Agraganya Tradeco Pvt. Ltd., , Kolkata V. DCIT, Circle - 9(1), Kolkata , Kolkata

ITA 1303/KOL/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2320 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-06-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 13-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TAJINDER PAL SINGH
• Keywords: Business expenditure; Assessment record; Commercial expediency
• Section: 201; 154

Judgement Text

ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA [VIRTUAL COURT HEARING] BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT & SHRI A.T. VARKEY, JUDICIAL MEMBER I.T.A. NO. 1303/KOL/2018 ASSESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LIMITED,.................... ......................... APPELLANT C/O. SUBASH AGARWAL & ASSOCIATES, SIDDHA GIBSON, 1, GIBSON LANE, 2 ND FLOOR, SUITE-213, KOLKATA-700069 [PAN:AAFCA0321C] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ...................... RESPONDENT CIRCLE-9(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069 APPEARANCES BY: SHRI SUBASH AGARWAL, ADVOCATE, APPEARED ON BEHALF O F THE ASSESSEE SHRI TAJINDER PAL SINGH, CIT(D.R) , APPEARED ON BEHALF OF THE REVENUE DATE OF CONCLUDING THE HEARING : JUNE 22, 2021 DATE OF PRONOUNCING THE ORDER : JUNE 25, 2021 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, KOLKATA DAT ED 07.03.2018 . 2. THE ISSUE RAISED IN GROUND NO. 1 RELATES TO THE DISALLOWANCE OF RS.4,06,16,220/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 2 DISALLOWANCE OF INTEREST EXPENSES BY TREATING THE S AME AS PRIOR PERIOD EXPENSES WHICH IS SUSTAINED BY THE LD. CIT(APPEALS) BY HOLDING THAT THE SAID INTEREST EXPENSES ARE NOT ALLOWABLE AS DEDUCTI ON EVEN UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF FINANCIAL ACTIVITIES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28.09.2012 D ECLARING TOTAL INCOME AT NIL. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS.7,32,36,558/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF INTEREST PAID ON THE FUNDS BORROWED FROM M/S. ISG T RADERS LIMITED. AS NOTED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE SAID INTEREST TO THE EXTENT OF RS. 4,06,16,220/- WAS RELATED TO THE PERIOD FROM 01.04.2010 TO 31.03.2011 . HE, THEREFORE, REQUIRED THE ASSESSEE-COMPANY TO EXPLAIN AS TO WHY THE INTEREST EXPENDITURE TO THAT EXTENT SHOULD NOT BE TREATED AS PRIOR PERIOD EXPENSES AND SHOULD NOT BE DISALLOWED AS WAS NOT RELATED TO THE YEAR UNDER CONSIDERATION. IN REPLY, THE FOLLOWING SUBMISSION W AS FILED BY THE ASSESSEE IN WRITING:- FROM THE PAST ASSESSMENT RECORDS YOU WOULD NOTE TH AT WE HAD OBTAINED INTEREST BEARING LOAN FROM M/S. ISG TRADERS LTD. AT THE TIME OF TAKING THE LOAN, THE CONTRACTED RATE OF INTEREST WAS 15% IN VIEW OF THE CONTINUOUS LOSSES INCURRED WE WERE FACING CONSIDERA BLE FINANCIAL CONSTRAINTS AND WE WERE NOT ONLY DEFAULTI NG IN REPAYING THE PRINCIPAL LOAN AMOUNT BUT WE WERE ALSO UNABLE TO PAY INTEREST AT THE CONTRACTED RATE. CONSIDERING THE ESTIMATED CASH FLOW POSITION OF F.Y . 2010-11 WE WERE ENVISAGING A NEGATIVE OPERATING PRO FIT FRONT OUR OPERATIONS, ANY LIABILITY TO PAY INTEREST WOULD HAVE CAUSED ADDED FINANCIAL BURDEN ON OUR FINANCES. 117 THE CIRCUMSTANCES, BEFORE THE CLOSE OF THE F. Y 201 0-11 A REPRESENTATION WAS MADE BY US TO ISG TRADERS LTD REQUESTING THE LENDER COMPANY TO WAIVE INTEREST ON THE LOAN FOR THE F. Y. 2010-11. ON RECEIPT OF OUR REQUE ST, WE WERE INFORMED BY THE CREDITOR THAT OUR REQUEST FOR WAIVER OF LOAN WAS UNDER ACTIVE CONSIDERATION OF IT S ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 3 SENIOR MANAGEMENT. UPON RECEIPT OF SUCH INTIMATION, WHILE DRAWING UP OUR ANNUAL ACCOUNTS FOR THE FY 201 0- 11, NO PROVISION FOR INTEREST PAYABLE TO ISG TRADER S LTD WAS MADE IN OUR BOOKS FOR THE F. Y.2010-11. SINCE T HE MANAGEMENT OF ISG TRADERS LTD WAS ACTIVELY CONSIDER ING OUR REQUEST FOR WAIVER OF INTEREST, ISG TRADERS LTD ALSO DID NOT ACTUALLY CHARGE ANY INTEREST ON THE LOAN PROVIDED FOR THE F.Y. 2010-11 AND ACCORDINGLY NO DEMAND FOR INTEREST WAS RAISED AGAINST US BY THE SA ID LENDER TILL 31 ST MARCH 2011. SINCE NO DEMAND FOR INTEREST WAS RAISED BY ISG TRADERS LTD TILL 31 ST MARCH 2011 IN DRAWING LIP ITS ANNUAL ACCOUNTS: ISG TRADER S ALSO DID NOT ACCOUNT FOR ANY INTEREST INCOME IN ITS BOOKS FOR THE FINANCIAL YEAR ENDING ON 31 ST MARCH 2011. HOWEVER, AFTER THE CLOSE FOR THE ACCOUNTING YEAR 20 10- 11, THE BOARD OF DIRECTORS OF ISG TRADERS LID DELIB ERATED ON OUR REQUEST FOR WAIVER. THEIR DELIBERATIONS WERE MADE IN THE CONTEXT OF THEIR OWN PROFITABILITY & IT WAS FOUND THAT FINANCIAL POSITION OF THE LENDER ITSELF WAS NOT SOUND ENOUGH TO GRANT WAIVER OF INTEREST. THE DECIS ION OF THE MANAGEMENT OF ISG TRADERS LTD. WITH REGARD T O CHARGING OF INTEREST WAS COMMUNICATED TO US VIDE IT S LETTER DATED 12 TH SEPTEMBER, 2011. ALONG WITH THE SAID LETTER ISG TRADERS LTD. ALSO SERVED ON US A DEBIT N OTE FOR INTEREST PAYABLE FOR THE F. Y. 201 0-11. YOUR GOODS ELF WILL THUS NOTE THAT ISG TRADERS LTD FORMALLY RAISED THE DEMAND FOR INTEREST OF RS.4.06 CRORES ONLY DURING F .Y. 2011-12 WHICH PERTAINED TO THE PERIOD 01.04.2010 TO 31.03.2011. YOUR GOODSELF WILL APPRECIATE THAT TILL THE MANAGEMENT OF ISG TRADERS LTD HAD NOT TAKEN ANY DECISION WITH REGARD TO OUR REQUEST/OR WAIVER OF IN TEREST AND TILL ISG TRADERS LID DID NOT RAISE DEMAND FOR INTEREST, WE COULD NOT HAVE ACCOUNTED FOR THE INTER EST LIABILITY IN OUR BOOKS. PARTICULARLY DURING THE F.Y .2010- 11, WE WERE INFORMED BY THE MANAGEMENT OF ISG TRADE RS LTD THAT OUR REQUEST FOR INTEREST WAIVER WAS UNDER THEIR ACTIVE CONSIDERATION. THE DECISION ABOUT THE NON-WA IVER OF INTEREST EFFECTIVE FROM 01.04.2011 WAS TAKEN AND COMMUNICATED TO US ONLY IN THE MONTH OF SEPTEMBER 2011 AND SIMULTANEOUSLY THE SAID LENDER ALSO RAISED DEMAND FOR INTEREST PAYABLE FOR THE F. Y 2010-11 BY SERVING DEBIT NOTE IN THE MONTH OF SEPTEMBER 2011. YOUR GOODSELF WILL THUS NOTE THAT OUR LIABILITY TO PAY I NTEREST ON LOAN GRANTED BY ISG TRADERS LTD. ACCRUED & CRYSTALLIZED ONLY DURING THE F.Y.2011-12 WHEN WE FI NALLY RECEIVED THE DEMAND FOR INTEREST FROM ISG TRADERS L TD. FOR YOUR KIND PERUSAL & RECORD, WE ENCLOSE HEREWITH ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 4 COPY OF THE DEBIT NOTE RAISED BY ISG TRADERS FROM W HICH IT WILL BE EVIDENT THAT THE DEMAND FOR INTEREST FOR THE FY 2010-11 WAS RAISED ON US BY THE SAID LENDER FOR THE FIRST TIME ONLY IN THE MONTH OF SEPTEMBER 2011. THIS FACT PROVES BEYOND DOUBT THAT OUR LIABILITY TO PAY INTER EST ACCRUED & GOT CRYSTALLIZED ONLY IN THE 1170NTH OF SEPTEMBER 2011 AND NOT BEFORE. IT IS ONLY ON THE RE CEIPT OF THE SAID DEBIT NOTE IN THE F. Y.2011-12 WE COULD RECOGNIZE THE LIABILITY TO PAY INTEREST IN OUR FINA NCIAL BOOKS FOR THE FY. 2011-12 AND ACCORDINGLY CLAIM DEDUCTION THEREFOR IN A. Y 2012- 13. MERELY BECAUSE THE INTEREST EXPENDITURE PERTAINED TO ACCOUNTING PERIOD 2010-11;FOR THAT REASON ALONE INTEREST EXPENDITURE CANNOT BE TERMED TO BE 'EXPENDITURE FOR PRIOR PERIO D'. THE DOCUMENTARY EVIDENCES WOULD PROVE BEYOND DOUBT THAT OUR LIABILITY TO PAY INTEREST NOT ONLY CRYSTAL LIZED BUT IT IN FACT ACCRUED ONLY IN THE MONTH OF SEPTEMB ER 2011WHEN THE LENDER COMPANY FOR THE FIRST TIME RAIS ED DEMAND THEREFOR BY ISSUING A DEBIT NOTE. TILL THE D EBIT NOTE WAS NOT FORMALLY RAISED BY THE LENDER COMPANY WE COULD NOT HAVE ACCOUNTED LIABILITY FOR INTEREST IN OUR BOOKS. ANY LIABILITY FOR INTEREST TILL THEN INCHOAT E AND INDETERMINATE. WE, THEREFORE, SUBMIT THAT THE ENTIR E EXPENDITURE OF RS.4,06,16,220/- WAS ALLOWABLE AS BUSINESS EXPENDITURE IN AY 2012-13, SINCE THE LIABI LITY IN RESPECT OF SUCH EXPENDITURE ACCRUED IN THE FY 2011- 12. OUR CLAIM IN THIS REGARD IS SUPPORTED BY THE DECISI ON OF THE ITAT, KOLKATA IN THE CASE OF OFF-SHORE INDIA LT D. IN ITA NO. 2165/KOL/2007 (COPY ENCLOSED). 4. THE ABOVE SUBMISSION MADE ON BEHALF OF THE ASSES SEE-COMPANY WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. ACCO RDING TO HIM, THERE WAS NO DISPUTE ON ACCOUNT OF RATE OF INTEREST OR TH E LIABILITY ON ACCOUNT OF INTEREST AND THE SAID LIABILITY HAVING BEEN CRYSTAL LIZED IN THE EARLIER YEAR RELEVANT TO ASSESSMENT YEAR 2011-12 ON THE BASIS OF AGREED RATES AND TERMS, THE ASSESSEE-COMPANY FOLLOWING THE MERCANTIL E SYSTEM OF ACCOUNTING WAS ENTITLED TO CLAIM DEDUCTION FOR THE INTEREST IN AY 2011-12 ITSELF AND NOT IN THE YEAR UNDER CONSIDERATION. HE ALSO NOTED THAT THE LOAN CREDITOR HAD FINALLY NOT WAIVED THE INTEREST OF THE ASSESSEE-COMPANY AND HAD OFFERED THE CORRESPONDING INTEREST INCOME RELAT ED TO THE PERIOD FROM 01.04.2020 TO 31.03.2011 AMOUNTING TO RS.4,06,16,22 0/- AS ITS INCOME IN ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 5 THE RETURN OF INCOME FILED FOR AY 2011-12 ITSELF. H E ACCORDINGLY TREATED THE INTEREST EXPENSES CLAIMED BY THE ASSESSEE TO TH AT EXTENT AS PRIOR PERIOD EXPENSES AND DISALLOWED THE SAME. 5. THE DISALLOWANCE OF RS.4,06,16,220/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST EXPENSES TREATING THE SAME A S PRIOR PERIOD EXPENSES WAS CHALLENGED BY THE ASSESSEE IN THE APPE AL FILED BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF APPELLATE PROCEE DINGS, THE LD. CIT(APPEALS) NOTED THAT THE ALLOWABILITY OF THE SAI D INTEREST EXPENSES HAD NOT BEEN EXAMINED BY THE ASSESSING OFFICER UNDER TH E RELEVANT PROVISIONS OF SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961. HE ACCORDINGLY PROCEEDED TO EXAMINE THE SAME UNDER SECTION 36(1)(I II) AND CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON A CCOUNT OF INTEREST EXPENSES UNDER SECTION 36(1)(III) FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- ON PERUSAL OF SECTION 36(1)(III), IT IS OBSERVED T HAT THE DEDUCTION IS WITH RESPECT TO THE INTEREST PAID FOR CAPITAL BORROWED FOR PURPOSE OF BUSINESS AND PROFESSION. TH E SINE QUA NON FOR ALLOWABILITY OF INTEREST EXPENSES U/S 3 6(1)(III) IS THAT THE CAPITAL BORROWED MUST BE UTILIZED FOR T HE PURPOSE OF BUSINESS. IN THIS REGARD THE CONTENTION OF THE A PPELLANT IS EXAMINED WHETHER THE ADVANCES GIVEN TO NRC LTD. FOR THE PURPOSES OF BUSINESS OR NOT. THE ADVANCES TO NRC LT D. HAVE BEEN GIVEN AS FOLLOWS:- M/S. AGRAGANYA TRADECO PVT. LTD. FINANCIAL YEAR AMOUNT (RS.) 2008-09 6,75,00,000 2009-10 9,15,31,882 2010-11 3,45,00,000 2011-12 50,50,000 19,85,81,882 IT HAS BEEN SUBMITTED THAT THESE ADVANCES WERE GIVE N FOR PURCHASE OF CHEMICAL AND THEREFORE NO INTEREST WAS CHARGED. THE VERACITY OF THIS EXPLANATION IS, THEREFORE, EXA MINED HEREINAFTER. IN THIS CONTEXT IT IS OBSERVED THAT DU RING THE PERIOD I.E. F. Y. 2008-09 TO F. Y. 2011-12 THE APPE LLANT HAS ADVANCED TOTAL AMOUNT OF RS.19.85 CRORES TO NRC LTD . IT IS ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 6 FURTHER NOTED THAT IT IS AN ADMITTED FACT THAT NRC LTD. WAS DECLARED AS A SICK COMPANY BY THE BOARD FOR INDUSTR IAL AND FINANCIAL RECONSTRUCTION (BIFR) IN F.Y. 2008-09 ITS ELF. IT IS ALSO AN ADMITTED FACT THAT DURING THIS PERIOD ONLY ONE PURCHASE OF VISCOSE FILAMENT YARN WAS MADE VIDE BIL L DATED 09/09/2009 FOR AN AMOUNT OF RS.378035/-. NE OTHER PURCHASE OF MATERIAL OR CHEMICAL HAS BEEN MADE FROM NRC LTD BY THE APPELLANT COMPANY. THE ONLY OTHER TRANSA CTION BETWEEN NRC LTD. AND THE APPELLANT COMPANY IS THAT OF PURCHASE OF DEPB LICENCES VIDE BILL DATED 03/03/201 0 FOR AN AMOUNT OF RS.8168118/-. FURTHER THE BORROWINGS FROM ISG TRADERS HAVE BEEN DIRECTLY UTILIZED IN GIVING INTER EST FREE ADVANCES TO NRC LTD. THEREFORE THE NEXUS OF THE BOR ROWED FUNDS FOR GIVING INTEREST FREE 'ADVANCES TO NRC LTD . IS CLEARLY ESTABLISHED. MOREOVER AS OBSERVED EARLIER N RC LTD. IS A SICK COMPANY WITH WHICH ONLY ONE SINGLE PURCHASE TRANSACTION OF VISCOSE FILAMENT YARN WAS DONE BY TH E APPELLANT COMPANY. IT IS OBSERVED THAT IN F.Y. 2008 -09 A SUM OF RS.6.75 CRORES WAS GIVEN AND NO PURCHASE MADE. I N NEXT F.Y. PURCHASE OF FILAMENT YARN - OF RS. 378035/- AN D DEPB WORTH RS.81,68,118/- WAS MADE. THEREFORE, THERE WAS NO COMMERCIAL EXPEDIENCY FOR ADVANCING A FURTHER AMOUN T OF RS.9.15 CRORES. THE ADVANCES CLEARLY DO NOT HAVE A DIRECT NEXUS WITH REGARD TO BUSINESS, AS CLAIMED BY THE AP PELLANT. ON PROPER APPRECIATION OF THESE FACTS IT IS OBSERVE D THAT THE BORROWED FUNDS FROM ISG TRADERS LTD. HAVE BEEN UTIL IZED FOR ADVANCING INTEREST FREE LOANS TO NRC LTD. THERE WAS NO REGULAR PURCHASE TRANSACTION FROM NRC LTD THEREFORE THE CONTENTION OF THE APPELLANT THAT THE ADVANCES WERE GIVEN FOR PURCHASE OF CHEMICALS IS NOT ACCEPTABLE. IT IS A ME RE GARB TO CLOSE THE TRANSACTION OF INTEREST FREE ADVANCES AS A BUSINESS TRANSACTION. IN THIS CASE THE DIRECT NEXUS OF DIVER SION OF FUNDS HAS BEEN ESTABLISHED. NO INTEREST HAS BEEN PA ID ON THE BORROWED FUNDS OF THE APPELLANT UTILIZED BY NRC LTD . THE EXPLANATION THAT THE ADVANCES WERE GIVEN FOR COMMER CIAL CONSIDERATION IS NOT FOUND TO BE CORRECT. THE SUM A ND SUBSTANCE IS THAT THE BORROWED FUNDS WERE GIVEN TO NRC LTD., A SICK COMPANY, TO PROP UP THE FINANCES OF TH AT COMPANY. ACCORDINGLY THE CLAIM OF INTEREST PAYMENT OF RS.4061622/- IS NOT ALLOWABLE U/S 36(1)(III). THERE FORE, THE ADDITION ON THIS ISSUE MADE BY THE ASSESSING OFFICE R IS HEREBY CONFIRMED. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. AS SUBMITTED ON ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 7 BEHALF OF THE ASSESSEE-COMPANY BEFORE THE AUTHORITI ES BELOW AS WELL AS BEFORE US, THE LIABILITY ON ACCOUNT OF INTEREST EXP ENSES PAYABLE TO M/S. ISG TRADERS LIMITED FOR THE PERIOD 01.04.2010 TO 31 .03.2011 WAS IN DISPUTE AT THE RELEVANT TIME, INASMUCH AS, WAIVER O F THE SAID LIABILITY WAS SOUGHT BY THE ASSESSEE-COMPANY ON THE BASIS OF ITS ADVERSE FINANCIAL POSITION. AS PER THE SUBMISSION MADE ON BEHALF OF T HE ASSESSEE-COMPANY, THE SAID DISPUTE WAS FINALLY SETTLED IN THE YEAR UN DER CONSIDERATION AND A DEBIT NOTE WAS ISSUED BY M/S. ISG TRADERS LIMITED O N 12.09.2011 (COPY PLACED AT PAGE NO. 20 OF THE PAPER BOOK) CLAIMING T HE INTEREST OF RS.4,06,16,220/- FROM THE ASSESSEE-COMPANY FOR THE PERIOD 01.04.2010 TO 31.03.2011. THE LD. COUNSEL FOR THE ASSESSEE HAS CO NTENDED THAT THE SAID LIABILITY ON ACCOUNT OF INTEREST RELATED TO THE PER IOD FROM 01.04.2010 TO 31.03.2011 THUS WAS CRYSTALLIZED DURING THE YEAR UN DER CONSIDERATION AND THE SAME WAS ALLOWABLE AS DEDUCTION AS RIGHTLY CLAI MED BY THE ASSESSEE- COMPANY. IN SUPPORT OF THIS CONTENTION, HE HAS RELI ED ON THE DECISION OF THIS TRIBUNAL RENDERED IN THE CASE OF DCIT VS.- M/ S. OFF-SHORE INDIA LIMITED (ITA NO. 1585 & 1609/KOL/2008 RENDERED VIDE ITS ORDER DATED 29.05.2009), WHEREIN THE SIMILAR CLAIM OF THE ASSES SEE ON ACCOUNT OF INTEREST RELATED TO THE PRIOR PERIOD WAS ALLOWED BY THE TRIBUNAL VIDE PARAGRAPH NO. 6 AS UNDER:- 6. HEARD THE PARTIES, PERUSED THE RECORDS AND CONS IDERED THE CASES LAWS CITED BY THE LD. AUTHORISED REPRESENTATI VE OF THE ASSESSEE. WE FIND THAT THE REVENUE HAS NOT DISPUTED THE ALLOWABILITY OF THE EXPENSES INCURRED BY THE ASSESS EE. DURING THE EARLIER YEAR, THE ASSESSEE NEITHER PROVIDED NOR CLAIMED THESE EXPENSES AS IT WAS NEGOTIATING WITH THE LOAN CREDIT TO REDUCE THE INTEREST LIABILITY. THIS FACT WAS NOT DI SPUTED BY THE REVENUE AUTHORITIES AT ANY STAGE. THIS ACT IS ALSO BORNE OUT FROM THE RECORDS LIKE AUDIT REPORT. P& L ACCOUNT ETC. WE FIND THAT THE HON'BLE BOMBAY HIGH COURT HAD HELD THAT WHERE A LIA BILITY ARISING OUT OF A CONTRACTUAL OBLIGATION IS DISPUTED , THE ASSESSEE IS ENTITLED, IN THE ASSESSMENT YEAR RELEVANT' TO TH E PREVIOUS YEAR IN WHICH THE DISPUTE IS FINALLY ADJUDICATED UPON OR SETTLED, TO CLAIM A DEDUCTION IN THAT BEHALF. IN VIEW OF THE AB OVE, WE ARE OF THE CONSIDERED OPINION THAT THE DISALLOWANCE OF RS. 63,00,000/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) IS ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 8 HEREBY DELETED. THEREFORE, THE APPEAL OF THE ASSESS EE IS ALLOWED. 7. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WEL L AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF M /S. OFF-SHORE INDIA LIMITED AND EVEN THE LD. D.R. HAS NOT BEEN ABLE TO DISPUTE THIS POSITION, WE RESPECTFULLY FOLLOW THE DECISION OF THE COORDINA TE BENCH OF THIS TRIBUNAL IN THE SAID CASE AND HOLD THAT THE LIABILI TY ON ACCOUNT OF INTEREST PAYABLE TO M/S. ISG TRADERS LIMITED FOR THE PERIOD FROM 01.04.2010 TO 31.03.2011 HAVING BEEN CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOW ING THE SAME BY TREATING THE SAME AS PRIOR PERIOD EXPENSES. 8. AS REGARDS THE ACTION OF THE LD. CIT(APPEALS) IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOU NT OF INTEREST EXPENSES UNDER SECTION 36(1)(III) OF THE ACT ON THE GROUND THAT THE FUNDS BORROWED BY THE ASSESSEE FROM M/S. ISG TRADERS LIMI TED WERE UTILIZED FOR GIVING INTEREST-FREE ADVANCE TO M/S. NRC LIMITED, W HICH WAS NOT FOR THE PURPOSE OF ITS BUSINESS, THE LD. COUNSEL FOR THE AS SESSEE HAS MADE AN ATTEMPT TO CONTEND THAT M/S. NRC LIMITED WAS THE RE GULAR SUPPLIER OF RAW MATERIAL OF THE ASSESSEE-COMPANY AND, THEREFORE, TH E INTEREST-FREE ADVANCE GIVEN TO THEM WAS FOR THE PURPOSE OF ITS BU SINESS. 9. AS NOTED BY THE LD. CIT(APPEALS) IN THIS REGARD, ONLY ONE PURCHASE MADE BY THE ASSESSEE-COMPANY FROM THE SAID PARTY WA S ON 09.09.2009 AND THAT TOO FOR A SMALL AMOUNT OF RS.3,78,035/-. T HE INTEREST-FREE ADVANCE TO THE SAID PARTY, HOWEVER, WAS GIVEN BY TH E ASSESSEE-COMPANY IN THE FINANCIAL YEAR 2008-09 TO 2011-12 AND THAT TOO TO THE TUNE OF RS.19,85,81,882/-. THE SAID ADVANCE THUS HAD NOTHIN G TO DO WITH THE SMALL AMOUNT OF PURCHASE MADE BY THE ASSESSEE FROM M/S. NRC LIMITED AND THERE BEING NO OTHER REASON ADVANCED ON BEHALF OF THE ASSESSEE- COMPANY TO PROVE THAT THE SAID ADVANCE WAS GIVEN FO R THE PURPOSE OF ITS ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 9 BUSINESS, WE FIND NO MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE INTEREST-FREE ADVANCE GIVEN BY TH E ASSESSEE-COMPANY TO M/S. NRC LIMITED WAS FOR THE PURPOSE OF ITS BUSINES S. WE, HOWEVER, FIND MERIT IN THE ALTERNATIVE CONTENTION RAISED BY THE L D. COUNSEL FOR THE ASSESSEE THAT ONLY PART AMOUNT OF FUND BORROWED FRO M M/S. ISG TRADERS LIMITED HAVING BEEN ADVANCED TO M/S. NRC LIMITED IN TEREST-FREE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN DISALLOWING THE E NTIRE INTEREST EXPENSES OF RS.4,06,16,220/- UNDER SECTION 36(1)(III) AND TH E SAID DISALLOWANCE SHOULD BE RESTRICTED TO BE INTEREST EXPENSES ATTRIB UTABLE TO THE INTEREST- FREE ADVANCE GIVEN BY THE ASSESSEE-COMPANY TO M/S. NRC LIMITED DURING PERIOD 01.04.2010 TO 31.03.2011. WE ACCORDINGLY DIR ECT THE ASSESSING OFFICER TO COMPUTE THE INTEREST EXPENSES ATTRIBUTAB LE TO THE INTEREST-FREE ADVANCE GIVEN BY THE ASSESSEE TO M/S. NRC LIMITED A ND RESTRICT THE DISALLOWANCE TO THAT EXTENT. GROUND NO. 1 OF THE AS SESSEES APPEAL IS ACCORDINGLY PARTLY ALLOWED. 10. THE ISSUE RAISED IN GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.2,38,29,825/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF INTEREST EXPENSES UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT T HIS ISSUE RAISED IN GROUND NO. 2 IS SIMILAR TO THE ONE INVOLVED IN GROU ND NO. 1, INASMUCH AS, THE FUNDS BORROWED BY THE ASSESSEE-COMPANY FROM M/S . ISG TRADERS LIMITED HAVING BEEN UTILIZED DURING THE YEAR UNDER CONSIDERATION TO GIVE INTEREST-FREE ADVANCES TO M/S. NRC LIMITED, WHICH W AS NOT FOR THE PURPOSE OF THE ASSESSEES BUSINESS, THE ASSESSING O FFICER DISALLOWED THE EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF INTE REST PAID ON LOAN TAKEN FROM M/S. ISG TRADERS LIMITED TO THE EXTENT I T WAS ATTRIBUTABLE TO THE INTEREST-FREE ADVANCE GIVEN BY THE ASSESSEE-COM PANY TO M/S. NRC ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 10 LIMITED. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER. AS ALREADY HELD BY U S WHILE DECIDING GROUND NO. 1 RAISED IN THIS APPEAL, THE INTEREST-FR EE ADVANCE GIVEN BY THE ASSESSEE-COMPANY TO M/S. NRC LIMITED WAS NOT FOR TH E PURPOSE OF ITS BUSINESS AND, THEREFORE, THE INTEREST PAID BY THE A SSESSEE ON THE LOAN BORROWED FROM M/S. ISG TRADERS LIMITED TO THE EXTEN T IT WAS ATTRIBUTABLE TO THE INTEREST-FREE ADVANCE GIVEN TO M/S. NRC LIMI TED, WAS NOT ALLOWABLE AS DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT. F OLLOWING THE SAID CONCLUSION DRAWN WHILE DECIDING THE ISSUE INVOLVED IN GROUND NO. 1, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) C ONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOU NT OF INTEREST EXPENSES TO THE EXTENT THE SAME WAS ATTRIBUTABLE TO THE INTEREST-FREE ADVANCE GIVEN BY THE ASSESSEE-COMPANY TO M/S. NRC L IMITED. GROUND NO. 2 OF THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED . 12. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFO RE THE LD. CIT(APPEALS), THE ASSESSEE HAS FILED AN APPLICATION SEEKING ADMISSION OF THE FOLLOWING ADDITIONAL GROUND:- FOR THAT THE LD. CIT(A) ERRED IN NOT ADJUDICATING THE GROUND RAISED BY THE ASSESSEE CHALLENGING THE ACTIO N OF THE AO IN NOT ALLOWING THE SET OFF OF THE BROUGHT F ORWARD BUSINESS LOSS OF EARLIER YEAR. 13. AS SUBMITTED BY THE ASSESSEE-COMPANY IN THE APP LICATION FILED SEEKING ADMISSION OF THE ABOVE ADDITIONAL GROUND, A RECTIFICATION PETITION UNDER SECTION 154 HAS ALREADY BEEN FILED BY THE ASS ESSEE BEFORE THE ASSESSING OFFICER ON THE ISSUE RAISED IN THE ADDITI ONAL GROUND, WHICH IS STILL PENDING. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO POINTED OUT THAT THE ISSUE BEING RAISED IN THE ADDITIONAL GROUND WAS DULY RAISED IN GROUND NO. 8 TAKEN IN THE APPEAL FILED BEFORE THE LD. CIT( APPEALS), BUT THE SAME HAS NOT BEEN DECIDED BY THE LD. CIT(APPEALS) VIDE H IS IMPUGNED ORDER. HE HAS SOUGHT LIMITED RELIEF FROM THE TRIBUNAL BY WAY OF A DIRECTION TO THE ASSESSING OFFICER TO CONSIDER AND DECIDE THE ISSUE RAISED IN THE ADDITIONAL ITA NO. 1303/KOL/2018 ASS ESSMENT YEAR: 2012-2013 AGRAGANYA TRADECO PVT. LTD. 11 GROUND. KEEPING IN VIEW THIS SUBMISSION MADE BY THE LD. COUNSEL FOR THE ASSESSEE AND HAVING REGARD TO ALL THE FACTS OF THE CASE, WE ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. EVEN THE LD. D.R. HAS NOT RAISED ANY OBJECTION IN THIS REGARD. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO CONSIDER AND DECIDE THE ISSUE RAISED BY THE ASSE SSEE IN THE ADDITIONAL GROUND AFTER VERIFYING THE RELEVANT RECORDS. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 25, 2021 . SD/- SD/- (A.T. VARKEY) (P.M. JAGTAP) JUDICIAL MEMBER VICE-PRESIDENT) KOLKATA, THE 25 TH DAY OF JUNE, 2021 COPIES TO : (1) AGRAGANYA TRADECO PVT. LIMITED, C/O. SUBASH AGARWAL & ASSOCIATES, SIDDHA GIBSON, 1, GIBSON LANE, 2 ND FLOOR, SUITE-213, KOLKATA-700069 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-9(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-3. KOLKATA ; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY/DDO, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.