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TMI Blog2021 (2) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The Revenue has raised the following substantive grounds in the instant appeal: "1. The Learned CIT (Appeals) erred in deleting the addition made by the Assessing Officer on account of disallowance of financial charges of Rs. 5,05,73,510/- claimed by the assessee. 2. The Learned CIT (Appeals) ought to have considered that said financial charges were incurred for arranging finance to associate enterprises through accommodation bills for purchases and sales to group concerns and subsequently by discounting the same and not for business purposes of the assessee. 3. The Learned CIT (Appeals) ought to have noted that authorities relied upon in the order of CIT(A) were all rendered in a different factual context and the said authorities are not applicable to the facts of the present case where the modus operandi is raising accommodation bills, discounting the same and arranging finance to associate concerns. 4. The Learned CIT (Appeals) ought to have further appreciated that similar disallowance made by the Assessing Officer in assessee's own case for A.Y. 2006-07 and A.Y. 2007-08 was sustained by the predecessor CIT(A) and on appeal by the assessee, Hon'ble ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l report, tax audit report, details of finance charges for Rs. 5,05,73,510/-, copies of letter of credits, details of receipts and utilization of LC proceedings, party wise breakup of purchases for Rs. 713,25,25,959/- and party wise breakup of sales of Rs. 720,49,69,995/-. Applicant stated that proper ledger accounts have been maintained with respect to each of the trade creditor in its books of account. Before me, the applicant submitted that the financial charges were incurred on a letter of credit granted by various financial institutions, the letter of credit proceeds were utilized for payments to various trade creditors and for these services, the amounts charged by the banks were shown under the head "financial charges". Applicant submitted that the present issue of disallowance of financial charges had already covered in its own group case of M/s. Global Forgings Ltd for A.Y. 2010-11 wherein the Hon'ble ITAT vide ITA No. 1269/Hyd/2014 has dismissed the appeal of the Revenue and upheld the order of the CIT (A) wherein the disallowance of financial charges was deleted. Applicant also cited the following case laws in its support: 1. Decision of ITAT, Hyderabad Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure incurred towards the financial charges was allowed as business expenditure cannot be accepted since the assessment proceedings for each year are independent. The asst. order or the decision taken with respect to AY 2006-07 or AY 2007-08 should not have any impact or relation with the asst. order for the A.Y. 2008-09. Though the AO had not submitted detailed report regarding financial charges for AY. 2006-07, 2007-08 and 2008-09 as per the request of the CIT(Appeals)-II, Hyderabad, vide her letter dated 19-6-2012mentioned in para 303 of this order, the report of the AO dated 15-6-2014 is exhaustive and very much relevant and adequate on the issue of financial charges. Hence, I fully agree with the AO regarding the disallowance of 50% of the amount of financial charges debited i.e. Rs. 41,94,797, being interest related to the borrowed funds utilized for the purpose other than business and also agree with the report of the AO dated 15- 6-2012. The case-law cited by the appellant are also different from the facts of the appellant and hence, the appellant submission cannot be accepted. Therefore, I confirm the addition". 2.1. Similar order was passed in AY. 2007-08 also. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Counsel referred to the orders in the AY. 2008- 09, wherein AO after detailed examination of the claim has disallowed only an amount of Rs. 3,07,808/- pertaining to discounting charges paid to M/s. DPJ Viniyog Pvt. Ltd., on the reason that assessee could not furnish any explanation. It was further submitted the Ld.CIT initiated proceedings u/s. 263 on the reason that 'MBB transactions' stated in the details pertain to third party and AO was wrong in allowing the expenditure. The ITAT vide its order dt. 26-03-2014 in ITA No. 1099/Hyd/2013 has considered that M/s. MBB transactions are not third party transactions but multibranch bank transactions and on that basis, proceedings are held to be bad in law, thereby it was submitted that there was no disallowance of financial charges in either earlier years or in later years and disallowance of 50% of financial charges on adhoc basis for the impugned years is not correct. 4. It was further submitted that the Co-ordinate Bench in the case of M/s. Bartronics India Ltd., in ITA No. 2188/Hyd/2011 dt. 31-05- 2012 held that when there is a special audit in the particular year and special auditor has not reported any disallowance, AO is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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