TMI Blog2009 (8) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... bad debts and advances to the tune of ₹ 1,09,93,814. However, the assessing authority declined to allow the deduction as claimed by the assessee alleging that there was no effort shown to have been taken for recovery thereof. The assessee s claim of expenditure to the tune of ₹ 1,18,78,000 towards research and development was not allowed on the premise that the assessee had not furnished any other details. The assessee s claim of₹ 1,80,22,000 towards exchange fluctuation loss was also not allowed. A total income of ₹ 41,77,59,433 was determined and tax demanded which included levy of interest under section 234B and 234C of the Act to the tune of ₹ 17,55,384. 3. The learned counsel for the assessee reiterated the submissions as were made before the lower authorities. (a) With respect to the issue of disallowance of claim of bad debt, the learned counsel submitted that the learned CIT(A) erred in not following the decision of the ITAT, Special Bench, Mumbai in the case of DCIT Vs. Oman International Bank SAOG reported in 100 ITD 285 which clearly indicate that the assessee having fulfilled the requirements under section 36(1)(vii) r.w.s. 36(2) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment expenses, he pointed out that the entire amount was claimed in the profit and loss account under the group R D expenses as can be pursued in the paper book being R D expenses incurred separately with the assessee incurs being in the manufacturing of Indian Made Foreign Liquor (IMFL) for quality control and development and has to be identified as in the immediately preceding assessment year also when the claim of ₹ 97.59 lakhs was made and allowed. It is not the case of the assessee to claim weighted deduction to only to identify the human resources indulged in such activity which cannot be denied to the assessee. The learned CIT(A) confirmed the action of the Assessing Officer who had held that the assessee had not incurred any expenditure on R D as no vouchers etc were submitted before him. Specific requirement by the learned CIT(A) was also known to the assessee, therefore, ought to have been specified with the claim was made in accordance with the Income Tax Act, 1961 and was not deviated from it as in the earlier years. (c) (i) With respect to the claim of foreign exchange conversion loss, he pointed out that the assessee had maintained foreign exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Assessing Officer and CIT(A). The assessee had obtained FCNR(B) loans for the purpose of working capital and the evidences in support of this has been provided before the authorities below and was available in page Nos.68 to 93 of the paper book filed. The exchange loss pertaining to this is ₹ 30592521 whereas the interest paid on the forex loans was ₹ 4.85 crores. The forex loans were obtained on various dates between 2.4.2004 and 31.3.2005 which is evident from the Annexure 1. The increase in investments from 102.92 crores to ₹ 380.32 crores was on account of investment of ₹ 287 crores in 8% redeemable preference shares of Phipson Distillery Ltd. The said investment was made on 31.3.2005 i.e. on the last day of the year. Factually no expenditure was said to have been incurred on this investment made on the last day of the year. Even the said investment in subsidiaries was for the purpose of business. The distinction made by the Assessing Officer between business purpose and investment was erroneous as both were for commercial purpose as held by the Hon'ble Supreme Court in the case of S.A. Builders reported in 288 ITR 1. Hence the reason giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opportunity to explain the same. The learned CIT(A) has held that the Assessing Officer has given him adequate opportunity to explain but which the assessee has failed to do so. During the appellate proceedings too the assessee has not been able to produce corroborative vouchers showing expenses and has upheld the addition made by the Assessing Officer. 9. The learned D.R. further submitted that the assessee has claimed an amount of ₹ 1,80,22,000 towards exchange fluctuation loss. During the course of hearing the assessee was asked to file the details of the expenditure and the reason of the loss. The assessee vide its letter stated that the company has entered into an agreement with certain banks and raised FCNR working capital demand loans. The assessee has not shown any nexus between the loans availed by it and the usage of it for the working capital requirements. The assessee has also made investments during the year in the form of fully paid equity shares in a number of quoted / unquoted investments. The investments of the assessee during the year have gone up from ₹ 102.90 crores in the year 2004 to ₹ 380.32 crores in the year ended 2005. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 37(1) as they do fulfill the criteria envisaged by the provisions for claiming expenses under the mercantile system of accounting consistently followed by the assessee. Under the Mercantile System of Accounting, the amounts so claimed were expenses to be incurred against income in the previous years and the nature thereof clearly indicate that the amounts written off by the assessee were considered of their irrecoverability to be allowed as revenue loss claimed as business expenditure. For this proposition, the Assessing Officer ought to have verified such claims of amounts written off when the very nature of their expenses have been allowed by him as day to day business expenses. The assessee has furnished details with respect to various items claimed including the claim of trade advances amounting to ₹ 69,31,963 being the amount paid to one Martin Burns Limited for repair/renovation of office at Calcutta in 1998-99. It was similarly considered allowable in assessee s own case for A.Ys 1996-97, 1997-98 by the Tribunal when the amount was claimed as revenue expenditure on renovation and repairs of an asset not owned by the assessee but categorized being advances paid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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