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TMI Blog2013 (3) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,858/- was arrived by reducing the warranty provision of Rs. 10,74,22,129/- for the relevant previous year from the total provisions of Rs. 13,90,60,987/- for earlier years. As per the assessee, provisions made for earlier years were disallowed by the Hon'ble Income Tax Settlement Commission by their order in SA Nos. 600/III/57-2003-IT and 6000/III/51-2004-IT dated 24.3.2008, wherein it was held that such provisions were contingent liability and hence not allowable. Settlement Commission for this purpose placed reliance on the decision of Hon'ble Madras High Court in the case of CIT v. Rotork Controls India Ltd. (293 ITR 311). As per the assessee, the order of Settlement Commission was received after the return for impugned assessment year was filed and there was no time available with it for filing a revised return. Therefore, through a revised computation, it had reversed the earlier provisions which were disallowed by the Settlement Commission and this reversal resulted in the income of Rs. 3,16,38,858/- earlier offered being withdrawn. Assessee requested the A.O. to consider the revised computation while completing assessment. However, the A.O. was of the opinion that this wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im before the A.O. for reversal of excess provision written back for the impugned assessment year. According to him, ld. CIT(Appeals) was absolutely justified in allowing the claim in view of the circumstance of the case and in view of the extensive powers enjoyed by him in his appellate jurisdiction. 8. We have perused the orders and heard the rival submissions. Income Tax Settlement Commission in its order dated 24.3.2008 at para 3 has given a clear finding that warranty provision was a contingent liability and for this reliance was placed by the Settlement Commission on the decision of Hon'ble jurisdictional High Court in the case of Rotork Controls India Ltd. (supra). No doubt, the said decision of Hon'ble jurisdictional High Court stands now reversed by the decision of Hon'ble Apex Court in the case of Rotork Controls India P. Ltd. v. CIT (314 ITR 62). But, nevertheless, Apex Court's decision dated 12th May 2009 was not available either to the assessee or the Settlement Commission or the A.O. The assessee, prior to the receipt of the order of the Settlement Commission, in its original return had reversed the excess provision made for the earlier years against the provision f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,48,570/- paid to one Shri Pawar. 11. Short facts apropos are that Assessing Officer, during the course of assessment, received a reference from Additional Commissioner of Income Tax, Sattara Range, Sattara, that one Shri D.H. Pawar had entered into certain transactions with assessee company and a sum of Rs. 3,93,48,570/- was shown by the said Pawar as advance received by him from assessee. A.O. put the assessee on notice as to why the amount, which had been claimed by the assessee as expense, should not be disallowed, when Shri Pawar had shown it as only advance. Reply of the assessee was that it had shown the amount as expenditure based on the invoices raised by Shri Pawar. Assessee also produced some copies of invoices. Assessing Officer noted that the assessee could produce invoices only for Rs. 2,73,28,500/-. In any case, according to him, since Shri Pawar had treated the amount of Rs. 3,93,48,570/- as advance in his hands, the claim could not be allowed as revenue expenditure for the assessee. He made an addition of Rs. 3,93,48,570/- on protective basis. 12. In its appeal before ld. CIT(Appeals) , claim of the assessee was that it had received invoices from Shri D.H. Pawar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. shall give an opportunity to the assessee for proving its case. 16. Ground No.3 of the Revenue is allowed for statistical purpose. 17. Vide its ground No.4, Revenue's grievance is that ld. CIT(Appeals) deleted a disallowance of interest of Rs. 1,62,14,635/-. 18. Short facts giving raise to this issue are that assessee had claimed interest payments of Rs. 6,03,11,000- on fixed loans and Rs. 42,65,000/- on other loans, in its Profit & Loss account . From the balance sheet, it was noted by the A.O. that assessee had given loans and advances to its subsidiary companies Rs. 21,78,46,000/-. Assessee was required to explain why corresponding interest should not be disallowed for investment made in subsidiary company out of loans. Reply of the assessee was that loans and investments were made from its own funds and were not made out of borrowed capital and for the relevant previous year, it had income of more than Rs. 240 Crores. As per the assessee, the subsidiary companies, where assessee had invested, were incorporated in Karnataka to facilitate assessee's business interest. However, A.O. was not appreciative. According to him, the subsidiary companies had a separate role of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterests of the assessee. There is also no dispute that the taxable income of the assessee for assessment year 2001-02 to 2006-07 totalled to more than Rs. 317 Crores. Assessee thus had more than sufficient own funds with it for giving advance of Rs. 21,78,46,000/-. In the case of S.A. Builders (supra), Hon'ble Apex Court clearly held that "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of his business. Once it is established that there was nexus between the expenditure and purpose of business, Hon'ble Apex Court held, revenue could not assume the role of the businessman to decide what was reasonable expenditure having regard to the circumstances of the case. We are, therefore, of the opinion that ld. CIT(Appeals) was well justified in relying on the decision of Hon'ble Apex Court in the case of S.A. Builders (supra) for deleting the disallowance. 23. Ground No.4 of the Revenue stands dismissed. 24. In the result, appeal of the Revenue for assessment year 2006- 07 is partly allowed for statistical purpose. 25. Now, we take up Revenue's appeal for assessment year 2005- 06. Two issues have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned assessment year was advance part only out of total sum of Rs. 5,95,43,410/- and balance stood offered for assessment year 2004- 05. According to assessee, the whole of sum of Rs. 5,95,43,410/- was considered as a part of income for assessment year 2004-05 and it was well within its right to write-off a part of it as bad for the impugned assessment year. Vis-à-vis the other advances, there were no contentions made by the assessee before ld. CIT(Appeals) . Ld. CIT(Appeals) was of the opinion that the sum of Rs. 1,00,92,401/-, being advance given to Sambhav Steel Distributors stood already offered by the assessee as income before Settlement Commission and therefore, addition in this regard was not called for in the impugned assessment year. In other words, ld. CIT(Appeals) held that such an amount was allowable as bad debt for the impugned assessment year. He, therefore, deleted the disallowance of Rs. 1,00,92,401/- out of the total disallowance of Rs. 1,06,98,381/- made by the A.O. 30. Now before us, learned D.R., strongly assailing the order of ld. CIT(Appeals) , submitted that assessee had, before Settlement Commission offered Rs. 5,95,43,410/- as income and was now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- and thus there was short disclosure of Rs. 33.70 lakhs. In this regard the AR pointed out that the amount of Rs. 2,32,40,000/- is no doubt the total purchases from Sambhav Steel Distributors for the year ended 31.3.2001 reflected in the statement of account. However, it is explained that the total includes opening balance of Rs. 10,60,036/- and reversal of purchases of Rs. 25,01,970/- as returned. Hence the entire purchase of steel of Rs. 1,96,79,595/- is offered for Asst. Year 2001-02 which is the correct amount. On verification the offer made by the applicant is correct. Hence, no adjustment is required. In addition, the applicant has offered Rs. 5,95,43,410/- in AY 2004-05 as additional income. The total payments to M/s Sambhav Steel Distributors being Rs. 15,01,30,454/-, the entire sum is offered. (Rs. 9,05,87,044 + 5,95,43,410/-) The above facts being correct, there is no need to make any adjustment on this account." Now the claim of the assessee is that out of Rs. 5,95,43,410/-, a sum of Rs. 1,00,92,400/- was only an advance and since this amount continued to appear in its balance sheet, it was required to effect a write-off and thus the claim of bad debt was to be al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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