TMI Blog2021 (10) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... of stock over the years. Hence, the assessee has engaged the services of a leading professional, who has investigated the matter, found out the methodology adopted for inflating the stock and finally quantified the difference in the value of stock. Hence, we are of the view that the shortage in the value of stock has been ascertained by the assessee in a systematic manner. Whether the treatment given by the assessee in the accounts is justified or not? - In the instant case, the special auditors have reported that the manipulation in the value of stock has happened from FY 2004- 05 onwards. Hence the shortage of stock quantified relate to the conditions existing as on 31.3.2010 and it materially affects the determination of value of assets as on Balance Sheet date. Accordingly, as per AS-4, the effect of the same needs to be given as on 31.3.2010, even though the report of special auditors has been received only in July, 2010. Hence, it cannot be considered as a prior period expenditure as opined by the AO. It should be considered as current year loss only, since effect of shortage could be given in this year only. Accordingly, the assessee was justified in accounting the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on rendered in the case of Micro labs Ltd [ 2016 (4) TMI 219 - KARNATAKA HIGH COURT] it can safely be presumed that the acquisition of fixed assets has been funded out of own funds only - we set aside the order passed by Ld CIT(A) and direct the AO to delete entire disallowance. Disallowance of interest expenditure as relatable to interest free loans given to associate concerns - CIT(A) deleted the disallowance - HELD THAT:- As noticed earlier that the own funds available with the assessee as on 31.3.2010 was ₹ 91.30 crores and the interest free loans given to sister concerns was around ₹ 6.43 crores. We notice that the co-ordinate bench has already deleted an identical addition made in AY 2008-09 following the decision rendered in the case of M/S RELIANCE INDUSTRIES LTD [ 2019 (1) TMI 757 - SUPREME COURT] - M/S MICROLABS LTD. - In any case, the binding decision rendered in the case of Micro Labs Ltd [ 2016 (4) TMI 219 - KARNATAKA HIGH COURT] also holds that no interest disallowance is called for when the own funds available with the assessee is more the amount of interest free advances given. Under these set of facts, we find no reason to interfere with the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved on the basis of past experience. In our view, the above said details furnished by the assessee distinguishes the case of the current year from that of the case prevailed in AY 2009-10. In our view, the terms and conditions of sale of machineries would show that the liability for erection and commissioning is placed upon the shoulders of the assessee - as submitted that the provision rate of 1% to 3% has been determined on the basis of past experience - this claim of the assessee may be allowed after examining relevant sale bills and the computation of provision so created. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore this issue to the file of the AO for examining the claim of the assessee by duly considering relevant sales invoices and computation of quantum of provision so made. TDS u/s 195 - Disallowance voluntarily made by the assessee in respect of Exhibition charges u/s 40(a)(i) of the Act for failure to deduct tax at source from the payment - AO initiated proceedings u/s 201(1) of the Act for failure of the assessee to deduct tax at source from the above said payments and held that the assessee is an assessee in default - HELD THA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts and bank statements, the assessee explained that the stock statements given to Bank were provisional statements and correct figures were later submitted to the bank through CMA data and audited Balance Sheet. It was explained that the stock shown in the Balance sheet was arrived at after taking inventory of physical stock. 3.2 The AO examined the Annual report furnished by the assessee and noted following points/also took following views: - (a) The assessee has claimed short fall in inventory amounting to ₹ 22,49,09,068/- below the line in the Profit and Loss account, but claimed the same as allowable expenditure while computing total income. (b) No physical verification of stock was carried out during the year. However subsequent to 31.3.2010, physical verification of stock has been carried out in July, 2010. Material discrepancies were noticed at that time and the short fall in the value of inventory was arrived at ₹ 22,49,09,068/-. (c) The above amount was shown as prior period item in the Tax audit report. In the Profit and Loss account, it is shown as an Exceptional item. (d) In view of the above, the AO took the view that the short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed the claim of ₹ 22.40 crores with the following observations:- (a) The assessee has failed to explain the reasons for such huge write off. It has not given any evidence as to the nature and reason for the difference. (b) The assessee could not substantiate as to why the insurance claim was not made for the loss of inventory. (c) An item of missing asset becomes a loss of the year in which it is discovered. (d) The assessee company has not made available any report of physical verification and the outcome of such report, management replies and so on. (e) The assessee company is not able to explain how such inventory shortfall of ₹ 22,49,09,068/- was admitted by the Excise Department, VAT department. (f) The assessee could not explain whether the said over valuation resulted in increase in profits in any of the year and whether it was offered to tax or not. 3.5 In the appellate proceedings, the Ld CIT(A) accepted the contentions of the assessee and held that the shortfall in the value of inventory amounting to ₹ 22.49 crores is allowable as deduction. The revenue is aggrieved by this decision of Ld CIT(A). 3.6 The L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial years 2005-06, 2006-07 and 2007-08 across multiple inventory accounts. During the current year, the assessee decided to migrate to SAP software. After migration to SAP software, these mistakes came to be noticed and hence the assessee decided to set right all mistakes. Hence the assessee appointed M/s Earnest Young to investigate into this matter vis- -vis actual physical stock. The Special auditors have conducted a thorough review of the internal control procedures, inventory accounting and valuation methods. After undertaking the above said exercises, they have quantified the shortfall in the value of inventory at 22.49 crores, which actually does not exist. Accordingly, he submitted that the difference in the value was arrived at in a scientific manner, which has been dealt with properly in the books of account. 3.9 The Ld A.R submitted that though the shortage of stock was found out only in July, 2010, yet it was found that the mistakes have happened prior to 31.3.2009. He submitted that the closing stock shown on 31.3.2009 shall become opening stock as on 1.4.2009. The Hon ble Supreme Court has also reiterated this view in the case of V.K.J Builders and Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e period prior to 31.3.2010 and hence, even if it is found only in July, 2010, the same is required to be given effect to on 31.3.2010 as per AS-4. Accordingly, the A.R submitted that the assessee has booked this as expenditure on 31.3.2010 as an exceptional item in compliance with Accounting Standards. With regard to the report of the special auditors M/s Earnst and Young, the Ld A.R submitted that the Ld CIT(A) has captured the relevant portion of the report, which clearly describes the circumstances which led to the over valuation of stock. 3.12 In the rejoinder, the Ld CIT-DR reiterated that the assessee has not furnished full copy of report of the special auditors. 3.13 We have heard rival contentions and perused the record. The issue under consideration is whether the Ld CIT(A) was justified in deleting the disallowance of shortage in the value of inventory? In order to address this issue, in our view, following points have to be examined: - (a) Whether the loss of ₹ 22.49 crores was properly ascertained and quantified? (b) Whether the treatment given by the assessee in its accounts is justified. (c) Whether the claim of the assessee is allowabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has failed to explain the reasons for such huge write off and the assessee has not given any evidence as to the nature and reason for the difference. The above said observation of the AO is contrary to the facts available on record. The discussions made in the earlier paragraphs would show that there was shortage in the value of stock due to manipulation done by an earlier employee and the same has resulted in declaration of higher value of stock over the years. Hence, the assessee has engaged the services of a leading professional, who has investigated the matter, found out the methodology adopted for inflating the stock and finally quantified the difference in the value of stock. Hence, we are of the view that the shortage in the value of stock has been ascertained by the assessee in a systematic manner. 3.18 The next question is whether the treatment given by the assessee in the accounts is justified or not. As noticed earlier, the assessee has accounted the loss in the profit and loss account for the year ending 31.3.2010, even though the loss was quantified, vide report given by the Special auditor in July, 2010. The AO has expressed the view that an item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current year loss only, since effect of shortage could be given in this year only. Accordingly, the assessee was justified in accounting the shortage during the year ending 31.3.2010. 3.21 Another important point to be noted is that the assessee has split the opening stock as on 1.4.2009 into two items, viz., opening stock and exceptional expenditure, i.e., the shortage has not been separately accounted for in the books of accounts. It has been duly disclosed in the Profit and Loss account by making corresponding reduction in the Opening stock value. There should not be any dispute that the closing stock of the preceding year is carried forward as opening stock of the current year. Having accepted the closing stock of preceding year, the opening stock value of current year also requires to be accepted. 3.22 The AO has observed that the assessee has not made any insurance claim. Since it is a case of excess valuation of stock, the question of lodging any insurance claim does not arise. The Ld A.R submitted that the Excise department and VAT department are concerned with the sales turnover only. Further, the question of making any claim before them for the inflation in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, I am of the view that the closing stock of the previous year should be considered as opening stock without any adjustment as per Hon ble Supreme Court rulings quoted above. As stated earlier, the reduction of opening stock and disclosure of the same amount as exceptional item is only to meet the disclosure requirements of the Accounting Standards and the above accounting disclosure is revenue neutral and accordingly addition of ₹ 22.49 crores on account of shortfall of inventory is deleted. 3.24 Another important aspect, which is relevant for this issue is the valuation of closing stock as on 31.3.2010. As noticed earlier, the assessee has split the opening stock brought forward from 31.3.2009 and disclosed one portion as Opening stock and the remaining portion as exceptional item . It is an undisputed fact that the assessing officer has accepted the value of closing stock as on 31.3.2010 . Even if the above said exercise has not been carried out, the assessee is required to value the actual physical stock at lower of cost or net realisable value , which is the accounting policy followed by the assessee as reported in clause (j) of Note 2 given under Schedule Q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Accordingly, it was contended that the above said addition has not resulted in any extension of business. It was also submitted that the assessee is having adequate own funds as on 31.3.2010, i.e. ₹ 91.30 crores. It was submitted that the amount of ₹ 6.03 crores included opening work in progress of ₹ 4.55 crores and hence the net addition to assets made during the year was only ₹ 1.48 crores. It was submitted that the assessee was having cash and balance of ₹ 25.51 crores as at the beginning of the year, i.e., as on 1.4.2009. Accordingly, it was contended that the disallowance u/s 36(1)(iii) is not warranted. 4.4 The Ld CIT(A) gave a finding that the addition to fixed assets has not resulted in extension of business . The Ld CIT(A) also accepted that the net addition made during the year was ₹ 1.48 crores only. The assessee had put up an alternative contention before the Ld CIT(A) that the disallowance, if any, should be restricted on the value of net addition to the capital assets, i.e., on ₹ 1.48 crores . The ld CIT(A) accepted the alternative contention of the assessee and accordingly directed the AO to restrict the disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue relates to disallowance of ₹ 9,59,265/- out of interest expenditure as relatable to interest free loans given to associate concerns. The AO noticed that the assessee has advanced interest free funds to its associated companies and hence proposed to disallow part of interest expenses. The assessee submitted that it has got sufficient interest free funds and the advances to associated companies have been given out of interest free funds. It was further submitted that an identical disallowance made in AY 2008-09 has since been deleted by ITAT. However, the AO noticed that the assessee has accepted an addition of ₹ 9,59,265/- in its written submissions. Accordingly, he disallowed the same. 5.1 The Ld CIT(A) deleted the disallowance by following the decision rendered by the Tribunal in the assessee s own case in AY 2008-09 in ITA No.1185/Bang/2011. 5.2 The Ld D.R submitted that the assessee has not proved that the interest free funds have been given to associate companies out of own funds only. Accordingly, she supported the order passed by the AO. On the contrary, the Ld A.R submitted that the assessee has got sufficient interest free funds and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Ld A.R submitted that the assessee has been following above said method of writing of loose tools is followed by the assessee for the past 20 years. The same was not accepted for the first time only in AY 2008-09. However, the ITAT has accepted the method followed by the assessee and deleted the disallowance. He submitted that the furnishing of details was not an issue before the Tribunal in AY 2008-09. 6.3 We notice that the co-ordinate bench of ITAT has deleted an identical disallowance made in AY 2008-09 with the following observation:- 14. Having heard both the parties and having considered their rival contentions, we find that the Revenue has not disputed the incurring of expenditure by the assessee in purchase of the tools. The only reason for the disallowance is that it is not revenue in nature but is of capital in nature. It is also not disputed that the assessee is following the said method of accounting for the past 14 years and no disallowance has been made in the previous years. As rightly pointed out by the learned counsel for the assessee, the Revenue effect would be very minimal whether the expenditure is treated as revenue in nature or treated as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2019) and held that the decision in the case of Tejas Network Ltd (supra) has been rendered by Hon ble Karnataka High Court on a different point and accordingly distinguished the same. Further, following the decision rendered in the case of Mahindra Electric Mobility (supra), the Tribunal held that Form no.3CL is not mandatory for claiming weighted deduction for the year under consideration. In these cases that Form 3CL has become mandatory with effect from 1.7.2016 only and prior to that date, there is no legal sanctity for Form 3CL. Accordingly the Ld A.R submitted that the disallowance of weighted claim is not in accordance with law. 7.4 The Ld D.R, on the contrary, supported the order passed by Ld CIT(A) on this issue. Further, the Ld D.R placed here reliance on the following case laws and contended that Form No.3CL has been held to be mandatory in these cases for claiming weighted deduction u/s 35(2AB) of the Act. (a) Tejas Network Ltd vs. DCIT (2015)(60 taxmann.com 309)(Kar) (b) Electronics Corporation of India Ltd vs. ACIT (2012)(28 taxmann.com 280)(Hyd) (c) PCP Chemicals Ltd vs. ITO (2017)(88 taxmann.com 5) 7.5 We heard rival contentions on this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in-house R D facilities was approved by the DSIR, Govt. of India, Ministry of Science and Technology for AY 2012- 13 vide their letter dated 20-5-2009, a copy of which is placed at Page-30 of the Assessee's paper book. The approval is for the period 1-4-2009 upto to 31-3-2012. Therefore, the condition for allowing deduction u/s.35(2AB) of the Act has been fulfilled by the Assessee. The claim of the revenue, however, is that the approval by the prescribed authority in form No. 3CM is not final and conclusive and the quantum of expenditure on which deduction is to be allowed is to be certified by DSIR in form No. 3CL. There is no statutory provision in the Act which lays down such a condition. We shall therefore examine what is Form No. 3CL. 15. DSIR has framed guidelines for approval u/s.35(2AB) of the Act. The guidelines as on May, 2010 which is relevant for AY 2012-13, in so far as it is relevant for the present appeal, was as given below. (i) As per guideline 5 (iv) of the guidelines so framed, every company which has obtained an approval from the prescribed authority should also submit an undertaking as per Part C of Form No. 3CK to maintain separate accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -13. Though there has been no communication to the Assessee in this regard, the learned counsel for the Assessee submitted that since the audited accounts were not submitted by 31st October of the succeeding AY, as is required under Guideline 5 (vi), the Assessee's application would not have been considered by the DSIR. 17. Rule-6(7A)(b) of the Rules specifying the prescribed authority and conditions for claiming deduction u/s.35(2AB) of the Act has been amended by the Income-tax (10 th Amendment) Rules, 2016 w.e.f. 1-7-2016, whereby it has been laid down that the prescribed authority, i.e., DSIR shall quantify the quantum of deduction to be allowed to an Assessee u/s.35(2AB) of the Act. Prior to such substitution, the above provisions merely provided that the prescribed authority shall submit its report in relation to the approval of in-house R D facility in Form No. 3CL to the DGIT (Exemption) within 60 of granting approval. Therefore prior to 1-7- 2016 there was legal sanctity for Form No. 3CL in the context of allowing deduction u/s.35(2AB) of the Act. 18. The issue as to whether deduction u/s.35(2AB) of the Act can be denied for absence of Form No. 3CL by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 35(2AB) of the Act. Accordingly, we hold so. Thus, we reverse the order of Assessing Officer in curtailing the deduction claimed under section 35(2AB) of the Act by ₹ 6,75,000/-. Thus, grounds of appeal No.10.1, 10.2 and 10.3 are allowed. (ii) The Hyderabad ITAT in the case of M/S. Sri Biotech Laboratories India Ltd. v. ACIT ITA No. 385/Hyd/2014 for AY 2009-10 order dated 24-9-2014 took the view (vide Paragraph-13 of the order) that when the Assessee's R D facility is approved the deduction u/s.35(2AB) of the Act cannot be denied merely on the ground that prescribed authority has not submitted report in Form 3CL. 19. The question of allowing deduction u/s.35(2AB) of the Act was considered by the Hon'ble Delhi High Court in the case of CIT v. Sadan Vikas (India) Ltd. [2011] 335 ITR 117 (Del) where AO refused to accord the benefit of the weighted deduction to the assessee under s. 35(2AB) on the ground that recognition and approval was given by the DSIR in February/September, 2006, i.e., in the next assessment year and, therefore, the weighted deduction cannot be allowed. The CIT(A) confirmed the order of the AO. The Tribunal held that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed deduction on expenditure so incurred by the assessee for development of facility. The Tribunal has also considered r. 6(5A) and Form No. 3CM and come to the conclusion that a plain and harmonious reading of rule and Form clearly suggests that once facility is approved, the entire expenditure so incurred on development of R D facility has to be allowed for weighted deduction as provided by s. 35(2AB). The Tribunal has also considered the legislative intention behind above enactment and observed that to boost up research and development facility in India, the legislature has provided this provision to encourage the development of the facility by providing deduction of weighted expenditure. Since what is stated to be promoted was development of facility, intention of the legislature by making above amendment is very clear that the entire expenditure incurred by the assessee on development of facility, if approved, has to be allowed for the purpose of weighted deduction. 20. From the above discussion it is clear that prior to 1-7-2016 Form 3CL had no legal sanctity and it is only w.e.f 1-7-2016 with the amendment to Rule 6(7A)(b) of the Rules, that the quantification of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the amount mentioned in Form 3CL, i.e., the quantum of R D expenditure mentioned in Form 3CL cannot be tampered with by the Tribunal. Thus, the question whether Form 3CL is mandatory or not was the issue before the Hyderabad bench of Tribunal. In the case of PDP Chemicals (P) Ltd (supra), the issue before Mumbai bench of Tribunal was whether the deduction u/s 35(2AB) could be granted without an approval from the prescribed authority? Hence the issue considered by Mumbai bench of Tribunal is totally different. 7.7 The assessment year under consideration is AY 2010-11 and hence the decision rendered by the co-ordinate bench in the case of Kumar Organic Products Ltd (supra) shall apply to the assessee for AY 2010-11. Following the same, we hold that Form No.3CL is not mandatory for the year under consideration and hence the weighted deduction claimed by the assessee cannot be rejected. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to allow weighted deduction as claimed by the assessee. 8.0 The next issue contested by the assessee relates to the disallowance of provision made for erection and commissioning work. 8.1 The assessee created a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has also furnished sample copies of invoices, wherein it is clearly mentioned that Commissioning of machinery including freight shall be carried out at free of cost. He invited our attention to a copy of invoice, purchase order and commissioning report placed in page 118 123 of the paper book in support of the above said submission. He submitted that the assessee is making provision for erection and commissioning @ 1% to 3% of the sale value of machinery, depending upon the nature of machinery and the estimated expenditure that may be incurred on erection and commissioning. He submitted that the above said percentage has been determined by the assessee on the basis of past experience. Accordingly, he submitted that the assessee is following scientific method for making this provision. He submitted that the provision made as at the yearend is reversed in the succeeding year as per accounting principles. Accordingly he submitted the decision rendered in AY 2009-10 is not applicable to the year under consideration. He submitted that this disallowance needs to be deleted, since the assessee has furnished all the details to the AO. 8.5 The Ld CIT-DR submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave held that the entire interest disallowance has to be deleted. Accordingly, the interest disallowance partially confirmed by Ld CIT(A) is liable to the deleted. We order accordingly. 10.0 In the next ground, the assessee has claimed that depreciation on the amount of interest capitalised should be allowed, if the interest disallowance is confirmed by Ld CIT(A). This ground has become infructuous, since we have deleted the interest disallowance. 11. The last issue urged in this year relates to non-adjudication of grounds relating to Capital gains by Ld CIT(A). Since the Ld CIT(A) has not adjudicated this issue, we restore this ground to the file of Ld CIT(A) for adjudicating the same after affording adequate opportunity to the assessee. ASSESSMENT YEAR : 2011-12 (C) REVENUE S APPEAL - 2011-12 12.0 The first ground urged by the revenue in this year relates to disallowance of interest expenditure relatable to the interest free advances given to sister concerns. 12.1 The facts prevailing in this year are discussed in brief. The AO noticed that the assessee has advanced interest free loans to its sister concerns and a sum of ₹ 44,47,571/- was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king provision for warranties every year and the percentage of provision on sales work out to less than 1% and further they are very near each other. The Ld CIT(A) also referred to the decision rendered by Hon ble Supreme Court in the case of Rotork Controls (314 ITR 62)(SC) in this regard. He further noticed that he had allowed identical disallowance made in AY 2010-11 and AY 2008-09. Accordingly, he deleted the disallowance made in AY 2011-12 also. 14.2 The Ld CIT-DR supported the order passed by the AO on this issue. The Ld A.R submitted that the Ld CIT(A) has given a finding that the provision created forms a fraction of the sales value. Further, the assessee has been making provision on a scientific basis every year and in the past years, the provision has been allowed. 14.3 Having heard rival contentions on this issue, we are of the view that the decision rendered by Ld CIT(A) on this issue does not require interference, since the Ld CIT(A) has followed his decision rendered in AY 2008-09 and 2010-11, which has since been accepted by the revenue. Further, the ld CIT(A) has given a finding that the provision for warranty made by the assessee is reasonable and on scie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the hands of non-resident recipients and since they do not have permanent establishment in India, the same is not taxable in India as per Article 7 read with Article 5 of Indo-German DTAA. Accordingly, he set aside the order passed by the AO u/s 201(1) of the Act. 17.3 Relying on the above said decision of Ld CIT(A), the Ld A.R submitted that there is no liability to deduct tax at source from the exhibition charges and hence the voluntary disallowance made by the assessee on mistaken belief should be deleted. 17.4 The Ld D.R, on the contrary, submitted that the assessee is making fresh claim without filing revised return of income, which is contrary to the decision rendered by Hon ble Supreme Court in the case of Goetz India Ltd (284 ITR 323)(SC). 17.5 We heard the parties on this issue and perused the record. The assessee is making a fresh claim for removal of disallowance voluntarily made u/s 40(a)(i) of the Act in the return of income filed by it. Even though the Hon ble Supreme Court has held in the case of Goetz India Ltd (supra) that the assessee can make fresh claim only through revised return of income, yet the Hon ble Supreme Court has specifically held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. 17.7 Thus, we notice that the Ld CIT(A) has held in the proceedings initiated u/s 201(1) of the Act that the assessee is not liable to deduct tax at source from the payments made towards exhibition charges. In that case, there is no necessity to invoke provisions of sec.40(a)(i) of the Act. Accordingly, we direct the AO to delete the disallowance made by the assessee voluntarily u/s 40(a)(i) of the Act in respect of exhibition charges. 18.0 The next issue urged by the assessee by way of additional ground relates to claim of set off of short term capital loss brought forward from earlier year. Since this issue requires factual verification, we restore this issue to the file of the AO. ASSESSMENT YEAR 2012-13 (E) REVENUE S APPEAL - 2012-13 19.0 The first ground urged by the revenue in this year relates to disallowance of interest expenditure relatable to the interest free advances given to sister concerns. 19.1 The facts prevailing in this year are discussed in brief. The AO noticed that the assessee has advanced interest free loans to its sister concerns and a sum of ₹ 21,40,68,782/- was outstanding as on 31.3.2012. The AO took the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d followed the decision rendered by ITAT in AY 2009-10. The ITAT had confirmed the disallowance in AY 2009-10. 21.1 Identical issue has been examined by us in AY 2010-11 and the matter has been restored to the file of AO with certain directions. Following the same, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO with similar directions. 22.0 In the next ground, the assessee has claimed that depreciation on the amount of interest capitalised should be allowed, if the interest disallowance is confirmed by Ld CIT(A). This ground has become infructuous, since we have deleted the interest disallowance. 23.0 The next issue urged by the assessee by way of additional ground relates to claim of set off of short term capital loss brought forward from earlier year. Since this issue requires factual verification, we restore this issue to the file of the AO. ASSESSMENT YEAR 2013-14 (G) REVENUE S APPEAL 2013-14 24.0 The first ground urged by the revenue in this year relates to disallowance of interest expenditure relatable to the interest free advances given to sister concerns. 24.1 The facts prevailing in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26.0 The first issue contested by the assessee relates to the disallowance of expenditure claimed under the head Provision for Erection and Commissioning works . As in last year, the AO disallowed the claim of ₹ 35,32,502/- holding that the assessee has failed to furnish scientific basis for creation of such provision. The Ld CIT(A) also confirmed the disallowance by following his decision rendered in AY 2010-11, wherein he had followed the decision rendered by ITAT in AY 2009-10. The ITAT had confirmed the disallowance in AY 2009-10. 26.1 Identical issue has been examined by us in AY 2010-11 and the matter has been restored to the file of AO with certain directions. Following the same, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO with similar directions. 27.0 In the next ground, the assessee has claimed that depreciation on the amount of interest capitalised should be allowed, if the interest disallowance is confirmed by Ld CIT(A). This ground has become infructuous, since we have deleted the interest disallowance. 28. In the result, all the appeals of the assessee are treated as allowed and all the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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