9911796707
TMI Blog2017 (2) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... rores disclosed and returned by the assessee on account of sale of scrap.The AO completed the assessment u/s.143(3) r.w.s.153C making certian additions/disallowances. 2.1. First effective ground is about disallowance made u/s.14A of the Act.During the assessment proceedings,the AO found that the assessee was in receipt of exempt income by way of dividend of Rs. 7.97 lakhs,that it had made investment in shares to the tune of Rs. 2.99 crores,that no disallowance u/s.14A was made.He directed the assessee to file submission in that regard.The assessee submitted that it had made investment out of its own funds and accruals.However,the AO did not agree with the assessee and referring to the judgment of Godrej & Boyce Manufacturing Company Ltd.(328 ITR 81)held that the assessee had not established that entire investment had been made out of its own funds,that the interest relating to investment had to be disallowed. Applying the provisions of Rule 8D of the Rules,he made a disallowance of Rs. 21.80 lakhs. 2.2. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,it relied upon the case of Reliance Utility and Power Ltd.( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D of the Rules. Considering the above,first Ground of appeal is decided in favour of the assessee. 3. Second effective ground of appeal is about confirming the addition of Rs. 84.65 lakhs under the head sundry balances written off.During the assessment proceedings, the AO found that the assessee had debited its P&L a/c.by sundry balances written off of Rs. 84,65,755/-. He directed the assessee to file complete details in that regard and to prove how the various conditions stipulated in section 36(1)(vii) r.w.s.36(2)were fulfilled.After considering the submission of the assessee,the AO held that the assessee had neither submitted the details required not furnished any proof to show that the amount in question had been offered for tax in the earlier years.Invoking the provisions of section 36(1) (vii)of the Act,he made a disallowance of Rs. 84.65 lakhs. 3.1. During the appellate proceedings before the FAA, the assessee stated that it had written off grant receivable from ASIDE (Rs. 71.78 lakhs) and Service Tax (Rs. 12.87 Lakhs),that it had acquired a sponge iron unit as a going concern on 22/05/2009, that in the past it was granted Central assistance Ltd Rs. 203.80 lakhs by Mahara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itten off balances for the claim for the year under consideration . 3.3. We have heard the rival submissions and perused the material available on record.We find that the assessee had acquired M/s.Vikram Ispat (VI)from M/s. Grasim Industries during the year under consideration as a going concern,that VI was granted Central assistance by Maharashtra Maritime Board,that out of the total grant of Rs. 380 lakhs the board released assistance of Rs. 253.09 lakhs only,that the assessee wrote off the balance amount, that the FAA held that under scheme of slump sale the assessee was not entitled to claim the assets/ liabilities of the erstwhile entity, that the loss was capital in nature,that the assessee had written off grant receivable from ASIDE (Rs.71.78 lakhs), service tax on VAT (Rs.12.87 lakhs),that there is no doubt about writing off of both the items during the year under appeal in the books of account. In our opinion,there is no bar on making a claim about the sums written off in a slump sale transaction.The assessee had taken over the assets as well as the liabilities of VI. In the remand report proceedings,the assessee had submitted the evidences proving that the erstwhile enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken over to any income offered to tax earlier by the seller entity,that the conditions stipulated in section 36 were not satisfied, that the amount in question could not be allowed as a business loss as held in the earlier paragraph of the order,that it was a capital loss. 4.2. Before us, the AR contended that while filing return of income for AY 2008-09 and 2009- 10 it had shown STCG of Rs. 2.09 crores and Rs. 3.61crores in accordance with the provisions of section 50 with regard to claim of insurance made by it, the insurer i.e. The New India Assurance Co.Ltd. repudiated the claim made by the assessee. The DR relied upon the order of the FAA. 4.3. We have heard the rival submissions. We find that the claim had arisen after the slump sale took place,that the erstwhile company had claimed loss with the insurance company, that the claim was rejected, that the assessee discarded the assets for the year ended on 31.03.2008 and 31.03.2009. In the light of these developments the assessee wrote off the insurance claim of Rs. 9.37 crores. We have gone through the insurance claim lodged by the assessee and we find that all the conditions for allowing bad debts stand fulfilled i.e. of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, if any, should not be disallowed in case the expenditure was capitalised.The assessee was also directed to specify the end use of the funds raised by Maginot Trading Co.Pvt.Ltd.In its response, dt.3.12.2012,the assessee stated that disputed payments had been debited under the head 'land development charge'in the books of account, that no depreciation had been claimed or would be claimed, that unpaid tax would be paid in due course of time. 9.1. After considering the submission of the assessee,the AO held that bogus expenses were recorded in the books of account,that same could not form part of cost of land,that bogus expenses could not be allowed as deduction under any head of income in any of the assessment years.So,he treated the expenditure of Rs. 5 crores as unexplained expenditure and added it to the total income of the assessee. 9.2. During the appellate proceedings before the FAA,the assessee made elaborate submissions in that regard.A remand report was called from the AO.After considering available material,the FAA held that BG had admitted the accommodation entries and offered it for taxation,that during appellate proceedings it was claimed that the statement of BG w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s.Welspun Syntex Ltd.) as my unaccounted income generated by debiting bogus expenses and offer this amount as my taxable income, over & above my regular income, for the current financial year." It is further found that in its letter dt.3.12.2012 the assessee made following submissions before the AO: "In answer of question no.14 Mr. B.K. Goenka has stated that Rs. 5 Crores is an accommodation entry in the hands of M/s.Welspun Max Steel and Rs. 2 Crores in the hands of M/s. Welspun Syntex Ltd., It may please be noted that the above referred two payments have been debited as 'Land Development charges' in the books of accounts of the respective companies. We confirm that no depreciation has been claimed so far and no depreciation will be claimed by any of the above companies on the above mentioned amounts. The balance tax, if any, will be paid by M/s. Welspun Max Steel in due course of time." If we go through the above statement of BG and the letter of the assessee dt.3.12.2012, it becomes clear that the BG had made the disclosure of Rs. 5 crores in the capacity of MD of the company and that the assessee had promised to pay outstanding taxes.The land develop - ment A/c. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
