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TMI Blog2017 (4) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... tshell are as under: 2.1. That the assessee filed return of income for AY 1996-97 declaring total income at Rs. 41,58,551/-. The assessment for the year under consideration was completed under Section 143(3) r/-w Section 144 A of the Act on 30.03.1999 determining the income at Rs. 1,19,50,490/-. It appears that AO during the scrutiny assessment proceedings observed that the assessee has become proprietor viz. Lab Enterprises in which no business activities were carried out and no any income was reflected from the concern. Despite the above, the assessee claim various expenses and business expenditure including Bad Debts etc. totaling to Rs. 54,29,508/-observing that no business activities were carried out /- conducted during the year under consideration the then AO disallowed the above expenses i.e. Rs. 54,29,508/-. That after making the aforesaid additions, the total income of the assessee was determined by the AO at Rs. 1,19,50,490/-for the year under consideration. 2.2. Against the scrutiny assessment order, the assessee preferred appeal before the learned CIT (A). That the learned CIT(A) gives relief of Rs. 7836/-. After giving effect to CIT(A)' order's, the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore, the matter was remanded to the AO. It is submitted that therefore, in the second round of proceeding, it was not open for the learned Tribunal to take a different view and confirming the disallowance on the ground that assessee was not carrying on business for the relevant year under consideration. 3.2. It is further submitted by Shri Patel, learned advocate for the appellant that even otherwise learned Tribunal has materially erred in disallowing the amount of Rs. 30,47,240/-claimed by the assessee on account of bad debts. It is submitted that as per the memorandum of understanding as on 31.3.1996 Labh Enterprise was to recover Rs. 62,01,858.92. Against this, stock of flat valued at Rs. 8,53,600/-was on hand with Labh Enterprise and as per the Settlement Agreement, Samrajya agreed to pay Rs. 23,01,018.59 to Labh Enterprise. It is submitted that therefore, remaining amount of Rs. 30,47,240/-was claimed as Business Loss/- Bad Debts by the assessee as the same remained unrealized. It is vehemently submitted by Shri Patel, learned advocate for the appellant-assessee that the learned Tribunal has materially erred in not properly appreciating and /- or considering the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed by the learned Tribunal as well as order passed by the learned CIT(A), the aforesaid has no substance. From the impugned order passed by the learned ITAT as well as learned CIT(A), it appears that the aforesaid disallowances are confirmed on their own merits and not on the ground that the assessee is not carrying on business during the year under consideration. In fact, while passing the impugned order, learned Tribunal has kept in mind the observation made by the learned Tribunal in earlier round of litigation /- proceedings, more particularly, made in para 6 and 7 of the order and the Tribunal has noted that '"we find that issue relating to the fact that whether the AO was carried on business or not during the AY 1996-97 and 199798 has been dealt elaborately by the Coordinate Bench wherein they have given a finding that the assessee has carried out the business activity during the year under consideration". That thereafter, on merits, the learned Tribunal has allowed the expenses of Rs. 23,82,268/-as business expenses out of total disallowance of Rs. 54,29,508/-. 5.0. That thereafter, the learned Tribunal has independently taken the decision regarding disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 30,47,240/-. This ground is partly allowed. 5.1. Similarly, the learned Tribunal has independently considered the disallowance of interest of Rs. 23,54,592/-and has confirmed the disallowance of Rs. 23,54,592/-claimed by the assessee towards interest paid for business consideration on the ground that the amount of interest of Rs. 23,54,592/-has been paid on loans taken has actually been diverted towards investment in shares and other non interest bearing investment. Thereafter, learned Tribunal has made disallowance of Rs. 23,54,592/-towards the claim of interest paid for business consideration by observing in para 33 to 35 as under: 33.We have heard the rival contentions and perused the material on record. The issue before us is to examine the allowability of interest expenses of Rs. 23,54,592/-under the provisions of section 57(iii) of the Act. Before going further let us first go through the provisions of section 57(iii) of the Act which reads as below : Sec. 57(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income; 34. From the above provisions, we u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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