TMI Blog2014 (7) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... 36(1)(vii) r.w Explanation – Held that:- There could be a case where the provision amount which stands reduced from the amount of ‘sundry debtors’ in the balance-sheet as at the year-end, is not so for presentation purposes only, and in fact not carried forward to the following year in the accounts, and the debtors carried forward at the reduced, net amount so that the it is in effect and substance only a write off as decided in Vijaya Bank vs. CIT [2010 (4) TMI 46 - SUPREME COURT] - No explanation toward claim of a provision having been rendered by the assessee at any stage, thus, the penalty is confirmed – Decided against Assessee. Disallowance for rent paid – Held that:- The Revenue’s case in the penalty proceedings as not tenable - T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act amounting to ₹ 70,689/-; ii. disallowance regarding provision for doubtful debts at ₹ 1,25,393/-; iii. proportionate interest paid, amounting to ₹ 15,96,499/-, disallowed on interest-free loans advanced to directors; and iv. disallowance for rent paid at ₹ 1,20,000/-. Placing a copy of the order by the tribunal in its own case for the relevant year (in ITA No.5091/Mum/2011 dated 25.09.2013) on record, he continued that the matter in the quantum proceedings had travelled to the tribunal, which, while restoring the matter back to the file of the Assessing Officer (A.O.) with a direction qua the disallowance of interest relatable to interest-free loans to directors (at ₹ 15,96,499/-), confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.26 lacs. It having, besides own funds, borrowed funds (outstanding as on 31/3/2005 at ₹ 527.26 lacs), incurring interest at ₹ 103.55 lacs, the same stood disallowed on a proportionate basis u/s.14A of the Act. The assessee s balance-sheet for the year ending 31/3/2005 (as well as 31/3/2004), forming part of the record (PB pgs. 19-38), stands perused. The assessee s share capital is at ₹ 175 lacs. However, as against this, it has unabsorbed losses at ₹ 440.69 lacs and ₹ 424.30 lacs as at 31/3/2005 31/3/2004 respectively, so that in effect the entire capital stands wiped out by losses. As such, the entire assets, including investment in shares, of the assessee-company stand financed by borrowed capital, on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010] 323 ITR 166 (SC). However, this does not appear to be so in-as-much as the provision reduced (from the amount of total Debtors) in accounts (Rs. 3,86,350/-) is higher than the amount of provision debited to the operating statement (profit and loss account) for the year, so that the provision made and claimed is carried forward from year to year under a separate account, in which case it is only a provision, precluded for deduction u/s.36(1)(vii). No explanation toward claim of a provision having been rendered by the assessee at any stage, we confirm the levy of penalty subject to it being so, for which the A.O. shall cause verification, in terms of our delineation as above. That is, subject to the A.O., upon verification, confirming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee before the tribunal. The facts of the case as recorded in the assessment order reveal that the disallowance had been made toward rent to a director at the rate of ₹ 10,000/- per month. Further, an interest-free deposit of ₹ 100 lacs had also been made in respect thereof. The disallowance had been effected by the Revenue by merely doubting the transaction; the assessee being unable to furnish the copy of the agreement or any evidence of the ownership of the said property. We find the Revenue s case in the penalty proceedings as not tenable. This is as a disallowance u/s. 40A(2)(a) could only be of an expenditure that is otherwise allowable, so that there could be no doubt with regard to the assessee having rented a house ..... X X X X Extracts X X X X X X X X Extracts X X X X
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