TMI Blog2017 (11) TMI 1145X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs does not ipsofacto lead to an inference of charging assessee for furnishing of inaccurate particulars of income and levy penalty thereon in absence of any material brought on record that assessee’s claim in this year lacks bonafide. In any case, such claim of expenditure which otherwise is related to business not claimed in the earlier year albeit in this year cannot fall in the category of furnishing of inaccurate particulars as held by the ld. CIT(A) and, therefore, we uphold the deletion of penalty on this score. Disallowance of amount written off outstanding against M/s Southern Synthetic Limited - Held that:- the assessee has made advance to its subsidiary company, M/s Southern Synthetic Ltd. from time to time for urgent requirement of the said subsidiary company and also on account of its business needs, as the said company was manufacturing certain chemicals which were raw materials for the assessee-company’s product. The amounts were advanced to the subsidiary company with a view to help in production of raw material and manufacturing line of business of the company. In light of such business requirement and commercial expediency; advances were given to the subsidiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum proceedings confirmed only 50% of such disallowance, which has been upheld by the Tribunal. 5. So far as disallowance of advertisement and publicity expenses are concerned, the Assessing Officer has disallowed a sum of ₹ 13,970/- on the ground that the same pertains to assessment year 1993-94, as it was incurred in earlier year and the same cannot be allowed in this year and this addition too has confirmed from the stage of the Tribunal. 6. Lastly, with regard to the disallowance of amount written off of ₹ 27,88,311/- outstanding against one party namely, M/s Southern Synthetic Ltd., the assessee s case before the Assessing Officer was that the company has given advance given to M/s Southern Synthetic Ltd. out of their own funds in the form of share capital, reserve and surplus as shown in the balance sheet as on 31/3/1994, amounting to ₹ 51.40 crores in business interest, which could not be recovered due to various reasons. This amount was advanced from time to time and counter guarantee was also given by the assessee company against various advances provided to the bank to its subsidiary. It was submitted that the advances were given only at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stly, with regard to the amount written off, he held that the Tribunal itself has noted that all the particulars have been furnished by the assessee and the amount was confirmed only on the ground that it cannot be treated as bad debt. 9. None appeared on behalf of the assessee despite service of notice. After hearing the Ld. DR and on a perusal of the impugned order, we find that first of all, so far as the addition of ₹ 6,80,490/- is concerned, addition made by the Assessing Officer has been reduced to half, as the same were based on adhoc disallowance only. Assessee s contention before the authorities below has been that it has given full details of all the payments which were duly reflected in the books of account and has been made through account payee cheques and such a payment has been made in the past and accepted by the department. Therefore, in such a situation, it cannot be held that assessee has furnished any inaccurate particulars of income because as a matter of past practice, assessee has been reimbursing the expenses incurred by the agents for collecting FDRs and the findings given in the quantum side goes to show that disallowance has been made purely on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has furnished inaccurate particulars. Assessee s explanations qua this addition before the Assessing Officer as well as the ld. CIT(A) are reproduced hereunder:- The learned Assessing Authority has disallowed the claim of assessee for writing off Rs . 27,88,311 /- being amount due from Southern Synthetics Ltd . a subsidiary company that later on merged with M / s . Kothari Plantation Industries Ltd . , in pursuance of BIFR Order . The assessee Company has been advancing some amounts from year to year to the subsidiary company M / s . Southern Synthetics Ltd . on account of business needs . M / s . Southern Synthetics Ltd . was manufacturing formaldehyde and Hexamine both of Iwhich are the raw - materials of Company's products namely Urea Formaldehyde, Melamine Formaldehyde, U . F . M . F . Moulding Powders resins . The Company advanced these amounts to subsidiary company with a view to help in production of raw - materials and the manufacturing line of business of the company . Taking into consideration and also on the basis that the amounts were advanced to the subsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to forego the amount to save self from invocation of guarantees of Rs . 277 lacs . Therefore, it is contented that ( 1 ) writing off of the amount was duly considered by the Board of directors and noted in its meeting held on 30 . 4 . 94 . ( 2 ) The amounts were paid out of company's funds . ( 3 ) Writing off had become essential to save the assessee from the obligation of invocation of guarantee to the extent of Rs . 277 lacs . The assessee's plea for deleting the disallowances of interest in earlier years having been accepted by the CIT ( A ) , Faridabad . The amount which was advanced on account of business needs of the company and has been written off to save the company from invocation of the corporate guarantees, the writing off this amount is allowable to the Company . In case of Manubhai Bikhabhai v / s CIT ( 1994 ) 205 ITR 505 ( Guj .) the losses suffered on account of sale of shares, where the assessee was guarantor was allowed to the assessee, since, the Court come to the conclusion that the agreement of transfer was a composite agreement, whereby th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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