TMI Blog2012 (10) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the amount was advanced for earning profit, thus no reason to interfere in the order of CIT (A) on this account - against revenue. - I.T.A. No.99/Del/2011 - - - Dated:- 12-10-2012 - SHRI I.C. SUDHIR, AND SHRI T.S. KAPOOR, JJ. Appellant by : Shri Niranjan Kouli, CIT-DR. Respondent by : Dr. Rakesh gupta, Advocate Shri Ashwani Taneja, Advocate. ORDER PER TS KAPOOR, AM: This is an appeal filed by the revenue against the order of Ld CIT(A) dated 22.10.2010. The grounds raised by the revenue are as under:- 1. On the facts and circumstances of the case, Ld CIT(A) erred in law as well as on merits in deleting the addition of Rs.3,12,90,375/- made by the Assessing Officer on account of disallowance of speculative loss. 2. On the facts and circumstances of the case, the Ld CIT(A) erred in law as well as on merits in deleting the addition of Rs.30 lakhs which was made by Assessing Officer by disallowing interest being not incurred for the purpose of business and profession. 3. The appellant craves to amend, modify, alter, add or forego any ground (s) of appeal at any time before or during the hearing of this appeal. 2. The brief facts of the case are tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause of falling prices of pulses. Reliance was placed in the case of Hoosem Kasam Dada 52 ITR 171 wherein the Hon'ble Calcutta high Court had held that a transaction in which a contract for purchase and sale of any commodity is settled other than by delivery is a speculative transaction irrespective of whether the parties initially intended to give delivery or not. Similarly, the case law of CIT in Maya Ram Jia Lal 162 ITR 520 was relied wherein the Hon'ble Court held that compensation paid by the assessee for non completing the contract was speculative in nature within the meaning of section 43(5) of the Act. 4. Dissatisfied with the order, the assessee filed appeal before Ld CIT(A) and submitted as under:- a) That the assessee along with its group companies had made a total import of about 18 to 20 crores from M/s Agro Corp. International Pte Ltd. During the year under consideration, the assessee company could not honour two contracts by due date and the said contracts came to an end due to non performance. As a result the supplier claimed damages for breach of contract and company had also to make settlement for the breach of contract to safeguard its reputation in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces and has just referred to interest free advances and he has disallowed interest on an estimated basis without proving any discrepancy in the books. List of total advances along with the copy of accounts of sister concern were submitted to Ld CIT(A)and Ld AR submitted that company has neither paid any interest on credit balances of sister concern nor charged any interest on the debit balances. However, if the interest was to be calculated at 12% p.a. then the assessee company would have been required to pay net interest of Rs.1,02,207/-. 8. In view of the above, he submitted that ACIT has incorrectly stated that interest free advances were prejudicial to the interest of company. The Ld AR further submitted that a major portion of interest paid to bank was against import of pulses which do not fall within the section 36(1)(iii) of the Act. The rate of interest paid to foreign parties ranged between 4.4% to 6.7%. The Ld AR further submitted that company has paid total interest at Rs.4,27,413/- to banks on over draft limits at 11% per annum whereas it has earned interest of Rs.10,19,662/- from various parties and Rs.19,76,972/- from bank FDRs. Therefore, it was argued that inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds to demonstrate that own funds were given for the interest free loans. Therefore, he argued that disallowance made by A.O. was totally justified. 11. The Ld AR, on the other hand, argued that Ld DR should not be allowed to expand the scope of argument in view of judgment in the case of Mcrop Global P. Ltd. v. CIT (2009) 309 ITR 434 (SC). He argued that the case before Ld CIT(A) was a s to whether loss was speculative loss or business loss and as held in the case of DCIT v. Ms. Mayawati as reported in 135 TTJ 167 (Del.), there is limitation of power of Ld CIT(A) and therefore he argued that the Bench has to decide whether loss was of speculative nature or it was of business nature. He further argued that genuineness of loss was never questioned by A.O. The Ld AR then explained the chronology of events and stated that the breach of contract had happened on 11.7.2006 and 8.9.2006 in respect of two contracts and therefore the liability to pay damages occurred on breach of contract which was paid by the assessee in the form of credit notes placed at pages 23 24 of paper book and claim notes placed at page 25 of the paper book. The Ld AR further argued that the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he argued that loans were given out of overdraft limit (though on 31.03.2007 there was nil balance) and hence disallowance of interest was rightly made by A.O. 14. We have heard the rival parties and have gone through the material placed on record. We have noted that the first addition was made by A.O. on believing that loss was of a speculative nature and, therefore, was not allowable against the business profits. The genuineness of loss was never questioned by A.O., therefore, without going into the findings whether the loss was genuine or not, we are of the opinion that case of the assessee is covered by the case of sister concerns M/s. Orient Overseas Pvt. Ltd. wherein under similar facts and circumstances, the Hon'ble Tribunal had remitted the case back to the file of A.O. 15. Following the above Tribunal order, we also remit back the file to the office of A.O. who would decide this disallowance afresh. Needless to say that proper opportunity will be given to assessee of being heard. Therefore, ground no.1 of appeal filed by revenue is allowed for statistical purposes. 16. As regards second ground of appeal regarding disallowance of interest amount of Rs.30 lacs. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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