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2015 (11) TMI 1194 - ITAT AHMEDABAD

2015 (11) TMI 1194 - ITAT AHMEDABAD - TMI - Disallowance of prior period expenses” and “prior period salary" - Held that:- The rate of tax applicable upon the assessee in this assessment year remains the same. It has been reporting loss in the earlier years and in subsequent years. As far as taxability part is concerned, there is no substantial effect upon the assessee in this year because it show losses. Only effect is that the assessee can be exposed to penalty on account of reduction of loss .....

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ot? - Held that:- The conversion of interest into loan, and issuance of equity shares in lieu of interest payment being very basic similarity, therefore, does not amount to actual payment. in our opinion, Explanation 3C only prohibits an assessee for recognizing the actual payment of interest by converting its interest into loan or borrowings. In other words, if an assessee has interest liability, and he converts that interest liability in further loan, then that will not amount to payment of in .....

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isallowance.- Decided in favour of assessee.

Disallowance of expenses amortized under section 35D - Held that:- When in the first year no disallowance was made, and thereafter, in subsequent two years this 1/5th has been allowed, the AO is not justified to ask the assessee to establish its genuineness. Therefore, taking into consideration past history, we delete the disallowance. - Decided in favour of assessee. - ITA No.890/Ahd/2011 - Dated:- 24-7-2015 - SHRI G.D. AGRAWAL, VICE-PRESI .....

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essee has filed concise grounds of appeal, which are taken on record. 3. The ground no.1 is general ground of appeal, wherein, the assessee has pleaded that the ld.CIT(A) has passed order without appreciating the facts and submissions of the assessee. No specific arguments were advanced on this issue, rather, it is an ancillary argument in support of other grounds. Therefore, no specific finding is required to be recorded. 4. The ground no.2 and 3 are inter-connected. In these grounds of appeal, .....

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007. This notice was duly served upon the assessee. 6. On scrutiny of the accounts, it revealed to the AO that the assessee has claimed a sum of ₹ 4,62,427/- which includes ₹ 3,00,621/- under the head prior period expenses and ₹ 1,61,806/- under the head prior period salary . The ld.AO has disallowed the claim of the assessee on the ground that the assessee failed to demonstrate, how the incurrence of this expenditure have been crystallized during the accounting period relevant .....

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he learned counsel for the assessee alternatively contended that these expenses be allowed as business loss. In support of his contentions, he relied upon the judgment of the Hon ble Madras High Court in the case of Bank of Madura Ltd. CIT, 261 ITR 749. He also relied upon the judgment of the Hon ble Delhi High Court in the case of CIT Vs. M/s. Shree Ram Pistons and Rings Ltd., 220 CTR (Del) 404. 8. The learned DR, on the other hand, relied upon the orders of the Revenue authorities. She contend .....

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of the expenditure. His grievance is that this cannot be claimed in this accounting year, on the ground that these were not incurred in the accounting year relevant to the present assessment year. The rate of tax applicable upon the assessee in this assessment year remains the same. It has been reporting loss in the earlier years and in subsequent years. As far as taxability part is concerned, there is no substantial effect upon the assessee in this year because it show losses. Only effect is t .....

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dition of ₹ 60,79,265/-. 11. Brief facts of the case are that the assessee had taken loan from IDBI and LIC. The initial rate of interest was 17.75%. Since the assessee was in the initial stage of business, it had suffered loss. It had re-negotiated the rate of interest which was reduced to 14% from F.Y.2002-03. Accordingly, the revised liability towards interest was worked, and these financial institutions agreed to get paid for this amount of interest by way of equity shares of the respo .....

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ng any relief to the assessee. 13. Before us, the issue is whether the issuance of equity shares of the assessee-company to the financial institutions amounts to actual payment of interest liability or not. According to the assessee the liability of ₹ 60,79,265/- being the interest on term loan from IDBI and LIC has been shown as paid. It is no more outstanding in the accounts of the assessee. The amount is not due to IDBI and the LIC as per their account. The liability has not been waived .....

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ari Saran Singh, 191 ITR 83 (Allh.), Ramji Lal Rais Vs. CIT, 49 ITR 50 (All.) In these judgments, the Hon ble Courts have held that if a liability is discharged by way of money s worth, then it would tantamount to payment. 14. The learned DR, on the other hand, relied upon the order of the AO. 15. We find that the ld.AO has made reference to Explanation 3C attached to Section 43B of the Act and observed that conversion of interest into loan does not amount to payment of interest for the purpose .....

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ore, does not amount to actual payment. in our opinion, Explanation 3C only prohibits an assessee for recognizing the actual payment of interest by converting its interest into loan or borrowings. In other words, if an assessee has interest liability, and he converts that interest liability in further loan, then that will not amount to payment of interest under section 43B as per Explanation-3C. If an assessee has issued equity shares, which anyone can acquire, and it has a trading value, it wou .....

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