TMI Blog2008 (9) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... han 50 per cent of the total receipts and as the leasing is not an activity which falls under any of the sub-clauses from (i) to (v) of section 2(5B), it cannot be said that the company was carrying on exclusively, or almost exclusively, two or more classes of business referred to in sub-clauses (i) to (v) of section 2(5B) of the Act. Therefore, it was held that the company is not a financial company as defined in section 2(5B) and consequently, it is not a credit institution as envisaged in section 2(5A) of the Act. Since it is not a credit institution as defined in the Act, the assessee-company will be out of the purview of interest-tax under the interest-tax Act, 1974. In the present case, its income and assets being less than 50 per cent, its principal business may not be lease and the provision of Interest-tax Act may not be excluded on this ground of negative test. Further the mere fact that assessee is a public limited company and the Reserve Bank of India has classified it as a Leasing Company may not help the assessee. In our opinion, it cannot be said that the principal business of the assessee was in either of the two activities i.e., hire purchase loan business or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defines interest to mean interest on loans and advances made in India and includes (a) commitment charges on unutilized portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India. It however excludes (i) interest referred to in sub- section (1B) of section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); (ii) discount on treasury bills. According to the assessee the definition of Interest as per section 2(7) of the Interest Tax Act, 1974 is a restrictive definition since the word used is means and not includes . Lease Income - In our opinion, when a part of the finance lease payment is inherently in the nature of interest inasmuch as it is compensation for time value of money, it could not be termed as not to be 'interest on loans and advances' for its inclusion in chargeable interest under the Interest-tax Act. There is no warrant in saying that merely because a payment is in the nature of interest, it would not mean that it was interest on loans and advances and could not be brought to tax under the Interest-tax Act. It is an interest on 'loan and advances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax initially but he claimed it as not taxable and therefore the matter has to be examined on merits and to determine as to whether it is taxable under the Act. We find it is not taxable in the light of the decision in the case of Utkarsh Finance (P.) Ltd.[ 2005 (11) TMI 167 - ITAT AHMEDABAD-A] wherein Tribunal after considering the decision in the case of Federation of Andhra Pradesh Chambers of Commerce Industry v. State of AP [ 2000 (8) TMI 78 - SUPREME COURT] , CIT v. Sahara India Savings Investment Corpn. Ltd.[ 2003 (9) TMI 74 - ALLAHABAD HIGH COURT] and following the decisions in the case of Oriental Insurance Co. Ltd. v. Dy. CIT [ 2004 (1) TMI 311 - ITAT DELHI-A] held that interest on inter-corporate deposits are not chargeable to interest tax, as the deposits are in the nature of loan or advances. In these circumstance we hold that interest on inter-corporate deposits is not an interest on loan or advance and therefore would not be includible in the chargeable interest under the Interest Tax Act. Interest on delayed payment from debtors - Assessee contends that interest from delayed payment from debtors is not on account of interest on loans and advance and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the business of banking or of money lending business. In this activity the finance is provide against bills that are discounted and the income therefrom is appearing in profit and loss account. The mere fact that it is less or not earned this year as on 31-3-2001 does not make any difference so long as the carries the business as an activity. We therefore vacate the order of the revenue authorities on this issue and allow the claim of the assessee. Inter-corporate deposits debts in respect of Mafatlal Industries Ltd. and Precession Fasteners Ltd. the amounts relate to various advances/deposits made by the appellant company which have been made out the deposits received by the appellant itself from various companies including the parent company. Such receipt of advances/deposit, the advancement of the deposits in other concerns is not the business of the assessee and we have held that it in interest tax appeals that these are not loans or advance these cannot be allowed as bad debt arising in money lending business of the assessee. Bad debts claim in hire purchase business which is though, one of the main business of the assessee, the claim u/s 36(1)(vii) r/w section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the investment made by the assessee are out of borrowed funds, this being so, there is no reason that warrants for interference of the order of the CIT(A) on this issue, which is accordingly upheld, and this ground of Revenue is dismissed. Non-inclusion of lease income of Rs. 4,44.367 in respect of various assets given on lease - HELD THAT:- The assessee is subsidiary of Gujarat Gas Company. The report was prepared by a firm of chartered accountants, Ernst and Young on the direction of GGCL for amalgamation and merger for efficient and effective functioning of GGCL and group companies. The charges bill was originally prepared in the name of GGCL, though later on the name of appellant company has been inserted by hand showing C/o GGCL. As this study was not commissioned by the assessee company, this expenditure does not relate to them and has nothing to do with the assessee. It could not be said to have been incurred wholly and exclusively for the carrying on business of the assessee. These findings were not successfully challenged or shown to be wrong in law therefore, considering the reasons given by AO and the CIT(A) we are of the opinion that the Revenue authorities are j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the lease operations. Referring to Section 2(5B) he observed that the wording of the section and the legislative intent is clear that the assessee company would also fall in the ambit of the Sub-section (5B)(vi) as the assessee company was engaged in the business of the hire purchase and investments i.e. to say that the assessee company was carrying out exclusively or almost, exclusively two or more classes of the business. He also rejected the contention of the assessee company that 'principal' means 50 per cent or above because the word, as defined in the Oxford Directory, stands for first, highest or foremost in importance, etc. However, nowhere there is any yardstick as to what constitutes a principal and how it can be measured. As the income of the assessee company from the hire purchase and the bill discounting activity is around Rs. 8.10 crores would not be this, he observed, a principal business or at least one of the principal businesses of the assessee company ? The legislative intent was clear that if the income was mainly or chiefly from an activity it would be a principal business. However the assessee company has Income from more than one source which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the company. It has however not been proved with reference to these that the only 'principal' business of appellant is of 'lease' so as to take it out of purview of being a credit institution and also of being a financial company liable to interest-tax. 4.3 It is also seen from Chart 1, that the income from hire purchase, income from Government securities, inter-corporate deposits, bill discounting, bank term deposits and other miscellaneous interest Income would together make-up at least 42 per cent of the receipts. This would certainly make them the other 'principal' business carried on where substantial funds and manpower would be engaged. 4.4 It is also seen from Chart 2, giving the break up of assets and percentage thereof against total assets that only 42 per cent assets are shown as on lease while more than that percentage is together in such investment, inventories, stock on hire, and loans and advances which are a financial company's various businesses. 4.5 I therefore do not accept the proposition that major income of company is from lease business and it is not liable to pay interest-tax. In fact the company has several business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the definition of the term 'principal business' the ordinarily the word principal would meaning main , major , substantial has to adopted. The word principal , therefore, envisages that other activities are less important than the principal one. 8. It is submitted that the company does not fall into the definition of credit institution as envisaged by Section 2(5B)(va) or 2(5B)(vi). In this connection reliance is placed on the decision of Ahmedabad Tribunal in the case of Pinacle Finance Ltd. (Interest-tax Appeal Nos. 39 to 42 47/Ahd/2003) wherein it is held that out of seven activities carried on by the assessee company, only two activities are covered by the Interest-tax Act, the share of these two activities taken together being around 60 per cent though individual share of these two activities is less than 50 per cent and therefore it cannot be said that the principal business of the assessee was in either of the two activities i.e. hire purchase loan business or investment business, the individual activity being less than 50 per cent. The combined percentage of these two activities is 58.67 per cent but by virtue of definition in Clause (vi) of the resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come received from the lease operations. Referring to Section 2(5B) he observed that the wording of the section and the legislative intent is clear that the assessee company would also fall in the ambit of the Sub-sections (5B)(vi) and (vi) as the assessee company had received and making deposits and earned Interest thereon and was engaged in the business of the hire purchase and investments i.e. to say that the assessee company was carrying out exclusively or almost, exclusively two or more classes of the business. The contention of the assessee company that 'principal' was leasing as It means 50 per cent or above because the word, as defined in the Oxford Directory, stands for first, highest or foremost in Importance etc. is not the correct as nowhere any yardstick is laid down as to what constitutes a principal and how it can be measured. The legislative Intent was clear that if the income was 'mainly or chiefly' from an activity it would be a principal business, however the assessee company has Income from more than one source which are quantitatively as big and hence to simply apply a criterion of 50 per cent as stated by the AO will be travesty of justice and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts. One part is in Sub-section (1) which provides for the charge of tax on every scheduled bank in respect of its chargeable interest of the previous year. The other part is in Sub-section (2) which provides for the charge of tax on every credit institution. The second part is effective from 1st April, 1992. This is the sub-section which is applicable to the assessee. 13. A 'credit institution' is defined in a. 2(5A)of this Act to mean,-- (i) a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in Section 51 of the Act); (ii) a public financial institution as defined in Section 4A of the Companies Act, 1956(1 of 1956); (iii) a State Financial Corporation established under Section 3or Section 3A or an institution notified under Section 46 of the State Financial Corporation Act, 1951 (63 of 1951); and (iv) any other financial company. 14. The credit institution thus means the banking company, a public financial institution. State Financial Corporation and any other financial company. 15. A 'finance company' is defined in Sub-section (5B) of Section 2 to mean a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc., in Clause (iii) the principal business of financing of acquisition or construction of houses; in Clause (iv) the principle business of providing finance by making loans and advances or otherwise; and in Clause (v) the principal business of acceptance of deposits from members to be Nidhi or mutual benefit society. In Clause (vi) the carrying on of two or more businesses referred to above is required either exclusively or almost exclusively. Clause (vi) however, is silent about the requirement of carrying on the business. Normally, therefore, it should be taken that a company receiving deposits is covered by this clause, but if it is read with the other clauses, particularly Clause (vi). i.e., a miscellaneous finance company which carries on either exclusively or almost exclusively two or more classes of businesses referred to in the preceding sub-clauses which include Clause (vi) as well, it gives an impression that unless the company referred to in Clause (vi) receives any deposit under any scheme or arrangement as a business activity, it would not be a financial company. To put it negatively, if the assessee had another business which is its principal business the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income from late payment 41,94,670 2% Income from other interest 3,66,184 0% Investment income 23,34,203 1% Other income 61,03,106 2% Total 25,98,43,794 100% 19. Lease income is 53 per cent of total income. There is some dispute regarding lease equalization whether can be reduced as it is only a book entry and it does not form part of Income or expense as it is excluded in the computation of income/interest-tax Act. Lease equalization allocation is part of the lease rental receipts and when receipts are a matter of consideration they cannot be ignored or kept out of consideration. Even if lease equalization reserve were reduced, its income from lease constitutes 47 per cent which being largest chunk it would reflect its main business. In any case, if they are not to be treated as receipts then they should also be not included in total receipts and if that be so, then also the lease receipts are more than 50 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s carrying on exclusively, or almost exclusively, two or more classes of business referred to in Sub-clauses (i) to (v) of Section 2(5B) of the Act. Therefore, it was held that the company is not a financial company as defined in Section 2(5B) and consequently, it is not a credit institution as envisaged in Section 2(5A) of the Act. Since it is not a credit institution as defined in the Act, the assessee company will be out of the purview of interest-tax under the Interest-tax Act, 1974. 23. In the present case, on this criterion, its income and assets being less than 50 per cent, its principal business may not be lease and the provision of Interest-tax Act may not be excluded on this ground of negative test Further the mere fact that assessee is a public limited company and the RBI has classified it as a leasing company may not help the assessee. In the case of Pinocle Finance Ltd. Interest-tax Appeal Nos. 47, 39 to 42/Ahd/2003 (supra), Ahmedabad Bench held by observing the share of the two activities taken together was around 60 per cent though individual share of these two activities is less than 50 per cent. In these circumstances, in our opinion, it cannot be said that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his clause, but if it is read with the other clauses, particularly Clause (vi), i.e., a miscellaneous finance company which carries on either exclusively or almost exclusively two or more classes of businesses referred to in the preceding sub-clauses which include Clause (vi) as well, it gives an impression that unless the company referred to in Clause (vi) receives any deposit under any scheme or arrangement as a business activity, it would not be a financial company. It is not the case of the Revenue in this case that the assessee received deposits as part of its business activity. Therefore, it may not be a company falling in Clause (vi) of Section 2(5B) of the Act. 26. Let us now examine the last residuary Clause (vi) of Section 2(5B) of the Act and see whether case of the assessee could be brought under this clause as a miscellaneous finance company. Here in contrast to other clauses the requirement Is that it is to be a company which carries on exclusively, or almost exclusively, two or more classes of business referred to in the preceding sub-clauses. In Pinacle Finance Ltd. (supra) where the combined percentage of the businesses of two activities was 58.67 per cent was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(7) of the Act. For this purpose, reliance was placed on the decision of the Supreme Court in Sundaram Finance Ltd. v. State of Kerala AIR 1966 SC 1178. The AO also held that the circular of the Board dt. 16th Nov., 1981, on which reliance had been placed by the assessee was only in respect of the requirement of tax deduction under Section 194A of the IT Act, 1961, and had no application to the Interest-tax Act. He referred to the subsequent circular of the Board, viz., F. No. 133/9289/91-TPL dt. 6th March, 1992 in which it had clarified that hire purchase financial companies entering into hire purchase agreements with hirers would fall within the scope of Section 4(2) of the Act and would, therefore, be liable to tax. The appeal was dismissed by the Commr. of Interest-tax (A) who analysed the hire purchase transactions and held that the hire purchase arrangement was basically an arrangement of advancing money by the assessee to the customers or on their behalf to the dealer and recovering the money so advanced through instalments after calculating interest chargeable on the principal amount. He further observed that the hire purchase agreement and the endorsement in the regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uine hire purchase transactions from transactions which are merely in the nature of financing. Otherwise, the Tribunal has accepted the assessee's claim that hire purchase charges earned on hire purchase transactions cannot be treated as interest under the Act. 29. In the case of Union Bank of India v. Addl CIT (2007) 108 TTJ (Mumbai) 720 it was held that while finance lease is a mode of financial accommodation, it is a step short of loan or advance'. A loan or advance has to be a direct monetary transaction, which 'finance leasing' is not. In fact, it is an alternate to loan or advance; it is a source of long-term funds and serves as alternative to long-term debt financing. Therefore, while a part of the finance lease payment is inherently in the nature of interest inasmuch as it is compensation for time value of money, it cannot be termed as 'interest on loans and advances'. While leasing financing is held to be in the nature of mode of loan or finance, it cannot be said to be a loan simpliciter and unless that condition is satisfied, there cannot be an occasion to bring it to tax under the Interest-tax Act. 30. A reference to the majority view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it. 33. Lease is a contract or bailment where return of goods is provided after a stipulated period. Without envisaging the return of goods it cannot be a proper bailment and hence not a valid lease. Return of goods also necessitates identifying and, therefore, where the assets are not so identified or identifiable, there cannot be a valid lease. Though developed as a commercial device to alternate for traditional loans, leasing has found all over the world massive application as a device to exchange tax burdens. Virtually keeping the same rights over the assets as an owner, the capital allowances applying to asset ownership are transferred in a lease to the lessor. 34. Be that as it may, the question still remains that whether it was in reality a case of sale or leaseback or it was only a case of loan transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of security deposit and interest accrued thereon at the time of buy-back of purchase of leased assets. Accordingly, it forwarded a cheque of Rs. 17,800 in their favour and final settlement of the dues under the lease agreement, The Special Court under Section 10 of the Special Court passed an order to handover the possession of all the 26 cars to the custodian within one week from the date of the order since the assessee had failed to make the payment as per the lease agreement. The assessee had taken a plea before the Special Court that it was a case of lease finance but the said plea had been rejected on the ground that in the pleadings the assessee had termed the agreement as lease agreement . The matter was carried in appeal. In appeal the Supreme Court posed the question for adjudication 'whether the agreement between the parties was a finance lease or not'. Various meanings of the term finance lease etc. were referred to and discussed: (i) Accounting Finance by Rule Brockington (Pitman Publishing, Universal Book Trader 1996s): A finance lease is one where the lessee uses the asset for substantially the whole of its useful life and the lease payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the risk of obsolescence. 4. The lessor is interested in his rentals and not in the asset. He must get his principal back along with interest. Therefore the lease is non-cancellable by either party. 5. The lease period usually coincides with the economic life of the asset and may be broken into primary and secondary period. 6. The lessor enters into the transaction only as a financier. He does not bear the casts of repairs, maintenance or operation. 7. The lessor is typically a financial institution and cannot render specialized service in connection with the asset. 8. The lease is usually full pay out, that is, the single lease repays the cost of the asset together with the interest. 37. Finally, their Lordships expressed their opinion at p. 520 of the report as under: 10. In our opinion, financial lease is a transaction current in the commercial world, the primary purpose whereof is the financing of the purchase by the financier. The purchase of assets or equipments or machinery is by the borrower. For all practical purposes, the borrower becomes the owner of the property inasmuch as it is the borrower who chooses the property to be purchased, takes delivery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essor or the lessee. Risks include the possibilities of losses from idle capacity or technological obsolescence and of variations in return due to changing economic conditions. Rewards may be represented by the expectation of profitable operation over the economic life of the asset and of gain from appreciation in value or realization of residual value. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incident to ownership. Title may or may not eventually be transferred. At the inception of the lease the present value of the minimum lease payments amounts to at feast substantially all of the fair value of the leased asset. In accordance with the provisions of AS-19 on leases issued by the ICAI all transactions entered by the assessee are classified as finance leases for this year and not operating lease, this is because substantially all the risks are borne by lessee, and also as the same assets are not offered to various parties from time to time as done in operating lease. Prior to AS-19, the company followed the recommendations of the ICAI contained in the guidance note on accounting for leases. 41. It is contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es made in India and includes (a) commitment charges on unutilized portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India. It however excludes (i) interest referred to in Sub-section (1B) of Section 42 of the RBI Act, 1934 (2 of 1934); (ii) discount on treasury bills. According to the assessee the definition of interest as per Section 2(7) of the Interest-tax Act, 1974 is a restrictive definition since the word used is means and not includes . In other words, even though interest is the basis for levy of interest-tax, by the adoption of a restricted meaning the parameters of levy of interest-tax have been clearly defined by the Parliament. In respect of each of the item, the matter can be examined. Lease income 44. Lease income is excluded by the CIT(A) and is in dispute in Revenue's appeal. The AO assessed Rs. 2,78,98,000 as interest out of lease rent by observing that the lease rent contains two parts--One of the capital and the other being the interest; that the Interest is charged from the lessee, forms an integral part of the lease rentals and that there is an inherent deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that merely because of a receipt in the nature of interest, it is not sufficient that it can be brought to tax under the Interest-tax Act; that it must also be interest on loans and advances. While lease financing is in the nature of mode of loan or finance, lease financing cannot be said to be a loan simpliciter and unless that condition is specified, there cannot be any occasion to bring it to tax under the Interest-tax Act. Therefore the AO is to exclude lease rental components attributable to interest from chargeable interest brought to tax under Interest-tax Act. In this case of Union Bank of India (supra) it was held that while finance lease is a mode of financial accommodation, it is a step short of 'loan or advance'. A loan or advance has to be a direct monetary transaction, which 'finance leasing is not. In fact, it is an alternate to loan or advance, It Is a source of long term funds and serves as alternative to long-term debt financing. Therefore, while a part of the finance lease payment is inherently In the nature of interest inasmuch as it is compensation for time value of money, It cannot be termed as 'interest on loans and advances' which is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re lease rent includes a recoupment of capital/finance provided by the assessee as well as interest/finance charges for providing the finances. The recovery of finance charges would be interest on loans and advances within the meaning of Section 2(7) of the Act in substance of the matter though given a name of lease rent. We therefore vacate the order of the CIT(A) in holding that leasing is outside the purview of chargeability of interest-tax as the definition of interest. being not inclusive but restrictive in Section 2 of Interest tax Act and in directing AO to exclude from the total amount of chargeable interest. 49. The decision of Union Bank of India (supra) when admits that lease financing is held to be in the nature of mode of loan or finance, there is no warrant in holding that lease financing cannot be said to be a loan and therefore cannot be brought to tax under the Interest-tax Act. When agreed that a finance lease is a mode of financial accommodation, there is no reason to hold that it is a step short of 'loan or advance'. It drew uncalled for distinction in a loan or advance that has to be a direct monetary transaction, in contradistinction to a finance le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of remand is merely to separate genuine hire purchase transactions from transactions which are merely in the nature of financing . 51. Though the assessee had stated in income-tax proceedings that it was a case of financial lease and in that case as we have held above it would be a case of loan transaction and interest portion of the receipts in lease rentals would be chargeable to tax. The necessary material has not been on record to decide as to how much of interest is included in the instalment. The matter thus requires examination in the light of the above decisions of Supreme Court and the Punjab Haryana High Court. We therefore set aside the matter to work out the interest portion and bring it to tax. Hire purchase 52. In the appeal by the assessee, the first dispute is with regard to income from hire purchase. The assessee company claimed before the AO that hire purchase transactions are out of the purview of the Interest-tax Act, 1974. AO referred to the Circular No. 760. dt. 13th Jan., 1998 and the Circular No. 738, dt. 25th March, 1996 [(1996) 131 CTR (St) 53], stating that the hire purchase transactions are generally in the nature of finance transactions ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Bharat Mining Corporation AIR 1980 Bom. 168 holding that this would be a sale; the CBDT Instruction No. 1425, dt. 16th Nov., 1981 saying that per se hire charges are not interest and cases N.K. Leasing Construction (P) Ltd. v. Dy. CIT (2002) 74 TTJ (Hyd) 261, Commercial Motors Finance Ltd. v. Asstt. CIT (2002) 76 TTJ (Lucknow) 918 and Kirloskar leasing Finance Ltd. (supra) were referred to. 54. The CIT(A) held that CBDT Circular Nos. 738 and 760, dt. 25th March, 1996 and 13th Jan., 1998 state that as to what constitute a transaction in the nature of hire purchase would have to be re-examined by the AO to decide the matter because hire purchase transactions were generally in the nature of finance transactions and finance charges accruing were in the nature of interest as defined under Section 2(7) of Interest-tax Act. AO observed that company had not given any material to decide the chargeabiiity of hire purchase receipts which were accordingly brought to tax. The CIT(A) held that the assessee had been merely relying on legal arguments which are found to be not acceptable in terms of the definition of financial company as well as definition of interest and in view of CBDT c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method of sale. (b) Bombay Steam Navigation Co. (1953) (P) Ltd. (supra) --It is held that hire purchase transaction does not give rise to loan, (c) N.K. leasing Construction (P) Ltd. v. Dy. CIT (supra), (d) Commercial Motors Finance Lid. v. Asstt. CIT (supra), (e) CIT v. Harita Finance Ltd. [2006] 283 ITR 370 (Mad.), (f) Kirloskar Leasing Finance Ltd. (supra), (g) Muthool leasing Finance Ltd. v. Jt. CIT (2003) 79 TTJ (Coch) 773 : (2003) 84 ITD 477 (Coch), (h) Commr. of Interest tax v. G.E. Capital Transportation (2007) 160 Taxman 329 (Del), (i) Asstt. CIT v. Visharad Automobiles Financiers (P) Ltd. (2007)109TTJ(Del)829, (j) CIT v. Sri Ram Investment Ltd. [2006] 283 ITR 371 (Mad.), (k) S.E. Investments Ltd. v. Asstt. CIT (2004) 83 TTJ (Agra) 809 : (2004) 88 ITD 620 (Agra), (1) Gujarat State Financial Services Ltd. ITA No. 65/Ahd/2004. 56. We have heard the parties and considered the rival submissions. It is true that originally the CBDT in Circular No. 738, dt. 25th March, 1996 opined as under: ...Hire purchase transactions are generally in the nature of finance transactions entered into by the companies engaged in the business of financing. 4. The Board are of the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are sold under a scheme of payment in instalments. If the hire purchase transaction is a sale, the hire charges paid are for outstanding purchase price and that as held by the Supreme Court in Bombay Steam Navigation Co. (1953) (P) Ltd. (supra) the hire purchase transactions would not give rise to loan or an advance. 59. In the case of N.K. Leasing Construction (P) Ltd. v. Dy. CAT (supra). Tribunal. Hyderabad Bench held as under (headnote): Chargeable interest--Financial company/credit institution--Interest from sister concerns, hire charges etc.--Assessee was engaged in the business of leasing, hire purchase finance and real estate--In the absence of any explanation supported with documentary evidence to show that hire purchase business which was apparently the principal business was in fact not the principal business, it has to be held that assessee was a 'financial company' and in turn a 'credit institution' --Interest income stated to be received by assessee from its sister concerns and included in the other income is covered by the definition of chargeable interest, attracting the rigours of the levy of interest-tax --Hire charges do not find mention in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire- purchase and leasing constitutes almost the same percentage. The P L a/c of the assessee company shows that hire purchase charges constitute a dominant portion of the assessee's income, i.e., hire purchase business is the principal business carried on by the assessee. There is no dispute for the Revenue that hire purchase charges cannot be said to be interest on loans and advances in any manner, unless the hire charges have resulted in the execution of agreements which are nothing but agreements for loans and advances. Hire purchase charges are not interest, according to the clarification Issued by the CBDT, of course, in the context of Sections 2(28A) and 194A of the IT Act, 1961. It is all the more clear that Circular No. 738, dt. 25th March, 1996. clarifies that hire purchase transactions are generally in the nature of financial transactions, but later the Board clarified that the intention of the parties is the dominant factor to decide whether the transaction falls within the ambit of hire purchase transaction or not. In other words, there is no dispute that hire purchase charges received are different from Interest received on loans and advances. Therefore, it is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of financial transaction. In this case statements of the customers were recorded who deposed that the assessee company had advanced loan for purchase of vehicles and that invoices were directly issued by the company in the name of hirer and thus vehicle stood owned by the hirer. In this case Tribunal held as under: The vehicles had already been registered in the name of the so called hirers and even the sale invoice had been issued In the name of the hirers, however, declaration form given in the so-called hire purchase agreement was just to ensure the recovery of the loan/advance along with interest thereon. The vehicles had already been owned or registered under the Motor Vehicles Act, 1988 in the name of the so called hirer. The delivery of the possession of the vehicles was not given by the assessee company, but it had been delivered directly by the dealers of the vehicle to the so-called hirers. The possession of vehicles had already been passed to the so called hirers without payment of any instalment. Therefore, as per the definition of hire purchase agreement under the Hire Purchase Act, 1972, it could only be said that this was only an act of advancing money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had only given the name of stock to create confusion, rather it was an advance/loan to the customers, which only was affecting the asset side of the balance sheet by reducing cash/bank balance and increasing advance/loan to the customers. Further, only the amount of advance had been taken in this stock and not the total value of motor vehicles financed, which further proved that the assessee was not dealing in hire purchase but it was a finance company giving advance on which interest was charged by the assessee company and such interest income had been declared as the revenue receipts in the P L a/c. The assessee company used to obtain from the customers, blank signed documents. Even terms and conditions for so-called hire were also signed blank. On those documents, except the signatures of the hirers/purchasers, all other columns were blank. The factual position showed that various documents were executed by the assessee company Just to safeguard the amount given on advance to the purchasers. In regard to the claim of the assessee company that it was registered with the RBI as a hire purchase company, merely because it was registered so with the RBI, the nature of transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the condition that on total payment of charges, the hirer shall have the option to get the vehicle transferred in his name. It was concluded that the transaction was in the nature of contract of hire purchase having an element of bailment as well as that of sale, therefore, the hire purchase transactions in the present case cannot be considered as transactions of money lending or advancing of loans, and therefore, such hire purchase transactions did not attract the provisions of Interest-tax Act. In Kirloskar Leasing Finance Ltd. (supra) it is held that the ownership is the deciding factor and where the equipment is sold and ownership is with the hirer, the agreement becomes a loan transaction and where the ownership is with the hiring company or with the leasing company and there is no sale of the equipment, it is a hire agreement and hire transaction or lease transaction. In Assti. CIT v. Visharad Automobiles Financiers (P) Ltd. (supra) it is held that the agreements being hire purchase agreements in accordance with the provisions of Hire Purchase Act, 1972 they could not be treated as financing agreements and hire charges could not be brought to charge under the Interest-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest and, therefore, do not fall within the definition of interest under Section 2(7) of the Act. The Tribunal has also observed that even the Board in its Circular No. 760, dt. 13th Jan., 1998 [see (1998) 144 CTR (St) 37 : (1998) 229 ITR (St) 42], had clarified that in the case of transactions which are in substance in the nature of hire purchase, the receipt of hire charges would not be in the nature of interest. The Tribunal, accordingly, disposed of the appeals in the following terms : Accordingly, instead of routinely treating all hire purchase transactions as mere financing transactions, the AO may be advised to examine each transaction in the above light and charge interest-tax in such of those transactions which are not in the nature of hire purchase. A careful reading of the extracts of the above circular divulges that all the hire purchase transactions cannot be construed as financing transactions and it is not open to the Department to levy tax on the hire charges resulting from genuine hire purchase transactions. It is the duty of the AO to separate the grain from the chaff by examining all the transactions separately with a view to draw a line between genuine hir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f had offered it to tax where the question of allowing it as not taxable. He also submitted that it is taxable as held in Bqjaj Auto Holdings Ltd. v. Dy. CIT (2005) 96 TTJ (Mumbai) 856 : (2005) 95 ITD 356 (Mumbai). 70. We have heard the parties and considered the rival submissions. It might be true that assessee had offered it to tax initially but he claimed it as not taxable and therefore the matter has to be examined on merits and to determine as to whether it is taxable under the Act. We find it is not taxable in the light of the decision in the case of Utkarsh Fincap (P) Ltd. v. ITO (supra) wherein Ahmedabad Bench of the Tribunal after considering the decision in the case of Federation of Andhra Pradesh Chambers of Commerce Industry and Ors. v. State of Andhra Pradesh [2001] 247 ITR 36 (SC). CIT v. Sahora India Savings Inwestment Corporation Ltd. (2003) 185 CTR (All) 136 : (2003) 264 ITR 646 (All) and following the decision in the case of Gujarat Industrial Investment Corporation Ltd. (2004) 89 ITD 520 (Del) [sic-Oriental Insurance Co. Ltd. v. Dy. CIT (2004) 82 TTJ (Del) 1084 : (2004) 89 ITD 520 (Del)] held that Interest on inter-corporate deposits are not chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that whether it was not a loan nor an advance and as to whether the amended definition of 'interest' under the Act was exhaustive or inclusive. In holding that the ICD is not an advance the Ahmedabad Tribunal also noticed that the meaning of term advance as understood in the commercial words and as stated under the title 'what is advance' in the following words: It was held in K.M. Mohammed Abdul Kadir Rowther v. Section Muthiah Chettiar [1960] 2 Mad. LJ 13 that 'advance' means literally a payment beforehand; in certain cases it may be a loan but it cannot be said that a sum paid by way of advance is necessarily a loan. In Raja of Venkatagiri v. Krishnayya Rao Bahadur AIR 1948 PC 150 at p. 155, it was observed that ordinarily an advance does not connote any idea of repayment. It is, therefore, clear that the word 'advance' used in Section 296 means an advance in the nature of a loan and not merely an advance as is understood in common parlance in the sense of payment of money beforehand and which is likely to become due at some future time. 72. It has also referred to Section 296 of Companies Act regulating loans to directors for book debt w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, which is not at all in the nature of interest on loans and advances. Reliance was placed on decision of the Madhya Pradesh High Court in the case of CIT v. State Bank of lndore [1988] 172 ITR 24 holding that this would not be covered in the definition of interest as given in Interest-tax Act. CIT(A) did not accept the contention of the assessee and held that: 5.2.1 I have carefully considered the matter. But to the extent that delayed payment do cover the interest on such delay and are relatable to the loans and advances which are subject to interest-tax, and there being no finding of the Jurisdictional High Court in the matter or of the learned Tribunal, Ahmedabad, in the matter. I uphold the finding of the AO. 77. The submission of the assessee is that interest from delayed payment from debtors is not Interest on loans and advances and hence is not exigible for interest-tax. Reliance is placed on the following decisions : (a) CIT v. State Bank of Tavancore [1997] 228 ITR 40 (Ker.), (b) CIT v. State Bank of Indore (supra), (c) State Bank of Hyderabad v. Dy. CIT (1998) 61 TTJ (Hyd) 678 : (1998) 66 ITD 464 (Hyd). (d) G.E. Capital Transportation financial Services Ltd. v. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory powers of stringent character and, therefore, the practice gets established that the makers handover the overdue bills to the bank for recovery. It is thereafter that the bank sets in motion. In other words, what is undertaken by the bank is the recovery of the amount covered by the bill and in regard to which, by virtue of Section 32 of the Negotiable Instruments Act, 1881, a statutory liability is created with regard to the prompt payment. The details that are available in the context would show that the origin of the amount which is the subject matter of an overdue bill gets snapped. In other words, the moment the maker presents the overdue bill to the bank for recovery, it becomes a document negotiable in itself on its own strength empowering the bank to effect recovery and creating the liabilities of the parties as regards prompt payment thereof. In such a situation, ignoring the intermittent acrobatics as to whether the amount can be understood as interest or could continue to have the character of its description as compensation in accordance with the provisions of Section 32 of the Negotiable instruments Act, 1881, would be wholly unnecessary, at least for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transaction, income was not chargeable to interest tax. Similarly in the case of BFIL Finance Ltd. v. ITO (supra), Mumbai Bench of the Tribunal with regard to the interest on delayed payment on account of bill discounting transactions, hire purchase instalments and lease rental payments held that The term 'interest' has been defined under Section 2(7) of the Act. The Supreme Court, various High Courts and the various Benches of the Tribunal have extensively considered and analysed the definition of 'interest' in various cases and have held that only the interest on the loans and advances is chargeable under the Act. As the expression 'means and includes' is used in the definition of 'interest' it is an exhaustive definition and cannot bring all receipts in the nature of interest under its purview. In the instant case, the overdue interest was against the delayed payments on account of bill discounting transactions, hire purchase instalments and lease rental payments. Thus, it was clear that this overdue interest was in the nature of the compensation for damages caused to the assessee due to the delayed payments. Hence, the overdue interest earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans and advances and, consequently, the provisions of the Act would not apply to the instant case. 82. In these circumstances, we hold that interest on delayed payments would not be an interest on loan or advance and therefore would not be includible in the chargeable interest under the Interest-tax Act. Other interest 83. The next dispute is for considering other interest of Rs. 3,66,184 as income liable for interest-tax. It is submitted that the same is not at all interest on loans and advances. It is amount from customers and employees including delayed payments. This includes (i) Rs. 2,56,352 being income from LPG connection and C G Kits given, (ii) Rs. 3,624 being the interest on deleted (delayed) payment by parties, (lii) Rs. 35,023 being interest from employees and (iv) Rs. 41,055 being income from advance against fixed deposit. The assessee also disputes bills discounting amount of Rs. 1,48,74,208. It is submitted that this is not in the nature of interest and loans and advances. The above amount is very meager and it is not forming part of principal business of the company and hence it was submitted that the same should be excluded. 84. The CIT(A) did not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly. 88. Now we come to IT appeals. The first common ground in IT appeals is regarding assessee's claim for bad debts being Rs. 2,52,41,464 in assessee's appeal for asst. yr. 2001-02 in ITA No. 35/Ahd/2005, Rs. 12,52,424 in Revenue's appeal for asst. yr. 2001-02 in ITA No. 515/Ahd/2005 and Rs. 2,71,07,143 in assessee's appeal for asst. yr. 2002-03. Briefly stated facts of the case are that the assessee company is claimed to be a finance company engaged in the business of financing industrial/commercial enterprises and other customers by way of leasing, hire purchasing, bills discounting, inter corporate deposits, investments etc. The income of the assessee is therefore, by way of lease rent, hire charges, discounting charges, interest and dividend which is offered to tax as income from business. The assessee company is also said to be registered as non-banking financial company (NBFC) by the RBI under Non-Banking Financial Companies Act, 1997. 89. First ground and third ground are interconnected and revolve around issue of disallowance of bad debts and provision for bad debts. The assessee in its return of income claimed bad debts of Rs. 2,71,64,237 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 12,11,182 was for ear hire purchase finance and the outstanding amount wrillen off was the principal outstanding amount only. Further, there were few home appliances finance written off amounting to Rs. 41,242 towards principal outstanding amount only. Hence, there was no interest portion written off in these cases. With regard provisions of Section 36(2) of the IT Act, assessee replied that the amount written off includes money lent in the ordinary course of business of banking or money lending which is carried out by the assessee. As you are aware that the company is an NBFC, which is duly registered with RBI under Section 451A of the Banking Regulation Act and hence the principal amount written off is also available as deduction. 90A. The AO. however, did not accept the explanation of the assessee and held that as per the provisions of Section 36(2) the bad debts have to be taken into account in the P L a/c for the previous year or any other earlier previous years, and therefore, the claim, of the bad debts cannot be allowed. The contention of the assessee that it being registered as NBFC with RBI and that as per Section 36(2) the money was lent in the ordinary course ; of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de out of the deposits received by the appellant itself from various companies including the parent company. Such receipt of advances/deposits and further advancement of the deposits in other concerns is not the regular business of the appellant: the alternative plea of the appellant's representative in respect of these items that the same may be considered as business loss under Section 28 of the IT Act cannot be accepted. No evidence had been adduced by the appellant company before the AO except that in the case of Mafatlal Industries Ltd., the amounts have been written off since the said company has gone into BIFR and the amounts have been written off in the books. In respect of Overseas Synthetics Ltd. and Precision Fasteners Ltd. deduction is claimed on the basis of amounts written off in the books. Merely writing off in the books of account would not make the claim as business expenditure and also the fact that the final outcome of the claim of the appellant in respect of Mafatlal Industries Ltd. whereby proceedings are pending with BIFR has not reached finality. In view of the same, the alternative plea of the appellant under Section 28 can also not be accepted in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the appellant has not lent money to the debtor but the asset has been given to the customer from whom instalments are being recovered towards principal and interest. The ownership of the asset remains with the appellant. Therefore, it cannot be equated with the business of banking or money lending and the principal amount cannot be termed as money lent in the ordinary course of business of banking or money lending. Every finance business cannot be termed as banking or money lending business. The appellant has also not given the bifurcation of amount of write off into principal and interest and has not shown as to how the interest income, if any which is written off has been taken as income in earlier year. The onus was on the appellant which has not been discharged. Considering these facts and reasons given by the AO, I find that the conditions of Section 36(2) of the IT Act are not fulfilled and therefore AO was justified in disallowing the claim of bad debt of Rs. 1,20,45,621 which is hereby confirmed. Accordingly, this ground of the appellant is dismissed. 93. The contention of the assessee Is that the company Is a finance company and as per the requirements of RBI, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its debts in respect of Mafatlal Industries Ltd. and Precession Fasteners Ltd. the amounts relate to various advances/deposits made by the appellant company which have been made out of the deposits received by the appellant itself from various companies including the parent company. Such receipt of advances/deposits, the advancement of the deposits in other concerns is not the business of the assessee and we have held that in interest-tax appeals that these are not loans or advance, these cannot be allowed as bad debts arising in money lending business of the assessee. The alternative plea of the assessee for allowance as business loss under Section 28 of the IT Act cannot also be accepted in absence of any business in this activity and also in absence of evidence brought before the AO except that in the case of Mafatlal Industries Ltd., the amounts have been written off since the said company has gone into BIFR and the amounts have been written off in the books. Merely writing off in the books of account would not make the claim as business expenditure and also the fact that the final outcome of the claim of the appellant in respect of Mafatlal Industries Ltd. whereby proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books. It became bad and was allowed as deduction by observing that it was not the case of the Department that the inter corporate deposit placed with 'SW' was for some personal reasons. The inter-corporate deposits are quite common and corporate houses accommodate each other on short-term basis on grounds of commercial expediency. If placing of inter-corporate deposits is in the normal course of business, the loss arising therefrom cannot be anything else but arising in the usual course of business. It was the contention of the assessee that the debt due from 'SW had become irrecoverable. Further the interest accrued on this very inter-corporate deposit was also claimed as a bad debt and the AO had also allowed the same. Therefore, considering the facts of the case, the claim of the assessee for deduction of Rs. 1 crore was to be allowed. These cases are of no help to the assessee. That is not the situation here and we have held that deposits are not loans or advances aforesaid. 96. In respect of bad debts claim in hire purchase business which is though, one of the main business of the assessee, the claim under Section 36(l)(vii) r/w Section 36(2) cannot be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same have been disallowed. However, the AO worked out proportionate interest expenses amounting to Rs. 22,07.840 to be disallowable and added back to total income. The AO further held that for the purpose of making investment and thereafter control of investment as well as purchase, sale of shares, assessee has used its office and its staff, the proportionate administrative expenses and employees cost are to be disallowed, which is estimated to be Rs. 1,20,000 and disallowed. 100. The assessee being aggrieved preferred first appeal, where the CIT(A) deleted disallowance of interest of Rs. 22,07,840 and restricted the administrative and other expenses to Rs. 60,000. The relevant observations of the CIT(A) in respect of administrative expenses, for which the assessee grieved and came up before us are as under: The second part of disallowance under Section 14A relates to Rs. 1,20,000 @, Rs. 10,000 per month for 12 months by correlating that expenditure relates to earning of income which is tax free. In this respect having regard to the total investments made of Rs. 12.17 lacs and tax free income earned of Rs. 98,716, 1 would consider it reasonable and fair that disallowance of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. Accordingly, this ground is not admitted. However, if there is any error on facts on record, the appellant is free to file petition under Section 154 of the Act. 103. The decision of Madras High Court in the case of T.N. Power Finance Infrastructure Development Corporation Ltd. v. Jt. CIT [2006] 280 ITR 491 is on the issue and decides it against the assessee by holding as under: Merely because the RBI has directed the assessee to provide for non-performing assets, that direction cannot override the mandatory provisions of the IT Act contained in Section 36(1)(vii) which stipulate for deduction not exceeding 5 per cent of the total Income only in respect of the provision for bad and doubtful debts which are predominately revenue in nature or trade related and not for provision for non-performing assets which are of predominately capital nature. The assessee was not entitled to deduction, in view of the Explanation to Section 36(1)(vii) which says that the provision for bad and doubtful debts made in the accounts of the assessee is not an allowable deduction. 104, Similar is the decision of the Tribunal decision in the case of New India Industries Ltd. v. Asstt. CIT i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iple of apportionment of expenditure will apply, because there will be no nexus between the expenditure attributable to the venture not forming an integral part of the business and the expenditure sought to be deducted as the business expenditure of the assessee. Accordingly, the AO held that assessee made investment of Rs. 319,93 lacs and the own funds available with the assessee were only Rs. 2,100.32 lacs. The assessee had borrowed funds of Rs. 1,730.88 lacs and the total funds available were Rs. 3,831.20 lakhs and held that proportionate interest expenses amounting to Rs, 22.07,840 is held to be disallowable and added back to total income. 107. This action of the AO was challenged before the CIT(A), who deleted this addition by following observations and findings: SI No, Particulars Investment mode (Rs. in lakhs) Income exempt (Rs.) Income offered (Rs.) 1. Investment in Government securities (as required by RBI) 307.24 37.65,701 2. Investment in shares (net) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound fault with. The figures shown above which also reflected in the relevant balance sheet do not indicate that the investment made by the assessee are out of borrowed funds, this being so, there is no reason that warrants for interference of the order of the CIT(A) on this issue, which is accordingly upheld, and this ground of Revenue is dismissed. 109. As regards non-inclusion of lease income of Rs. 4,44.367 in respect of various assets given on lease, it is contended that since in asst. yr. 1996-97 depreciation has not been granted on certain assets given on sale and lease back, the income thereof should not be considered as lease income. The same is of capital recovery and the AO has not discussed or granted the same. 110. The CIT(A) however directed the AO to give consequential benefits as per the earlier order for asst. yr. 1996-97. In view of this issue has go to back light of the fact that similar issue pending for decisions, which has to be decided accordingly. 111. In assessee's appeal for asst. yr. 2002-03 the other dispute is with regard to disallowance of consultancy fees of Rs. 15,77,350 paid to Ernst and Young. The AO disallowed the claim of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and effective functioning of GGGL and the assessee company i.e. the group as a whole. This was the underlined principle of the study. As a result the Ernst and Young was asked to submit report regarding the restructuring of the assessee company so that operations of the group become more efficient and effective. The steps suggested by consultant in its report included amalgamation of the assessee company with GGCL, demerger sale of the business of leasing etc. in addition to several other steps. Had the objective been to improve the efficiency and effectiveness of assessee company only, not of the group then Ernst and Young would have not suggested the amalgamation or sale of business as the options at all. It was not underlined principle of study at all that the assessee company would remain in existence. In such a scenario it is not difficult to understand for whose purpose the study was meant. Obviously, at least, not for the purpose of assessee company. (ii) Although payment might have been made by the assessee company, it cannot be a deciding factor. No company can be supposed to claim an expenditure for conducting a study for its extinction. For claiming an expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by hand showing C/o GGCL. As this study was not commissioned by the appellant company, this expenditure has nothing to do with the appellant. This expenditure has not been incurred wholly and exclusively for the carrying on business of the appellant. Therefore, considering the reasons given by AO and facts of the case, AO was justified in disallowing the claim of the appellant, which is hereby confirmed and the ground of the appellant is rejected. 114. We have heard the parties and considered the rival submissions. The assessee is subsidiary of Gujarat Gas Company. The report was prepared by a firm of chartered accountants, Ernst and Young on the direction of GGCL for amalgamation and merger for efficient and effective functioning of GGCL and group companies. The charges bill was originally prepared in the name of GGCL, though later on the name of appellant company has been inserted by hand showing C/o GGCL. As this study was not commissioned by the assessee company, this expenditure does not relate to them and has nothing to do with the assessee. It could not be said to have been incurred wholly and exclusively for the carrying on business of the assessee. These findings we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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