TMI Blog2024 (1) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the period from September, 1992 to 1993 and the same has been written-off after a considerable period of time in this year. Since considerable time has elapsed and the claim has not been received by the assessee till date, the write-off of the same has to be allowed as bad debts. Disallowance of Agri India claim - write-off of interest on fertilizer subsidy - HELD THAT:- It could be noted that assessee was handling imported fertilizers in earlier years and Government of India was reimbursing the handling charges to the assessee. Out of such claims made by the assessee, the amount of Rs. 3579.61 Lacs was not sanctioned even after persistent efforts made by the assessee. As per the submissions, this income was booked during the period from September, 1992 to 1993 and the same has been written-off after a considerable period of time in this year. Since considerable time has elapsed and the claim has not been received by the assessee till date, the write-off of the same has to be allowed as bad debts. The directions given by Ld. CIT(A) with respect to interest on fertilizer subsidy is quite apt and no further directions are required in the matter. Regarding equity advance , the und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een decided by us against the assessee in assessee s appeal [ 2024 (1) TMI 1278 - ITAT CHENNAI] wherein as held this liability has not yet crystallized and the same is merely in the nature of contingent and an unascertained liability only which may or may not arise. Undoubtedly, the same is covered under the provisions of Sec.43B. Therefore, the same has to be disallowed in normal computations as well as while computing Book Profits u/s 115JB also. Assessment of interest income - assessee underwent Corporate Debt Restructuring (CDR) and got relief of Rs. 507.16 Lacs as reported by statutory auditor - assessee submitted that they have accounted interest expenditure at the reduced rates instead of normal rates. Therefore, the question of adding the same would not arise - HELD THAT:- From the facts, it emerges that the assessee has accounted interest expenditure at reduced rates only and the separate reporting made by Auditor is part of statutory disclosure only. The Ld. CIT(A) has well appreciated the plea of the assessee and observed that the assessee did not provide the requisite documents and computations to support its stand. AO has been directed to verify the claim of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO in the assessment order. Therefore, the aforesaid claim would be assessable as capital loss and be allowed to be carried forward. The Ld. AO is directed to compute the same in accordance with law. The alternative claim made by the assessee stand allowed. - HON BLE SHRI MAHAVIR SINGH, VP AND HON BLE SHRI MANOJ KUMAR AGGARWAL, AM For the Appellant : Shri R. Vijayaraghavan Shri Saroj Kumar Parida (Advocates)-Ld. ARs For the Respondent : Shri Nilay Baran Som (CIT) Shri AR V Sreenivasan (Addl. CIT)-Ld. DRs ORDER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. Aforesaid appeal by assessee was heard along with other appeals for various assessment years having common issues. This appeal arises out of an order passed by learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] on 10.01.2023 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 23.12.2009. The grounds raised by the assessee are as under: - 1. The order of National Faceless Appeal Centre (NFAC), Delhi is contrary to law, facts and in the circumstances of the case. 2. The CIT(A) / NFAC erred in restricting the disallowance of proportionate int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or sale of electricity Act, 2003 and the validity of the Act was challenged before Hon'ble Madras High Court. 5.2 The Commissioner of Income Tax (Appeals) ought to have appreciated that amount due to TNEB is only an ascertained liability and hence the same should not be disallowed. 6. The CIT(A) / NFAC erred in treating the interest expenditure not claimed by the appellant to an extent of Rs. 5,07,16,600 as income arising from the business assessable u/s 28(iv) in the hand of appellant. 6.1 The CIT(A) / NFAC ought to have appreciated that the observation of the appellant vide item 10(a) to Notes on Accounts annexed to the audited Annual Report (18 month period) for the assessment year 2006-07 and upheld that the said disclosure was made only for statistical purposes and to quantify the interest expenditure not claimed by the appellants and such amounts cannot be subjected to tax, since the interest expenditure already accounted by the appellants was only at the reduced rate of interest . Hence the amount cannot form appellant's income u/s 28(iv). 7. The CIT(A) / NFAC erred in confirming the disallowance of business expenditure amounting to Rs. 8,00,00,000/- in connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (SPC) 318.97 5. SPEL semiconductor Ltd. 71.46 6. National Aromatics and Petrochemicals Corp. Ltd. (NAPCL) 1460.38 7. Tuticorin Alkali Chemicals and Fertilizers Ltd. (TAC) 628.76 8. SPIC Jet Engg. Construction Ltd. 2.38 Total 7870.18 The assessee, inter-alia, submitted that own funds were utilized to make those investments. The assessee also relied on the decision of Hon ble Supreme Court in the case of CIT V/s S.A. Builders (288 ITR 1) to bolster its claim. However, rejecting the same, Ld. AO computed proportionate disallowance of Rs. 657.50 Lacs. 3.2 During appellate proceedings, the assessee assailed the impugned disallowance on the ground that all these investments had business nexus and also raised plea of sufficiency of own funds to make these investments. However, rejecting the submissions of the assessee, Ld. CIT(A) confirmed the impugned disallowance except disallowance made against advances given to M/s Tuticorin Alkali Chemicals and Fertilizers Ltd. (TAC). The adjudication of Ld. CIT(A) reduced the impugned disallowance to Rs. 604.97 Lacs against which the assessee is in further appeal before us. 3.3 We find that this issue has been decided by us in assessee s favor in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 60% contribution in this entity. The venture was to ensure supply of critical raw material for the assessee. Simply because the project could not fructify would not disentitle the claim of the assessee that it had business connection with this entity. The investment made by the assessee has RBI approval vide letter dated 22.09.1994 which is placed on page nos.100 101 of paper-book-1. This being so, disallowance of interest either u/s 37(1) or u/s 36(1)(iii) could not be said to be justified. We order so. The advances given to SPEL have been given by the assessee as a promoter entity to meet its debt obligations and capital expenditure. The advances were given by the assessee to this entity only up-to financial year 2000-01. During impugned year, the advances made by the assessee have been converted into equity shares. In earlier years, when the advances were given, the assessee is having sufficient own interest free funds to make these investments. The working of the same has been given on page nos. 7 8 of the paper-book-1. Similar findings have been rendered by us in assessee s own case vide ITA No. 170/Chny/2023 for AY 2003-04. Therefore, the assessee s ground would succeed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (307 CTR 121) which held that it could be presumed that the investments were made out of interest free funds available with the assessee. The ratio of decision of Hon ble Madras High Court in CIT V/s Hotel Savera (239 ITR 795) as well the decision of Hon ble Bombay High Court in CIT V/s Reliance Utilities (313 ITR 340) also supports the case of the assessee. The interest disallowance on inter-corporate deposits of Rs. 675 Lacs has been deleted by us in assessee s own case vide ITA No.170/Chny/2023 for AY 2003-04 on the ground that in the year when these deposits were placed, the assessee had sufficient own funds to make the investments. Taking consistent view, no disallowance is called for against these ICDs. Finally, considering the facts and circumstances of the case, the impugned disallowance of Rs. 5519.30 Lacs as sustained in impugned order could not be sustained in law. We order so. In the above order, detailed findings have been rendered by us with respect to each of the parties under consideration. We have concurred with the plea of business nexus as well as sufficiency of own funds. The facts are quite similar in this year. Therefore, taking the same stand, the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance was upheld. Aggrieved, the assessee is in further appeal before us. 4.4 After careful consideration of material facts, it could be noted that assessee was handling imported fertilizers in earlier years and Government of India was reimbursing the handling charges to the assessee. Out of such claims made by the assessee, the amount of Rs. 3579.61 Lacs was not sanctioned even after persistent efforts made by the assessee. As per the submissions, this income was booked during the period from September, 1992 to 1993 and the same has been written-off after a considerable period of time in this year. Since considerable time has elapsed and the claim has not been received by the assessee till date, the write-off of the same has to be allowed as bad debts. We order so. 4.5 The directions given by Ld. CIT(A) with respect to interest on fertilizer subsidy is quite apt and no further directions are required in the matter. 4.6 Regarding equity advance, the undisputed fact that emerges is that the same has been offered to tax in earlier years. The Ld. AO denied the deduction of the same on the ground that it was capital in nature whereas Ld. CIT(A) confirmed the same on the ground tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R D facility which has been approved by the prescribed authority and the assessee is eligible to claim deduction u/s 35(2AB). The point of dispute is only for quantum. The approving authority has granted approval for revenue expenditure only from 28.01.2014 whereas the assessee has claimed expenditure incurred throughout the financial year. We find that Ld. CIT(A) has sought distinction in the case law of Hon ble Madras High Court in CIT Vs Wheels India Limited (2011) 336 ITR 513. However, after studying this case law, we find that the analogy of this case law would be applicable to the facts of the present case. The Hon ble Court concurring with the decision of Hon ble Gujarat High Court in CIT V/s Claris Life sciences Ltd. (326 ITR 251), held as under: - 5. We are in full agreement with the reasoning which weighed with the Division Bench of the Gujarat High Court while holding that de hors any specific dates specified in the certificate of the prescribed authority, namely DSIR, once the prescribed authority approved the existence of research and development facility and the expenditure incurred on such scientific research, the assessee would be entitled for the expenditure incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputed by the assessee before Hon ble High Court of Madras. The issue was decided favorably. However, to nullify the effect of the same, Govt. of Tamil Nadu brought a validation act called Tamilnadu Tax on consumption or sale of Electricity (Amendment) validation Act, 2007 which was again challenged by the assessee before Hon ble High Court of Madras, The Hon ble Court vide order dated 27.11.2008 directed that authorities could raise the demand but could not disconnect the power supply on account of non-payment. In other words, there was stay on collection of the demand and therefore, this amount was not remitted by the assessee. In the said background the assessee submitted that this amount was not hit by the provisions of Sec.43B and therefore, full claim was to be allowed. The assessee also submitted that amount of Rs. 37.69 Lacs was remitted during AY 2008-09 towards electricity tax and reversed the provision and credited to the profit loss account. The assessee also pleaded that this being ascertained liability, it could not be adjusted u/s 115JB. 6.2 However, rejecting the same, the Ld. AO held that these were statutory dues and hit by the provisions of Sec.43B. Further, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckage, in the appeal proceedings. Granting further time in this appeal pending for almost 13 years is not possible. Therefore, the AO is directed to determine, what was the interest payable in the year concerned at that point of time (before 31/03/2007) in view of the CDR package approved and whether the appellant debited that amount only, as claimed. If the applicant has claimed interest beyond the amount in the CDR package, the same to be brought to tax u/s 36(1)(iii). Aggrieved, the assessee is in further appeal before us. 7.2 From the facts, it emerges that the assessee has accounted interest expenditure at reduced rates only and the separate reporting made by Auditor is part of statutory disclosure only. The Ld. CIT(A) has well appreciated the plea of the assessee and observed that the assessee did not provide the requisite documents and computations to support its stand. Accordingly, Ld. AO has been directed to verify the claim of the assessee. Therefore, no further directions are required in the matter. The directions given in the impugned order are quite apt. The corresponding grounds stand dismissed. 8. Disallowance of business expenditure in connection with hire charges 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of lower authorities and dismiss the grounds raised by the assessee. The assessee is free to claim the deduction thereof in case the liability crystalizes in subsequent years. 9. Disallowance of overdue interest payable to subsidiary company 9.1 The assessee imported raw material from Indo Jordon Chemicals Ltd. (a subsidiary of the assessee). Due to financial hardships, the assessee did not pay the cost of raw material within stipulated time and accordingly, paid overdue interest of Rs. 324.93 Lacs. The same was claimed as business expenditure which was disallowed by Ld. AO on the ground that no supporting documents were furnished by the assessee. 9.2 The Ld. CIT(A) appreciated the ledger extract of the said party and held that there was no nexus in respect of business operations of the assessee. The only nexus was of investment. There was no supply of raw material as averred by the assessee and therefore, the disallowance was confirmed against which the assessee is in further appeal before us. 9.3 Upon perusal of page nos. 102 to 152 of paper book-1, it could be seen that the assessee has purchased Phosphoric Acid from this entity during financial years 1999-2000 to 2001-02. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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