TMI Blog2020 (2) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest on account of interest free advances - HELD THAT:- When in earlier year also, the interest has not been allowed, the action of Assessing Officer was not justified in disallowance of interest in respect of Cifco Travel Cifco Properties. In view of the aforesaid discussion and keeping in view that substantial interest disallowance has been deleted by Assessing Officer while giving effect to the order of ld. CIT(A). Therefore, we direct the Assessing Officer to delete the entire disallowance. Depreciation by treating the lease agreement with Kores India Ltd. as a financial agreement - HELD THAT:- We have noted that the lower authority has not disputed the ownership of leased asset. In AY 1995-96, there was a limited dispute about the date of put to use. Even otherwise, the dispute for AY 1994-96 was settled under KVSS, and it would not take any right of the assessee for taking up the issue in subsequent years. We have further noted that the assessee has placed on record sufficient material showing ownership of leased asset. The Hon ble Supreme Court in ICDS Ltd. vs. CIT [ 2013 (1) TMI 344 - SUPREME COURT] held that when assessee purchased vehicles from manufacturers ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars, which has not been disputed by Assessing Officer. Therefore, we do not find any merit in the ground of appeal raised by revenue. In the result, the ground of appeal raised by revenue is dismissed. Disallowance of interest advanced to Oceanic Investment Ltd - revenue submits that assessee not furnished any agreement for waiver of interest on the advance to Oceanic Investment Ltd. - CIT(A) deleted the disallowances to the extent of reopening balance - HELD THAT:- On appeal before the ld. CIT(A), the assessee made detailed submission as explained before us and also explained that no disallowance was made in earlier year. The ld. CIT(A) accepted that no disallowance of interest was made in earlier year and in view of the decision of Hon ble Karnataka High Court in CIT vs. Sridev Enterprises [ 1991 (1) TMI 52 - KARNATAKA HIGH COURT] . The ld. CIT(A) directed the Assessing Officer to grant the relief to the assessee to the extent of disallowance of interest related to the debit balance carried over from the preceding year. No contrary fact or law is brought to our notice to take the different view. Therefore, we do not find any reason to interfere with the finding of ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Method of Accounting the entire interest was allowable expenses for the year. The appellant, therefore, prays that the order of the CIT(A) be set aside and the Assessing Officer be directed to delete the disallowance of interest of ₹ 1,73,24.918/-. 2a. The CIT(A) erred in Facts and in law in confirming disallowance of ₹ 72,321/- out of bad debts in respect of amount due from Arcot Finance Limited on the ground that no details were filed in course of assessment proceedings. 2b. The CIT(A) erred in Facts and in Law in not accepting affidavit filed of Managing Director of the appellant as an additional evidence and thereby confirming disallowance of ₹ 72,321/- out of bad debts. The appellant, therefore, prays that the order of CIT(A) be set aside and the Assessing Officer be directed to delete the disallowance of ₹ 72,321/- out of interest paid. 3. On Facts and in Law, the CIT(A) erred in confirming disallowance of ₹ 16,85,250/- out of interest expenses in respect of advance given to Cifco Properties Private Limited and Cifco Travel Private Limited ignoring the facts that the advances given were for the purpose of business of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 41,87,500/- out of claim of depreciation. 6c. On Facts and in Law, the CIT(A) erred in not allowing depreciation even after treating the lease agreement with Prakash Industries Limited as a Financial arrangement. The appellant, therefore, prays that the order of the CIT(A) be set aside and the Assessing Officer be directed to allow the claim of depreciation of ₹ 41,87,500/- in respect of lease agreement with Prakash Industries Limited. 7. Without Prejudice to appeal filed in case of Oceanic Investments Limited, on Facts and in Law, the CIT(A) erred in not deleting income relating to Income from Sale of Shares of Panchmahal Cements Limited after upholding in case of Oceanic Investments Limited that no such transactions existed. The appellant, therefore, prays that the order of the CIT(A) be set aside and the Assessing Officer be directed to delete the income of ₹ 22,50,000/- from assessed income. 2. Brief facts of the case are that the assessee is a company engaged in the business of finance and leasing. The return of income was filed by assessee on 30.11.1996 declaring Loss. The case was selected for scrutiny and the assessment was complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no stipulation on interest in the agreement while taking advance and therefore, no interest had accrued in earlier years. The Assessing Officer erroneously relied on the order of Massore Tobacco Company Ltd. vs. CIT [115 ITR 698 (Kar.)] and Saraya Sugar Mills P. Ltd. vs. DCIT [117 ITR 344]. The ld. AR of the assessee further submits that in assessee s group concern i.e. Cifco Ltd., the ld. CIT(A) allowed the interest in Assessment Year 1996-97 vide order dated 04.03.2004, copy of the order is placed on record, and no appeal is filed by the revenue against the allowance on such interest. In case of Aditi Dalal where the Assessing Officer had relied on the same two decisions and ld. CIT(A) also based his decision, the Tribunal allowed the claim of Aditi Dalal in ITA No. 4750/Mum/2001, copy of which is placed on record. 5. On the other hand, the ld. Departmental Representative (DR) for the revenue relied on the order of lower authorities. 6. We have considered the submission of both the parties and perused the material available on record. During the assessment, the Assessing Officer noted that the assessee has debited an amount of ₹ 2,35,92,606/- from Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as a deduction under Maharashtra Agricultural Income Tax Act, 1992, expenditure in question must be incurred in the relevant previous year. Again expenditure must be one which is incurred for the purpose of deriving agricultural income from land and must not be in the nature of capital expenditure or personal expenditure. There is nothing in the section, which would impose a condition that in order to be allowable as a deduction, the expenditure must have been incurred in order to earn the income of the relevant previous year or must relate to the income of the previous year. Similarly, we find that in the relevant section in the Income Tax Act i.e. 36(1)(iii), the requirement is that the interest should be payable in respect of capital borrowed for the purpose of business. In the present case, this is not the case of the revenue that the amount was not borrowed for the purpose of business because the interest relatable to the current year has been allowed and disallowance was made only of that portion which pertains to the earlier years. We are of the considered opinion that because originally the amount was borrowed Interest free, there was no interest liability; and hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iency, board of Direct of the assessee decided to write off the said amount. In support of his submission, the ld. AR of the assessee relied upon the DBDT Circular No. 551 dated 23.01.1990 and the decision of Hon ble Supreme Court in TRF Ltd. vs. CIT (323 ITR 397) and the Circular No. 12 of 2016 accepting the ratio of decision of Hon ble Supreme Court (supra). In alternative, the ld. AR of the assessee claimed as business loss. 9. On the other hand, the ld. DR for the revenue relied upon the order lower authorities. 10. We have considered the submission of both the parties and perused the material available on record including the decision of co-ordinate bench in assessee s own case for various years as referred by ld. AR in his submission. The ld. CIT(A) while discussing this issue in para-6 of his order recorded that the assessee has not made any submission regarding the write off of ₹ 72,321/- in respect of Arcot Finance Ltd. and confirmed the disallowance of write off accordingly. We have noted that in para-3 of statement of fact filed before the ld. CIT(A), the assessee has specifically stated in the fact related to ground no.2 that interest accrued on the advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st free funds to give advance to its subsidiaries. The Assessing Officer has not established the nexus of interest bearing funds and advances. In alternative and without prejudiced submission, the ld. AR submits that the disallowed rate of interest is highly excess, the interest paid between 15% to 21%, funds were not used for entire period. The assessee has applied for rectification vide application dated 07.04.2000, the Assessing Officer considered it in his order giving effect to CIT(A) order and no appeal is filed by department. In past no such disallowance was made on similar advances. 12. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 13. We have considered the submission of the parties and perused the record. We have noted that in order giving effect, the Assessing Officer vide his order dated 23.01.2012. The Assessing Officer out of interest of ₹ 8,45,280/- in respect of Cifco Travel deleted ₹ 8,20,395/- and in respect of disallowance of Cifco Properties of ₹ 8,40,000/-, the Assessing Officer reduced/deleted ₹ 7,54,849/-. Accordingly, only dispute left with regard to Cifco Travel at ₹ 24,855/- an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he difference of ₹ 18,574/- added as a finance charges, no depreciation was allowed. The ld. CIT(A) upheld the action of assessing officer holding that disallowance in assessment order for AY 1995-96 attains finality. The ld. CIT(A) directed that lease rental of ₹ 7,23,600/- to be bifurcated into principle and financial charges by the Assessing Officer and financial charges only to be taxed. 18. The ld. AR of the assessee submits that matter for AY 1995-96 was settled under Kar Vivad Samadhan Schme (KVSS) and it did not take away the right of assessee for adjudication of issue on merit in other years. The ld. AR submits that CBDT issued a clarification that KVSS does not decide judicial issue and does not forego right to appeal on same issue in other AY. The ld. AR submits that copy of lease agreement dated 15.03.1995 is placed on record. The confirmation of General Manger of lessee, Insurance Policy, Installation Certificate, Lease Rental, details invoice, excise challan of supplier, consignment note of transporter, Truck No., Octroi receipt is placed on record. The ld. AR submits that Assessing Officer made direct enquires by issuing summon under section 131 and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. AR of the assessee submits that the Assessing Officer while passing the order giving effect allowed depreciation in case of leases with LML Ltd., Aplab Ltd. and Precision Capsule Ltd. The ld. AR further submits that in appeal for AY 1994-95, the Tribunal restored the matter back to the Assessing Officer to decide the issue afresh in the light of decision for AY 1989-90 relying on the order of AYs 1991-92 and 1993-94. For AY 1989-90 the Tribunal set-aside the issue to the file of ld. CIT(A). 23. On the other hand, the ld. DR for the revenue though supported the order of lower authorities. However, on our query about the further against the order of Tribunal, the ld. DR submits that matter may be restored back to the lower authorities to pass consequential order. 24. We have considered the submission of both the parties and find that on similar grounds on various lease assets for various years, the Tribunal in AY 1994-95 by following the other years order restored back the issue to the file of Assessing Officer with the following direction: 6.3 Ground 6 is against the disallowance of depreciation of assets whose lease period has expired. We note that for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... photographs of lease equipments and submits that similar lease was made to Kores India Ltd. and that he adopts the same argument as made for allowance of depreciation on lease asset to Kores India Ltd. 28. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 29. We have considered the submission of both the parties and perused the record including various documentary evidence furnished in respect of lease asset including lease agreement, transportation, installation, insurance policy and photographs of leased equipments. We have further noted that this issue is similar to the ground taken in Ground No. 5a to 5c, which we have allowed by following the decision of Hon ble Supreme Court in ICDS Ltd. (supra). Therefore, this ground of appeal is also allowed with similar observation. 30. Ground No.7 relates to taxing profit of ₹ 22.50 lakhs on sale of shares of Panchmahal Cement Ltd. The ld. AR of the assessee submits that during the relevant period, the assessee sold and purchases share of Panchmahal Cement Ltd. from Oceanic Cement Ltd. The assessee had a profit of ₹ 22.50 lakhs and offered the same for taxation. The ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds: 1 a) directing to delete the disallowance of ₹ 17, 10,771/- made on account of write off of accounts in respect of debit balances in the cases of Andhra Sintex Ltd., Swastik Surfactants Ltd., Indage India Ltd; b) not considering the fact that the claim of deduction made by the assessee was not on account of 'bad debts' written off but was in respect of 'accounts' written off; c) ignoring the fact that the assessee company had not claimed deduction of write offs under the head bad debts; d) applying the provisions of Sec.36(l X vii) read with Sec.36(2) of the Act to the claim of write off of accounts even though the aforesaid provisions are applicable only in respect of claim off of write off of bad debts; e) overlooking the fact that the write off of accounts was authorised by the Board of Directors on the assessee company after the end of relevant previous year. in their meeting held on 2/11/1996 which fact is noted in the appellate order; f) ignoring the fact that till the last date of the relevant previous year the accounts were not authorised to be written off and such authorisation for write off given by the Board of Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to such fraudulent methods; d) not taking into account that such a direction may lead to absurd results in as much as the return to the assessee on the amounts financed amounted to only 4% (approx.) even though admittedly loans at bearing interest @ 15% to 21 % were taken by the assessee; e) not appreciating the tact that in such structured and collusive transactions, the return could have been negative also depending on the benefits availed off by the assessee on account of various deductions; f) not taking into account the fact that the direction given would reduce the income declared as lease rent as per the return of income filed and therefore would result in the assessee being assessed on an income lesser than the income declared in the return : g) not confirming the order of Assessing Officer to arrive at income on financial charges @ 24% on the outstanding amount due from the lessees on reducing balance method. 35. Ground No.1 relates to deleting the disallowance of amounts written off of ₹ 17,10,771/-. The ld. DR for the revenue supported the order of Assessing Officer. The ld. DR for revenue submits that Assessing Officer disallowed write of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the ld. CIT(A), the assessee categorically stated that the assessee has offered the interest on advances to tax in earlier years and that the advances given to the parties have become time barred. The assessee also placed on record the affidavit of Managing Director of assessee, wherein the assessee stated that no sufficient time was granted to assessee to prove its contention by the Assessing Officer. On the contention of assessee, a remand report was sought from the Assessing Officer. The Assessing Officer furnished his remand report vide letter dated 05.12.2000. In the remand report, the Assessing Officer has stated that no evidence was produced during the assessment proceeding, the assessee was given full opportunity to furnish the detail of amount of written off and to justify the reasons thereof. 38. The ld. CIT(A) after considering the submission of assessee and amended provision of law with regard to write off, allowed the relief of ₹ 17,10,771/-. The relief allowed by the ld. CIT(A) consist of claim of write off of Swastik Surfancutents Ltd., Andhra Syntex Ltd. and Indage India Ltd. We have noted that the Hon ble Supreme Court in TRF Ltd. vs. CIT (supra) held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company have huge investment in share and owned property in New Delhi. The Assessing Officer disallowed the interest @ 21%. On appeal before the ld. CIT(A), the assessee made detailed submission as explained before us and also explained that no disallowance was made in earlier year. The ld. CIT(A) accepted that no disallowance of interest was made in earlier year and in view of the decision of Hon ble Karnataka High Court in CIT vs. Sridev Enterprises [192 ITR 165 (Kar.)]. The ld. CIT(A) directed the Assessing Officer to grant the relief to the assessee to the extent of disallowance of interest related to the debit balance carried over from the preceding year. No contrary fact or law is brought to our notice to take the different view. Therefore, we do not find any reason to interfere with the finding of ld. CIT(A), which we affirmed. In the result, Ground No.2 is dismissed. 42. Ground No.3 relates to direction of bifurcate lease rent into repayment of principal amount and interest component as well as to delete estimation of higher lease rental received in case of Kores India and Prakash Industries Ltd. The ld. DR for the revenue supported the order of Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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