TMI Blog2013 (12) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-3-2013 - Mukul Kr Shrawat And T R Meena, JJ. For the Appellant : Shri D. P. Gupta, CIT D.R. For the Respondents : Shri S N Soparkar, Sr. Adv. With Shri Himanshu Shah ORDER:- Per: T R Meena: These are parallel appeals filed by the Assessee and Revenue in ITA Nos. 1149/Ahd/10 1207/Ahd/12 respectively which have emanated from the orders of CIT, Ahmedabad-III, Ahmedabad, dated 26.03.2010 and CIT(A)-XI, Ahmadabad, dated 23.03.2012 respectively for assessment year 2005-2006. Both appeals were heard together and are being disposed of by way of this common order for the sake of convenience. The sole ground of appeal of the appellant is against passing the order u/s.263 of the IT Act whereas Revenue s appeal is against dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income u/s.143(3) vide his order dated 17.12.2007. Thus, on this issue, the ld. CIT order is tantamount to change of opinion. On this issue i.e. Long Term Capital Loss and disallowance of interest in case of Satellite Management Service Pvt. Ltd. of Rs. 6,99,25,355/-, the ld. A.O. had not made assessment without proper inquiry, the order is erroneous and prejudicial to the interest of revenue, as held in case of Malabar Industries Co. Ltd. vs. CIT 343 ITR 83 (SC). Thus, we hold this revisionary order passed u/s. 263 is valid. ITA No.1207/Ahd/2012 (Revenue s appeal) 3. The ld. A.O. passed the order u/s.143(3) r.w.s. 263 for A.Y. 05-06 on 15.12.2010 ad he made addition is as under: i. Disallowance of bad debts Rs.44,48,51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of charging interest during the year. The financial position of Sunrise Fincap Pvt. Ltd. became worse and precarious, therefore, it was not able to pay the principal amount and interest. Similarly, Satellite Management Services Ltd. was also not in a position to repay principal amount and interest as it became a sick company. The assessee had further contended that expenditure couldn t be disallowed merely because certain loss became bad and doubtful. The assessee s reply was not found convincing to the A.O. and held that relinquishment of interest chargeable ICD of above that companies mentioned to diversion of income bearing fund to non-interest bearing fund. Thus, he charged interest @ 13% on the two deposits totally to Rs.8,49,25,355 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttled proposition of law that to claim allowable interest u/s.36(1)(iii), following conditions should be fulfilled. (i) The Assessed must have borrowed money (ii) The interest should have been payable (iii) Borrowing should be made for the purpose of business. 4.5 Perusal of the assessment order reveals that the A.O. has not analyzed these conditions and the A.O. had miserably failed to bring any material on record to prove that above said conditions were not fulfilled. It is mentioned by the A.O. in the assessment order that relinquishment of interest on ICD amounted to diversion of interest bearing funds to sister concern as non-interest bearing funds. The methodology applied by the assessing officer does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al only Rs.18.25 lacs, all funds available with it, are from loans which had been mostly given by the appellant in form of advances to the sister concern. Therefore, he requested to confirm the addition made by the A.O. 7. At the outset, ld. Counsel for the appellant contended that both the companies financial positions were very bad. Because of this, the appellant and these companies made an agreement dated 11.05.2005 (page no.35 to 38) to settle the account. They promised to pay principal on the condition that the interest during year is to be waived. All the evidences for bad financial position of both companies had been given before the A.O. He filed a paper book and claimed that the appellant company is engaged in the financial busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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