. Besides the assessee therein had not made provision for the liability that may arise or any part of the amount in the previous year relevant to the Assessment Year under consideration. As against that, in the present facts, the Respondent/assessee has not only debited the entire amount of royalty payable according to interim order but has proceeded further and paid that amount also during the previous year relevant to subject Assessment Year 1998- 99. Thus, the decision of this Court in Standard Mills Co. Ltd. (1997 (3) TMI 64 - BOMBAY High Court ) would have no bearing in the context of present facts. - Decided in favour of assessee. Addition on account of interest free loan given to Andhra Pradesh Rayon Ltd - commercial expediency - Held that:- This charging of interest on advance made to M/s. Andhra Pradesh Rayons Ltd. would clearly be covered by the decision of the Apex Court in S.A. Builders Ltd. vs. Commissioner of Income Tax (Appeals) and another, (2006 (12) TMI 82 - SUPREME COURT ) wherein held that once it is established that there was nexus between the expenditure and the purpose of business (which need not necessarily be the business of the Assessee itself) then the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the Board of directors and assume its role to decide how much is reasonable expenditure having regard to the circumstances of the case. Thus a business decision was taken to give loans to the company of which it is promoter so as to safeguard itself from litigation to pay amounts which were advanced by banks to M/s. Andhra Pradesh Rayons Ltd. of which the Respondent/Assessee was a guarantor. The Order of Tribunal in the Subject Assessment Year relies upon its Order for the earlier Assessment Year wherein the reason for deleting the disallowance of interest was on the ground of commercial expediency in order to stabilize finances of M/s. Andhra Pradesh Rayons Ltd. This holds good for the subject Assessment Year also. - Decided in favour of assessee.
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