TMI Blog2007 (11) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... ny and that it has not crystallized during the year. On appeal, the CIT(A) remanded the matter back to the file of the Assessing Officer directing him to verify the facts and also to consider the correspondence from the Bank of India stating that the bank has debited the above amount to the account of the assessee and thereafter allow the claim of the assessee. During the course of remanded proceedings, the assessee submitted that initially in its return of income the assessee had not claimed deduction from the profit for interest of Rs. 3,72,10,370 payable on cash credit for Sakharwadi and Lakshmiwadi factories not charged by Bank of India and it was shown in the annual report under the head 'Contingent liability' (not provided for). However, the assessee received two letters dated 6-12-1988 and 19-4-1989 from Bank of India making the demand and on the basis of these letters, the company has claimed the amount of Rs. 3,72,10,370 as deduction from the business income at the time of assessment. It was submitted that this interest amount which is due from 27-12-1985 was deferred by the bank due to the continuous losses incurred by the factories and the bank had not waived the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt as deduction in different assessment years mainly because it had gone before BIFR in 1983 and was all the time pressing for waiver of interest and such waiver did take place in the year relevant to the assessment year 1991-92, when this amount was waived off pursuant to the order of BIFR. He further observed that the liability of interest was finalised in 1991 when the BIFR passed an order and the final figure of interest arrived at Rs. 1.83 crores has finally been allowed by the Department i.e., Rs. 1.39 crores in the assessment year 1990-91 and Rs. 44.14 lakhs in the assessment year 1991-92 and so there does not remain any liability for any further amount of interest which could be considered for being allowed here in the relevant assessment year i.e., 1989-90. He also referred to the decision of his predecessor for the assessment year 1991-92 dated 4-7-1994 in support of his conclusion. Aggrieved by the same, the assessee is in second appeal before us. 3. The learned senior counsel for the assessee, Sri S.E. Dastur, while reiterating the submissions made by the assessee before the authorities below, submitted that the assessee had a cash credit arrangement with the Bank of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a finding that by the letter dated 22-10-1958, the assessee firm was definitely or specifically informed that excise duty in respect of business of the assessee firm in the accounting year was being recalculated on a fresh basis. He also drew our attention to p. 99 of the paper book wherein the BIFR has directed that section 41(1) will not apply to the assessee. He submitted that the direction to this effect was on the premise that deduction is allowed during the assessment year. Thus, according to him the interest payable is allowable during the relevant assessment year. 4. The learned Departmental Representative, on the other hand supported the order of the authorities below and submitted that the assessee had shown the bank interest as the contingent liability in its books of account and the contingent liability is allowable as a deduction only when it is crystallized. He submitted that during the relevant assessment year, the said liability had not been crystallized. He submitted that this interest was also subsequently waived by the order of the BIFR in August, 1991 and therefore, this claim did not become final during the relevant assessment year. In support of his con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, it can be said that the bank has made a demand for payment of these amounts vide letters mentioned above. These letters have thus crystallized the liability of the assessee to pay the bank interest for the relevant period. This has resulted in the claim of the assessee for deduction of the said amount during the assessment proceedings and the CIT(A) has accordingly remanded the issue to the file of the Assessing Officer to consider the same. The Assessing Officer had proceeded on the presumption that the bank had not debited the interest to the assessee's account during the period and therefore, it was not a liability during the period. This cannot be accepted. We have perused the copies of the letters dated 6-12-1988, 19-4-1989 and 4-4-1990 issued by the bank placed at pp. 1 to 3 of the paper book filed by the assessee. It is stated therein that amount of interest is payable by the assessee for the period 27-12-1985 to 30-9-1988, 1-10-1988 to 31-3-1989 and for the period during the year ending 31-3-1990 respectively. It is not mere working of the interest. The bank had also enclosed the statement of account for the said period. The bank without debiting the account of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and one of such businesses is closed before the previous year, it cannot claim allowance under s. 37 of the IT Act, 1961, of an outgoing attributable to the business which is closed against the income of its other businesses in that year. Similar view was expressed by the Madras High Court in the case of Waterfall Estates Ltd. 8. In the case on hand, from the facts on records and applying the ratio laid down by the Apex Court in the case of L.M. Chhabda Sons, it is to be seen if the Lakshmiwadi and Sakharwadi units constitute parts of the same business of the assessee. It is nobody's case that the assessee is carrying on any other business other than manufacture of sugar. The location of a sugar mill/factory depends upon the availability of the raw material i.e., sugarcane in order to reduce the exorbitant transportation charges and thus ultimately the cost of production. The presence of the units at different places by itself, as held by the apex Court, does not make them different businesses. In the absence of specific findings by the authorities below that these units were carrying on different business from that of the other units of the assessee and the objection of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance of Rs. 11,51,144 made by the Assessing Officer under section 37(1) of the Act." 12. As regards the grounds No. 1 and 2, the brief facts of the case are that the Assessing Officer had disallowed the amount of Rs. 29,72,592 being the provision for estimated balance of sugarcane price. The Assessing Officer was of the view that allowability of the same will be decided in the year in which the amount has actually been paid. Before the CIT(A), it was claimed that the above amount did not pertain to the earlier years but it pertained to the period from 1-10-1988 to 31-3-1989 relevant to the assessment year 1989-90. The CIT(A) thus, directed the Assessing Officer to verify the claim and if the amount pertains to the year under consideration to allow the same. During the assessment proceedings, the assessee submitted before the Assessing Officer that in the printed P L a/c, through oversight, the assessee had included the amount of Rs. 29,72,592 as expenses of earlier period, whereas it really pertains to purchases made during the period 1-10-1988 to 31-3-1989 at Rs. 10 per tonne on 2,97,259.20 MTs of sugarcane purchased in this period. It was submitted that as per the practice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to him, the entire amount of Rs. 1,98,46,300 has been shown as pertaining to the earlier years in assessee's P L a/c. He submitted that a fresh certificate dated 17-4-2000 of the chartered accountant filed before the CIT(A) and admitted and relied upon by him is in violation of rule 46A and it is against the facts of the case. 14. The learned counsel for the assessee, on the other hand, supported the order of the CIT(A) and submitted that the assessee had initially erroneously submitted the purchase details as relating to prior period and had submitted the correct working before the CIT(A) who had deleted the disallowance after considering the details and material before him and that there is no discrepancy in the order of the CIT(A). 15. Having heard both the parties and having considered their rival contentions, we find that the sugar cane price is initially fixed at a tentative figure and there is a provision made for the balance at an estimate basis pending the fixation of final price by the Government of India. In this case, the assessee has during the relevant assessment year, purchased 2,97,259.222 MTs of sugarcane and has provided for it at Rs. 315 ex-field pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o- at the rate of Rs. 10 PMT 29,72,592.22 -------------- Total provision payment made Rs. 315 PMT 9,36,36,654.93 Less : cane purchase tax rebate at the rate of Rs. 12 PMT reed., from Government of Karnataka, included in cane price 35,67,110.00 -------------- Amount debited to P L a/c 9,00,69,544.93 -------------- The above are as per books of account of due company and as per information and explanation given to us. For M/s Ambalal Thakkar Co. Mumbai Chartered Accountants Dated : 17th April, 2000 (G.P. Bhatt) M. No. 4849" 16. On comparison of the said certificate with the certificate dated 23-11-1989, we find that the third instalment mentioned in the certificate dated 23-11-1989 is shown at Rs. 30 per MT, while in the certificate dated 17-4-2000, there is break-up of Rs. 30 as Rs. 20 and Rs. 10 and the total provision and paym ..... X X X X Extracts X X X X X X X X Extracts X X X X
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