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The Asst. Commissioner of Income Tax Versus M/s Cineplex Pvt. Ltd. And Vica-Versa

2015 (11) TMI 1442 - ITAT BANGALORE

Addition on interest paid on unsecured loans - CIT(A) deleted the addition - Held that:- CIT(A) had considered the letters issued by the creditors demanding interest and threatening withdrawal of money for coming to a conclusion that the interest payment was a genuine allowable, business expenditure. There is no dispute that 50% of the total interest outgo pertained to preceding year. Assessee has also not disputed the claim of the revenue that there was no contract with the creditors for paymen .....

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that at least some of the records produced by the assessee before the CIT(A) were not before the AO. Just because AO was present at the time of proceedings before the CIT(A), we cannot say that requirements of Rule 46A of IT Rules stood satisfied. We are of the opinion that the issue therefore, requires a fresh look by the AO for verifying the allowability of the claim in accordance with law. We therefore, set aside the orders of the authorities below with regard to the allowance of interest ba .....

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, whether settled, require a detailed analysis before coming to a conclusion regarding the allowability of the claim made by the assessee. Unless and until such an exercise is carried out, it cannot be ascertained whether the claim is one of prior period expenditure or business expenditure incurred during the relevant previous year. In such circumstances, we are of the opinion that this issue also requires a fresh look by the AO. We therefore, set aside the orders of the authorities below and re .....

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ssessee respectively directed against an order dated 17-07-2013 of CIT(A), Mysore. The appeal of the revenue is taken up first for disposal. 2. The revenue has raised seven grounds of appeal of which ground 1,7 &8 are general in nature needing no specific adjudication. 3. Vide its ground no.2 to 4, grievance of the revenue is that the CIT(A) deleted an addition of ₹ 44,42,893/- made by the AO on interest paid on unsecured loans. As per the revenue, the CIT(A) had misinterpreted the jud .....

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t in the preceding assessment year, the assessee was required to explain. The explanation of the assessee read as under; "The following is the details of interest paid during the previous year interest @7%d on Unsecured loans Anand G Pai Rs.9,49,608.30 Anatha G Pai Rs.9,49,611.39 Subraya M Pai Rs.6,07,753.00 Sudhir M Pai Rs.6,99,263.00 Venkatesh M Pai Rs.6,07,754.00 Adlabs Films Ltd Rs.50,71,797.00 Rs.88,85,786.69 The tax was deducted at source on the interest paid, the same was paid on 07- .....

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4(SC), Himachal Pradesh High Court in the case of CIT Vs Himachal Pradesh State Forest Corpn.320 ITR 170(HP) and that of Allahabad High Court in the case of M/s Apollo Textiles Agency (2006) 283 ITR 591(All.) 5. However, the AO was not impressed by the above explanation. According to him, the loans were given by assessee's share holders and the interest payment was based on an inhouse arrangement. As per the learned AO, the assessee could not show any threat or dispute with the loan creditor .....

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entirely different. As for the judgment of Hon'ble Allahabad High Court in the case of M/s Apollo Textiles Agency(2006cadill) 283 ITR 591(Supra), learned AO was of the opinion that the question there was the liability of expenditure u/s 43B of the IT Act, 1961 on payment basis and had no relevance. He thus, held that interest claimed by the assessee for the period prior to 01-04-2009 could not be considered for allowance. The interest for financial year 2008-09 came to ₹ 44,42,893/-. T .....

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had just started. As per the assessee when threatened with withdrawal of the loans, its Board of Directors had decided to pay interest at the rate of 7% per annum w.e.f. 01-04-2008. Assessee also distinguished the facts vis-à-vis judgment of the Hon'ble Madras High Court in the case of Madras Fertilizers Ltd Vs CIT ( supra). 7. Learned CIT(A) after going through the submissions of the assessee was of the opinion that the assessee could produce letters from the share holders which pro .....

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sailing the order of the CIT(A) submitted that it was not a contractual liability. Assessee had never produced any contract which it had with the loan creditors that could show that there was any accrual of any interest expenditure. The claim was based on choice. No doubt, as per the learned DR, assessee had obtained letters from the loan creditors threatening withdrawal of the amounts unless the interest was paid from the date of the investments. However, as per the learned DR, this would not s .....

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himself was present during the course of hearing before the learned CIT(A) and all the particulars were given to him for verification. Therefore, as per the learned AR, there was no merit in the contention of the revenue that any fresh documents were considered by the learned CIT(A). Further, as per the learned AR, the minutes of Board of Directors meeting held on 25-03-2010 placed at paper book at page-29 read along with the letters sent by the various loan creditors placed at paper book pages .....

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spute that 50% of the total interest outgo pertained to preceding year. Assessee has also not disputed the claim of the revenue that there was no contract with the creditors for payment of any interest. However, as per the assessee it had taken a decision during the relevant previous year, in the meeting of its Board of Directors held on 23-03-2010 to pay interest from 01-04-2008 at the rate of 7%. Assessment order states that assessee could not produce any evidence regarding any dispute that sh .....

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ok by the AO for verifying the allowability of the claim in accordance with law. We therefore, set aside the orders of the authorities below with regard to the allowance of interest back to the file of the AO for consideration afresh in accordance with law. Needless to say assessee shall produce all documents in support of its claim before the AO. Ground no.2 to 4 of the revenue stands allowed for statistical purposes. 11. Vide its ground no.5 to 7, grievance raised by the revenue is that the CI .....

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377; 6,594.00 Short prvi. for Bonus 2008-09 ₹ 4,447.00 Total Rs.10,07,484.46 AO required the assessee how the common amenities and maintenance charges which related to an earlier year could be allowed in the relevant previous year. Assessee replied that it was an ascertained contractual liability which accrued and crystallized during the relevant previous year. As per the assessee, there was a dispute with M/s Bharath Mall, whose premises it was using for running the theatre and such a dis .....

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ssessee was that assessee was a joint venture between one M/s Adlabs Films Ltd.,and partners of Bharath Builders. As per the assessee its multiplex was located in Bharath Mall. There was a dispute with Bharath Mall on cam charges. Though, there existed a claim in this regard preferred by Bharath Mall, as per the assessee, the dispute was settled during the relevant previous year. 13. Learned CIT(A) was appreciative of the above contentions. According to him, the AO had not considered the evidenc .....

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