TMI Blog2012 (4) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... cer arrived at a taxable income of Rs.NIL for the assessment year 2003- 3. Aggrieved, the assessee preferred an appeal before the CIT(A). 4. Ground Nos. 2 to 4 in AY 2003-04 and Ground Nos. 1 to 3 in AY 2004-05 are common except the amounts, therefore, the same are to be disposed of by referring to the facts in AY 2003-04. 5. The first issue was w.r.t. the assessing officer s order estimating 14% of the loans and advances as interest income of ₹ 23,90,424/-. The assessing officer estimated the interest income at 14% on the advances amounting to ₹ 23,90,424/- and disallowed the said amount from the total loss shown by the assessee. Before the CIT(A) the learned counsel for the assessee submitted that the term loan obtained by the assessee from IDBI was used for extending loans and advances to the concerns in which the directors are interested, for business purpose of the assessee company. It was stated that the company was not in a position to pay the interest due to IDBI and the amount was disallowed in the statement of computation by the company as unpaid statutory liabilities. It was contended that the amount outstanding as loan to the companies under the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the assessee Shri Rama Rao submitted that the CIT(A) erred in holding that the sum of ₹ 1,28,95,682/- appeared as loans advanced to Jyothi Printing Inks P Ltd., APDC Printing Inks Ltd. and Shri P. Raghavaraju Family Trust, is not correct since there is a continuous account of lending and receiving with M/s Jyothi Printing Inks P Ltd., and APDC since both are sister concerns. W.r.t Shri. Raghavaraju Family Trust, the learned counsel for the assessee pointed out at Page 9 of the Paper Book wherein explanatory statement in the auditor s report, the following facts have been given: An amount of ₹ 91,71,883/- is outstanding from Shri P. Raghava Raju Family Trust which was paid in the earlier years pursuant to an agreement to buy land from the Trust by the Company for its expansion plants. The transaction could not be completed by the company due to funds constraints and the advance paid to them remains outstanding. The amount has been unrecoverable as the Trust has no realisable assets. A proposal has now been received on behalf of the Trust to make an One Time Payment of ₹ 10,00,000/- in full settlement by mobil ising funds from outside borrowi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not claimed any interest payable to IDBI as deduction this year. In the circumstances we delete the addition of ₹ 23,90,424/- towards interest made by the Assessing Officer. The Assessee succeeds on this issue. 16. The next issue is disallowance of ₹ 3,14,64/-.t of software expenses. The assessee had debited a sum of ₹ 8,62,759/-. The explanation of the assessee was that a sum of ₹ 3,00,000/- was paid to Insight Communications and Eversmart Application software with Final Touch and a sum of ₹ 14,641/- towards cost of PC Mc Milan Software . The AO, therefore, held that the software purchased is capital in nature and not a revenue expenditure. Hence, he disallowed the said expenditure of ₹ 3,14,641/-. Aggrieved, the assessee carried the matter in appeal before the CIT(A). 17. Before the CIT(A), it was stated that the software purchased for ₹ 3,14,641/- is an application software and is of revenue nature only. He further stated that no asset of long life was created by such purchase, therefore, the software expenses are allowable as revenue expenditure. He relied upon few case laws in support his case. After considering the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictional High Court, the Provident Fund was not approved by the CIT. The Andhra Pradesh High Court, af ter referring to the judgement of the Bombay High Court in Tata Iron Steel Co. Ltd. Vs. DV Bapat, ITO (1975) (101 ITR 292) and the judgement of the SC in Metal Box Company of India Ltd. Vs. Their Workmen (1969) 73 ITR 53 held that the amount paid towards an unapproved gratuity fund can be deducted u/s 37 of the Act though not u/s 36(1)(v). In view of this judgement of the jurisdictional High Court, in our opinion , even if any payment is made to an unapproved gratuity fund, it has to be allowed u/s 37. By respectfully following the binding judgement of the Andhra Pradesh High Court in the case of Warner Hindustan Ltd. we uphold the order of the CIT(A). In view of the judgement of the jurisdictional High Court, it may not be necessary for us to discuss the judgements of the other High Courts. 20. The assessee has raised one more ground in AY 2004-05, which is regarding disallowance of claim under discount rebate and allowance of ₹ 5,79,350/-. 21. The AO noted that in P L A/c, the assessee had claimed an amount of ₹ 8,78,659/- towards discount and rebate an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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