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TMI Blog2017 (9) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... ar is allowable as expenses and even assessee fulfill the condition of Sec. 36(2) of Income Tax Act, 1961. 3. The learned CIT Appeals seriously erred by not considering that amount of Rs. 18,40,000/- given as advance to M/s. Alwar Farmers Machinery House Pvt. Ltd. for business purpose and not considered the statement recorded of Sh. Pramod Gupta who confirm that this advance is given for business purposes. 4. The learned CIT Appeals seriously erred by disallowing on wrong allegation and false ground that both companies have common directors and share holders while company is artificial person and having separate identity. Both company are having only some of the directors and share holders as common which does not mean that such advance is recoverable. 5. The learned CIT Appeals seriously erred by not considering that the Alwar Farmers Machinery House Pvt. Ltd. was wind up and money was not recoverable. Further he has wrongly alleged that it is waived off by us while our company has not waived this amount and we are not concerned if Alwar Farmer Machinery House Pvt. Ltd. waived this amount. The fact is remain same that this money is given for business purpose and it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee advanced Rs. 18,40,000/- to M/s. Alwar Farmers Machinery House Pvt. Ltd. on 12.10.2006/ the advance was given for setting up a service station. At the time when the advance was given, it cannot be presumed by any stretch of imagination that after four years, the assessee as an arrangement to avoid payment of taxes, would write off the amount and claim the same as bad debt. The burden to proof that a transaction is collusive/sham is on the person who alleges so and such burden has to be discharged by furnishing positive evidence and not on hypothetical assessment of the real motive of the assessee. In this connection decision of Supreme Court in case of UOI vs. Azadi Bachao Andolan 263 ITR 706 and Vodafone International Holdings B.V. vs. UOI, 341 ITR 1 may be referred. Therefore, by simply assuming that the transaction of advance given by the assessee is collusive, the claim of the assessee cannot be disallowed. From the facts on record it is clear that assessee advanced Rs. 18,40,000/- to M/s. Alwar Farmers Machinery House Pvt. Ltd. on 12.10.2006 for setting up a service station. Such service station was not set up as Tata Motors has allotted the agency of light commercial ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trict. The total turnover of the company was Rs. 131.40 crore during this financial year. The company is having dealings with M/s. Alwar Farmers machinery House Pvt. Ltd. and sold goods of Rs. 22162 and advanced to them Rs. 1840000 to acquire service facility for our vehicles which are sold by us in FY 2006-07. 4.5. the appellant has stated that an amount of Rs. 18,40,000/- was given as an advance in FY 2006-07 to M/s. Alwar Farmers Machinery House Pvt. Ltd. This advance was given to set up a service centre facility for the vehicles sold by the appellant. Apart from this, the appellant sold goods of Rs. 22,162 in FY 2006-07 to the same company. An MOU was also entered by the appellant vide agreement dated 01.09.2006 with the same company. No payment was received from the said company and also no facility of service centre could be set up by the said company and therefore interest of Rs. 94,389/- was charged by the appellant in FY 2007-08 on which TDS of Rs. 21,389/- has also been deducted. This interest income has been shown by the appellant in FY 2007-08 in the P&L A/c. The amount outstanding from the party has been shown as debtors in the books of accounts. 4.6. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. has been waived off. The application for winding up filed by M/s. Alwar Farmers Machinery House Pvt. Ltd. before the ROC is a voluntary action and can not be classified as a company becoming insolvent. Therefore, there is no question left for making a claim of the debt having become bad. This action of claim of bad debts is only aimed at defeating the revenue for purpose of payment of rightful taxes. The pattern of ownership and the list of directors, as is clear from the chart given in the assessment order, of both the companies makes it quite obvious that the claim of bad debts and winding up of the company has been a tool of design. 4.9. Further, I find that the claim of the appellant for having a bad debt is not sustainable under the provisions of the Income Tax Act, as sale of goods of only Rs. 22,162 has been made to M/s. Alwar Farmers Machinery House Pvt. Ltd. out of the total outstanding amount of Rs. 19,72,993. An amount of Rs. 18,40,000 has been given an advance and has not been booked as sales in the profit and loss account of the company. The amount of loss suffered on account of non receipt, even if it is to be allowed theorically/academically speaking, can n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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