TMI Blog2023 (7) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... was incorporated and being promoters the corporate guarantees were extended for the credit facilities received for the joint venture company. It appears that Ld. AO had fallen in error in not appreciating the fact that although, the joint venture was a separate entity it was promoted by the assessee along with his partners and they had direct interest in the sustenance and existence of that company. There is no allegation that the Joint Venture was any paper or sham transaction but the matter on record show it was a functional unit which ended into loss making. The credibility of assessee was directly on stake with the default of the joint venture company FMRIL. The dues of joint venture were paid on full settlement of the dues standing against the assessee on account of corporate guarantee. The same was certainly a business expenditure as the operations of joint venture was to expand the market of assessee with his partner of joint venture. In the instant case the expenditure was rightly held to be deductible u/s 37. The assessee incurred the expenditure to avoid any adverse effect on its reputation and avoid costs of litigation and in CIT vs. Delhi Safe Deposit Company Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the company has paid a sum of Rs. 3,19,45,898/- to YES BANK due to invocation of the Corporate Guarantee given by company for securing the credit facilities extended by the YES BANK to M/s Foot- Mart Retail India Ltd. (FMRIL), a Joint Venture Company, jointly and severely with Pantaloon Retail India Limited (PRIL). Please note that to strengthen its presence in the organized retailing, the said joint venture company was got incorporated in the year 2005 by the Company, jointly with PRIL, having 49% shake in the same. To meet its financial requirements for its business operations the company, being a promoter of the said JV Company extended its corporate guarantee jointly with PPJL to Yes Bank for the credit facilities granted. Since due to higher operational cost and love volume of business in comparison to envisaged plans, FMPJL went into losses and ultimately expressed its inability in payment of its dues towards Yes Bank vide letter dated January 16, 2012 (copy enclosed). On receipt of the same Yes Bank initiated its recovery proceeding with the guarantee by giving notice for invocation of the Corporate Guarantee to both the guarantors vide letter dated January, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in appeal raising following grounds :- 1. Whether on the facts and in the circumstances of the case, the C1T(A) has erred in deleting the addition of Rs. 70,56,529/- on account of expenses related to exempt income u/s 14A read with Rule 8D of the Income Tax Rules, clearly overlooking the spirit of section 14A according to which the tax exempt income need not be necessarily included in the income of the year under consideration for the disallowance to be triggered in respect of expenses that shall eventually result in exempt income in future years. 2. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 3,19,45,898/- made by the A.O. in respect of the payment made by assessee company to YES Bank on account of a corporate guarantee, without even specifying the section / relevant provisions of the Income Tax Act under which the said deduction was allowed. 3. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in ignoring the fact that the assessee in its Proflt Loss Account had recorded the entry as Debts Written Off, and thus the same had to be tested on the touchstone of only th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) relied the determination of issue in favour of assessee in assessee s own case. Ld. AR has also drawn support from orders in assessee s own case in similar circumstances in ITA no. 1979/Del/2018 for A.Y. 2014-15 where by judgment dated 08.02.2023 the Revenue s appeal on that ground was disallowed and order of ld. CIT(A) was upheld. Thus, the Bench is inclined to not interfere in the findings of Ld. CIT(A). Consequently, ground is determined against the Revenue. 6. Ground nos. 2 to 8; These grounds arise out of common questions of facts and law therefore are taken up together for determination. Ld. AR has heavily relied Joint Venture tri-partite agreement available at page no. 58 to 84, minutes of the meeting resolution with regard to Corporate Bank Guarantee available at page no. 85 to 86, Copy of letter dated 16 Jan, 2012 by FMRIL expressing of inability in payments of its dues towards the YES Bank available at page no. 36 to 37, Copy of Notice dated January 17, 2012 issued by the YES Bank, on receipt of the letter dtd. January 16, 2012 mentioned in Point No.2, for invocation of the Corporate Guarantee to both the Corporate Guarantors at Page No. 38 to 40, copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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