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TMI Blog2012 (8) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... made addition of Rs. 57,19,206/- being discount allowed by the State Government on early repayment of deferred sales tax, loan holding the same to be income of the assessee for the year and not a capital receipt as claimed by the assessee. In appeal, the learned CIT(A) following the order of his predecessor on this issue for Assessment Year 2004-05 upheld the action of the AO. We find the Tribunal in assessee's own case in ITA No.1384/PN/2007 for the assessment year 2004-05 has deleted the addition by holding as under : "We have considered the rival submissions carefully. It was a common ground between the parties that identical issue has been adjudicated by the Larger Bench of Tribunal in the case of Suzler India Ltd. 42 SOT 457 (Mum) (SB), a copy of which has been placed on record. As per the Special Bench, the difference between the payment made against the future liability on account of deferred sales-tax is a capital receipt and could not be treated as a remission of cessation of liability assessable under section 41(1)(1) of the Act. As a result thereof, the addition of Rs. 67,34,793/- made by the Assessing Officer in the instant case by invoking the provisions of section 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) is reproduced below : "After careful consideration, I am not inclined to accept the contention of the Appellant. Firstly, the Appellant has failed to establish the connection of this expenditure with the current year. Secondly, even if one tries to examine the allowability of this amount as bad debts written off, it remains to be established that the amounts representing these sundry balances were taken into account in computing the income of the appellant in any assessment year. Under these circumstances, the amount of Rs. 1,20,951/- does not appear to qualify for deduction. Accordingly, the disallowance of Rs. 1,20,951/- is confirmed." 10. In respect of the Assessment year under consideration, however, the learned Authorised Representative submitted that out of Rs. 8,44,835/- a total of Rs. 8,20,390/- pertained to account reconciliation between the Appellant company and M/s. Bajaj Auto Ltd. In view of this, in exercise of powers of CIT(Appeals) under section 250(4) as explained by the Hon'ble Bombay High Court in the case of Smt. Prabhavati S. Shah 231 ITR 1 (Bom), the Appellants were asked to submit reconciliation of account confirmed by M/s. Bajaj Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge etc., Since the amounts were not recovered, the same have been written off as irrecoverable. There is no dispute that the amounts have indeed been written off as irrecoverable, and the other factual aspects brought out by the assessee are also not negated. Therefore, in our considered opinion, the lower authorities were not justified in rejecting the claim of the assessee keeping in mind the judgment of the Hon'ble Supreme Court in the case of TRF Ltd. (Supra). The order of the Commissioner of Income-tax (Appeals) is accordingly set-aside and the Assessing Officer is directed to delete the impugned addition". 7. Further, in view of the decision of Hon'ble Supreme Court in the case of TRF Ltd. (Supra) after 01-04-1989 the assessee has only to establish that the debt was written off. Since in the instant case, the debt admittedly has been written off by the assessee in the profit and loss account, therefore, respectfully following the decision of the Tribunal in assessee's own case and in absence of any contrary material brought to our notice by the learned DR against the findings given by the CIT(A) as well as the order of the Tribunal in assessee's own case we find no infirmity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the case of M/s. Triveni Engineering Works the guarantee commission was given @ 2% and was paid only to one of the Director and the other Director was not given any commission although he also stood as a Guarantor. In the case of the assessee the Guarantee commission was 0.25% and commission was given to both the Directors who stood as Guarantor. The assessee also relied on various other decisions. 12. Based on the arguments advanced by the assessee, the learned CIT(A) deleted the above by holding as under : " 17. I have given careful consideration to the matter. In my view, the Appellants have made a convincing case for the allowance of the said amount. I am in agreement with the learned AR of the Appellants that the mere fact that a benefit on allowance has not been paid or allowed to the Directors of a company in earlier years, but is allowed in a subsequent year when the company is in better economic health does not ipso facto make the payment excessive on unreasonable. The AO has at two places in his order mentioned that the commission is very heavy. However, as the learned AR of appellant pointed in his written and oral submissions, the commission has been worked ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The banks insisted on it and the directors and the substantial shareholders had to make allowance for it. There is no basis for the assumption of the ITO that the guarantee was demanded by the banks as a kind of hostage from the directors. On the other hand, the guarantee demanded was an additional security in case of the assets of the private limited company or public limited company are lost due to vicissitudes of business. The personal guarantee by the directors in effect pledges their personal assets against such contingency. It is a part of banking wisdom to insist on this kind of security. When the private limited company gets this assistance from its directors, it is but commercially proper that the directors should be compensated for the risk that they are running. It is clear from the report of Synthetics and Chemicals that although in that case the directors were not paid the guarantee commission, the bank clarified that if such a guarantee was not given the rate of interest would be increased and there would be restrictive covenants in the loan agreement. In other words, what the company loses by way of guarantee commission, it would gain by saving of interest and avoida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Factories and Oil Mills (Supra) apart from relying on the following decisions : 1. Inspecting Asst. CIT Vs. Ayurved Sevashram Ltd., 14 TTJ (JP) 36. 2. CIT Vs. Metalizing Equipments Co. P. Ltd., 92 TTJ (JD) 3. Ravikant Rula Vs. ITO 17 TTJ 382 (Mad) We find the learned CIT(A) following the decision of Hon'ble Allahabad High Court in the case of L.H. Sugar Factories (Supra) deleted the addition. In our opinion, the order passed by the learned CIT(A) deleting the disallowance of guarantee commission is a reasoned one under the facts and circumstances of the case. The learned DR could not controvert the findings given by the learned CIT(A). Under these circumstances, we find no infirmity in the order of the CIT(A). Accordingly the same is upheld. The ground raised by the Revenue is accordingly dismissed. ITA No. 1269/PN/2010 (by Assessee-A.Y. 2006-07) 1. The Ground of appeal no. 1(i) & (ii) by the assessee reads as under.. "1 (i) The learned A.O. erred [and Hon.CIT(A) erred in upholding] in disregarding the fact that the Income Tax Department itself has treated the sales tax liability as having been fully paid in terms of various circulars issued by CBDT. (ii) The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans on which interest had been incurred by the assessee. 3. Whether on the facts and circumstances of the case and in law the Ld CIT(A) erred in taking into consideration that the funds of the assessee are from a common pool and there was no exclusively pertaining to capital expenditure on purchase of equipment". 4. After hearing both the sides, we find the assessee received Dividend income of Rs. 3,56,032/- which it claimed as exempt. The AO noted that the assessee has made investment in shares and securities to the extent of Rs. 87,07,300/-. From the balance sheet as on 31-03-2006 he observed that the assessee has an outstanding loan of Rs. 115.91 Crores on which it has paid interest to the tune of Rs. 5.85 Crores. Therefore, according to the Assessing Officer interest attributable to the funds utilised for making investment to earn the tax free dividend cannot be allowed as deduction within the meaning of provisions of section 14A . He, therefore, disallowed an amount of Rs. 4,39,315/- being proportionate business funds utilised for earning exempt income and not exclusively utilised for the purpose of business. 5. In appeal, the learned CIT(A) following the decision of Specia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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