TMI Blog2015 (10) TMI 2468X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure by the assessee in the past and therefore the addition of the said sum u/s 41(1) of the Act cannot be sustained. In so far as the applicability of the provision of section 28(iv) of the Act is concerned the benefit in question was not received in kind and therefore the addition on the above said provision cannot be sustained. The decision referred to by the CIT(A) in the impugned order on this issue clearly support the conclusion arrived at by the CIT(A). We therefore do not find any ground to interfere. Consequently the appeal filed by the revenue is dismissed. - Decided in favour of assessee for statistical purposes. Unexplained share application money - Held that:- In the light of the letter of the AO to Saurabjh Agrotech (P) Ltd., a copy of which is placed at pages 32 to 39 of the assessee’s paper book No.2, the additions sustained by the CIT(A) deserves to be deleted. It is clear from the evidence that identity, capacity and genuineness of the transaction of the receipt of share application money of the assessee has been clearly established. In fact the additional evidence in the form of confirmation from the share applicant ought to have admitted by the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITA No.86/Kol/2013 , ITA No.284/Kol/2013 - - - Dated:- 16-10-2015 - Shri N.V.Vasudevan, JM Shri Waseem Ahmed, AM For the Appellant : Shri Niraj Kumar, CIT(DR) For the Respondent : Shri A.K.Tibrewal, FCA Shri Amit Agarwal, Advocate ORDER Per Shri N.V.Vasudevan, JM ITA No.86/Kol/2013 is an appeal by the assessee while ITA No.284/Kol/2013 is an appeal by the revenue. Both these appeals are directed against the order dated 08.11.2012 of CIT(A)-VIII, Kolkata relating to A.Y.2009-10. ITA No.86/Kol/2013 (Assessee s appeal) : 2. Ground Nos. 1 and 2 raised by the assessee in this appeal and the grounds of appeal raised by the revenue in its appeal can be conveniently taken together. The assessee is a company engaged in the business of manufacture of agro products. In the course of assessment proceedings, the AO noticed that the Assessee has shown a sum of ₹ 14,58,61,553 as capital reserve in the liability side of the Balance Sheet. The Assessee explained that the increase in the capital reserve was because of waiver of loans which the Assessee had obtained for the purpose of its business, by the creditors owing to financial crisis which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of loans and their interest. In other words, the waiver of loans together with interest (which was considered as capital reserve by the assessee) was out of the above difference of ₹ 17,61,53,420. 3. Though the loan and interest waived was ₹ 17,61,53,420/-, the addition to the capital reserve account which was considered by the AO for the impugned addition made was only a sum of ₹ 14,58,61,553/-. The capital reserves shown by the Assessee in the balance sheet comprised of interest accrued and due and ₹ 7,09,96,285/- which was interest on loans which were debited from time to time. The remaining amount of ₹ 7,48,65,268/- was on account of benefit obtained by the assessee consequent to waiver of principal amount by the banks and other creditors. The AO was of the view that the amount of waive of loan and interest due thereon was taxable u/s 41(1) of the Act r.w.s.28(i) (iv) of the Act as remission or cessation of liability which profit arising in the course of business. AO accordingly added a sum of ₹ 14,58,61,553/- to the total income of the assessee. 4. On appeal by the assessee the CIT(A) held that in so far as the waiver of the princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 331 ITR 317. In this case the Hon ble Madras High Court relying on Bombay High Court decision in the case of Mahindra Mahindra Ltd. V CIT (2003) 261 ITR502 and Hon ble Delhi High Court decision in the case of Ravinder Singh v CIT (1994) 205 ITR 353, has held as under :- That section 28(iv) of the Act speaks about the benefit or perquisite received in kind and has no application to any transaction which involves money. The transaction in question being a loan transaction having no application with respect to section 28(iv) of the Income-tax Act, the sum in question was not income within the purview of section 2(24) of the Act. In view of the above discussed legal and factual position the addition of ₹ 7,09,96,285/- on account of waiver of interest at the time of one time settlement of the loan cannot be sustained either under section 28(iv) or under section 41(1) of the Act and accordingly the addition of ₹ 7,09,96,285/- is deleted. (ii) The ld AR has submitted that the appellant has taken secured loan of ₹ 340 lacs from Industrial Reconstruction Bank of India and 450 lacs. From IDBI Bank in the year 1996-97 under project finance scheme. However, nei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o go into the question as to whether the principal amount waived was in respect of loan borrowed for meeting the capital requirements or for meeting the revenue expenditure. 8. We have considered his submissions and are of the view that the same cannot be accepted. It is no doubt true that in the aforesaid case the Hon ble Madras High Court has observed that the assessee was not trading in any money transaction and on the ground of loan by a bank cannot be termed as trading transaction and it cannot be construed in the course of business. This observation in our view cannot be read in isolation and out of context. The Hon ble Madras High Court in the aforesaid decision found that the undisputed fact prevailing in that case was that the assessee obtained loan for the purpose of investment in its capital asset. It is only on this basis that the Hon ble Madras High Court held that the provision of section 41(1)of the Act or section 28(iv) of the Act are not attracted. The Hon ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd. 198 ITR 287 (SC), has held as follows: It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly applicable. 10. We are therefore of the view that it was necessary for the assessee to establish the purpose of the loans in question had been borrowed. 11. We have perused the documents filed by the assessee in support of its contentions that the amount of loan that was waived by the creditors was for meeting the capital requirements. At the time of hearing it was noticed that the evidence filed by the assessee in this regard does not conclusively establish the assesses case. For e.g. the assessee had availed two major loans which are the subject matter of waiver. The first loan is one which was availed form IDBI on 13.06.1996. The other major loan is one availed by the assessee from IRBI on 22.01.1997. Copy of the loan sanctioning letters are at pages 76 and 83 of the assessee s paper book. It is no doubt true that that these loans refer to project finances thereby it can be sent that these loans were meant for meeting capital expenditure. It is however seen that the loan amount waived was by one Depak Vegpro Private Limited. When this was pointed out by the ld. Counsel for the assessee it was submitted that IDBI had assigned the loans to M/S.Deepak Vegpro Pvt.Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the names and addresses of the share applicants, mode of receipt of share application money, copy of application form etc. According to the AO the assessee had not filed the required details. The AO therefore treated the receipt of share application as expenditure and added the aforesaid sum to the total income of the assessee. 15. Before the CIT(A) the assessee pointed out that a sum of ₹ 2 crores had been given as share application money by one M/s. Saurabh Agrotech (P) Ltd who is assessed at Alwar, Rajasthan and also gave the assessment particulars of the share applicant. The CIT(A) called for remand report from the AO on the information provided by the assessee. The AO of the assessee thereupon had written a letter to ACIT, Circle-1 Alwar assessing the share applicant. The ACIT, Circle-1, Alwar in his letter dated 9.10.2012 confirmed that M/s. Saurabh Agrotech (P) Ltd was a regular assessee of his circle having a turnover of ₹ 150 crores and that the transaction of share application money given to the assessee of ₹ 2 crores is duly reflected in the balance sheet. 16. In the remand report filed by the AO of the assessee before CIT(A) this aspect was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee during the previsous year was 3,46,753 lts. The cost of 1 lt is ₹ 37.71 and the total cost incurred by the assessee on use of hexane claims as an expenditure in the Profit and loss account at ₹ 96,08,526/-. The AO found that the hexane chemical was used in the process of manufacture of oil from oil cake. This process has to be distinguished from the manufacture of oil from oil seeds. The consumption of oil cake in the process of oil extraction by the assessee during the previous year was 48,149 MT. The consumption of hexane with reference to oil cake consumption was 7.20 lts which worked out as follows :- 3,46,753/ 48,149= 7.20. 20. The AO was of the view that consumption of hexane per MT of oil cake consumed in extraction of oil has to be 1.5 lts. Maximum and the consumption shown by the assessee was excessive. In this regard AO relied on the report of Prof. P.J.Rao, Department of Chemical Engineering , Andhra University, Visakhapatnam who has opined that the consumption of hexane can be a maximum of 1.5 lts. Per MT of oil cake consumption. The AO based on the report of the expert came to the conclusion that the consumption of the hexane shown by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tactics of the appellant, the AO was not able to verify the correctness of consumption of Hexane and hence it is held that the AO was fully justified in relying on the report of expert and working out the excess consumption of Hexane amounting to ₹ 76,07,212/-. Accordingly, the addition of Rs/.76,07,212/- made by the AO is confirmed. 22. Aggrieved by the order of the CIT(A), the Assessee has raised the aforesaid grounds of appeal before the Tribunal. 23. Before us the contention of the ld. Counsel for the assessee was that the books of accounts have not been rejected by the AO u/s.145 of the Act and therefore the impugned addition cannot be sustained. His next submission was that the identity of Prof. P.J.Rao is not clear and the assessee did not have opportunity of cross examination of Prof.P.J.Rao. It was also submitted that consumption of hexane during the previous year compares favourbly with the past history and there was no reason to ignore the past history in assessee s own case. It is also pointed out that the assessee company was a sick company and there was no reason for the assesse to show higher cost of production. The ld. DR, on the other hand, relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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