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Commissioner of Income Tax Versus M/s. Aasia Business Ventures Pvt. Ltd.

2017 (2) TMI 554 - BOMBAY HIGH COURT

Addition u/s 41 - amount shown as 'advance against export' outstanding since 1997 - Held that:- As in Jayram Holidngs Pvt. Ltd. (2012 (7) TMI 1011 - ITAT MUMBAI) wherein in almost identical fact situation, advance received for exports was also shown in the accounts as a liability for a period of more than 10 years, the Tribunal took a view that there can be no addition of the amount shown as a liability either under Section 41(1) and/or under Section 28(iv) of the Act. This is so as long as the .....

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l (the Tribunal). The impugned order is in respect of Assessment Year 2007-08. 2. The Revenue urges the following question of law for our consideration : Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in deleting the addition made with regard to amount shown as 'advance against export' outstanding since 1997, allegedly received from Amas Mauritius Ltd. failing to appreciate the prevailing business/economic reality that no genuine buyer would .....

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ary, 1997 from one M/s. Amas Mauritius Ltd. in order to export goods. However the exports could not be made till date and the balance is still due and payable to M/s. Amas Mauritius Ltd. in the books of respondentassessee. The Assessing Officer in the above view held that the transaction of advance from M/s. Amas Mauritius Ltd. was not a genuine transaction and it was not to be repaid. Therefore an addition of ₹ 3.04 crores was made on application of Section 41(1) of the Act as cessation o .....

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t export to M/s. Amas Mauritius Ltd. However the approval of Reserve Bank of India had not yet been received. 6. The impugned order of the Tribunal allowed the respondentassessee's appeal by following the decisions of this Court in Commissioner of Income Tax v/s. Chase Bright Steel Ltd. 177 ITR 128 to hold that where an amount has shown as an advance in the balance sheet by the assessee it amounts to acknowledgment of liability and it does not cease to exist. So far as the genuineness of the .....

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n in the accounts as a liability for a period of more than 10 years, the Tribunal took a view that there can be no addition of the amount shown as a liability either under Section 41(1) and/or under Section 28(iv) of the Act. This is so as long as the liability exists. 7. The grievance of the Revenue is that the above transaction is not genuine. This particularly in view of the fact that M/s. Amas Mauritius Ltd. is a 40% shareholder in the respondent company. Thus related. Therefore the impugned .....

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14 to remit the amount of ₹ 3.04 crores shown as an advance received for export to M/s. Amas Mauritius Ltd. Consequent to the aforesaid permission, the amounts have in fact been repatriated on 16th May, 2014. Therefore the aforesaid amount is now no longer shown as a liability in its financial accounts relating to Assessment Year 201516. 9. We find that the issue as arising herein was also a subject matter of consideration before the Tribunal in the case of M/s. Jayram Holdings Pvt. Ltd. ( .....

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er the Tribunal held that Section 41(1) of the Act cannot be applied so long as the liability is acknowledged. This by placing reliance upon the order of this Court in Chase Bright Steel Ltd. (supra) wherein the Court has held that Section 41(1) of the Act will only apply if any deduction or allowance has been allowed for any assessment year on account of any loss or expenditure and in a subsequent year any benefit is obtained in respect of the above expenditure by way of remission or cessation .....

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