ACIT, CHENNAI V. M/s Shriram Chits Tamil Nadu Pvt. Ltd., CHENNAI

ITA 1512/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4796 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 15-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R SIVARAMAN
• Keywords: Gift; Depreciation; Business expenditure; Bad and doubtful debts; Commercial expediency; Revenue expenditure
• Section: 43B; 115JB; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 1512/MDS.2010 ASSESSMENT YEAR : 2003-04 THE ASSISTANT COMMISSIONER OF INCOME-TAX,COMPANY CIRCLE-VI(2), CHENNAI. V. M/S. SHRIRAM CHITS TAMILNADU PVT. LTD., GREAMS DUGAR, 149, GREAMS ROAD, CHENNAI-600 006. (PAN : AABCS0167N) I.T.A. NO. 1513/MDS/2010 ASSESSMENT YEAR : 1998-99 THE ASSISTANT COMMISSIONER OF V. M/S. SH RIRAM CAPITAL LTD. INCOME-TAX, COMPANY CIRCLE-VI(2), (PRE VIOUS LYY KNOWN AS CHENNAI. SHRIRAM CHITS AND INVESTMENTS PVT. LTD. AND SUBSEQUENTLY KNOWN AS SHRIRAM FINANCIAL SERVICES HOLDINGS PVT. LTD., MOOKAMBIKA COMPLEX, 4, LADY DESIKA ROAD, MYLAPORE, CHENNAI-600 004. (PAN : AABCS2726B) A N D I.T.A. NO. 1514 TO 1518/MDS/2010 ASSESSMENT YEARS : 1999-2000, 2000-01, 2003-04, 2004-05 & 2005-06 THE ASSISTANT COMMISSIONER OF V. M/S. SH RIRAM CAPITAL TRUST INCOME-TAX, COMPANY CIRCLE-VI(2), P VT. LTD.,MOOKAMBIKA COMPLEX, CHENNAI. 4, LADY DESIKA ROAD, MYLAPORE, CHENNAI-600 004. (PAN : AAACS7037E) (APPELLANT) (RESPONDENTS) I.T.A. NOS. 1512 TO 1518/MDS/2010 2 APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENTS BY : SHRI R. SIVARAMAN O R D E R PER BENCH: THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDERS OF THE LEARNED CIT(APPEALS)-V, CHENNAI. AS ALL THE ISSUES IN THES E APPEALS RELATE TO THE SAME GROUP OF ASSESSEES AND ARE INTER-CONNECTED, THEY AR E BEING DISPOSED OF BY THIS COMMON ORDER. 2. SHRI SHAJI P. JACOB, LEARNED SR. DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI R. SIVARAMAN, ADVOCATE REPRESENTED ON BEHA LF OF THE ASSESSEES. 3. ITA NO. 1512/MDS/2010: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-V, CHENNAI IN ITA NO. 57/2006-07 DATED 30-06-2010 FOR THE ASSESSMENT YEAR 2003-04. THE RE VENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE A DDITION OF BAD DEBTS OF ` 868 CRORES FOLLOWING THE ORDERS OF THE ITAT IN ITA NO. 973/MDS/2006 AND ITA NO.2117/MDS/2008 F OR A.YS 2002-03 AND 2004-05 IN ASSESSEES CASE. 2.2 IT IS SUBMITTED THAT THE DECISION OF THE ITAT RELIED UPON BY THE CIT(A) IN THE HAS NOT BECOME FINAL AND APPEAL TO HIGH COURT HAS BEEN FILED BY THE DEPARTMENT. I.T.A. NOS. 1512 TO 1518/MDS/2010 3 3.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF ` 10.20 CRORES BEING INTEREST ON SECURITY DEPOSIT, COMMISSION AND GIFT PAID TO CLOSELY ASSOCI ATED COMPANIES. 3.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT P AYMENT OF COMMISSION OF GROUP COMPANIES IS NOT FOR COMMERC IAL EXPEDIENCY THE GROUP COMPANIES NEVER OFFER ANY SECU RITY LIKE OTHER SUBSCRIBERS, THE GROUP COMPANIES PAY SUB SCRIPTION FROM PRIZED AMOUNTS AND ASSESSEE AND OTHER COMPANIE S HAVE COMMON DIRECTORS. 4.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF BID LOSS OF ` 8.89 CRORES. 4.2 HAVING REGARD TO THE OBSERVATION OF THE HON'BL E SUPREME COURT IN THE CASE OF M/S. BILAHARI INVESTME NT P. LTD. (299 ITR 1) THAT IT IS OPEN TO THE DEPARTMENT TO CONSIDER THESE NEW ACCOUNTING STANDARDS AND CONCEPT S IN FUTURE CASES OF CHIT TRANSACTIONS THE CIT(A) OUGHT TO HAVE CONFIRMED THE ORDER OF THE A.O. 5.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF ROYALTY OF 64.53 LAKHS 5.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT R OYALTY IS AN INTANGIBLE ASSET AND HENCE ONLY DEPRECIATION CAN BE ALLOWED. 6.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF O/D INTEREST OF ` 22.73 LAKHS. 6.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT BUSINESS EXPEDIENCY HAS NOT BEEN PROVED. I.T.A. NOS. 1512 TO 1518/MDS/2010 4 7. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING O FFICER RESTORED. 4. GROUNDS NO. 2.1 & 2.2 ARE AGAINST THE ACTION OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF BAD DEBTS. AT THE TIME OF HEARING IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE IN ITA NO. 973/MDS/2006 DATED 19-12-2007 WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE COMMON ORDER OF THE T RIBUNAL DATED 31-12-2004 FOR THE ASSESSMENT YEARS 1988-89 TO 1994-95 IN THE CASE OF SHRIRAM CHITS & INVESTMENTS P. LTD. RESPECTFULLY FOLLOWING THE SAM E, THIS ISSUE IS HELD IN FAVOUR OF THE ASSESSEE AND THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. 5. IN GROUND NOS. 3.1 & 3.2 THE REVENUE HAS CHALLEN GED THE ACTION OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF THE INTEREST ON SECURITY DEPOSIT, COMMISSION AND GIFT PAID TO CLOSELY ASSOCIATED COMP ANIES. AT THE TIME OF HEARING IT WAS FAIRLY AGREED THAT THIS ISSUE WAS SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TR IBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 973/MDS/2006 DATED 19-12-2007 WHERE IN THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRIRAM CHITS & INV ESTMENTS P. LTD. IN ITA NO. 1060/MDS/2006. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE SAME, THIS ISSUE I.T.A. NOS. 1512 TO 1518/MDS/2010 5 IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. 6. IN GROUNDS 4.1 AND 4.2 THE REVENUE HAS CHALLENGE D THE ACTION OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF BID LOSS OF ` 8.89 CRORES. AT THE TIME OF HEARING IT WAS FAIRLY AGREED BY BOTH SIDES THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F M/S. BILAHARI INVESTMENT P. LTD. (299 ITR 1). IN THE CIRCUMSTANCES, RESPECTFUL LY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S. BILAHARI INVESTMENT P. LTD., THE FINDING OF THIS LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRM ED. IT IS ALSO NOTICED THAT THE LEARNED CIT(A) HAS FOLLOWED THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF M/S. BILAHARI INVESTMENT P. LTD., REFERRED TO SUPRA. 7. IN GROUNDS 5.1 & 5.2 THE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF ROYALTY. AT THE TIME OF HEARING IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUES IS SQUAREL Y COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASES OF M/S. SHRIRAM TRANSPORT FINANCE CO. LTD. AND M/S. SHRIRAM CITY UNION FINANCE CO. LT D. IN ITA NOS. 725 & 726/MDS/2010 DATED 16-12-2010 WHEREIN THE TRIBUNAL HAD HELD THAT THE PAYMENT MADE FOR THE USE OF THE LOGO IS REVENUE IN NATURE B Y FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF JONAS WOODHEAD AND SONS (INDIA) LTD. V. CIT REPORTED IN 224 ITR 342 (SC). IN THE CIRCUMSTA NCES RESPECTFULLY FOLLOWING THE I.T.A. NOS. 1512 TO 1518/MDS/2010 6 DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. 8. IN GROUNDS 6.1 AND 6.2 THE REVENUE HAS CHALLENGE D THE ACTION OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF OVER DRAFT I NTEREST OF ` 22.73 LAKHS. IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE LEARNED CIT(A) HAD DELETED THE DISALLOWANCE BY HOLDING THAT THERE WAS COMMERCIAL EXPEDIENCY IN REGARD TO THE ADVANCES MADE OUT OF SURPLUS FUNDS GE NERATED FROM THE ASSESSEES BUSINESS AS ALSO THAT THE AMOUNT DUE FROM SHRIRAM C HITS & INVESTMENTS (P) LTD. WAS NOT AN ADVANCE BUT WAS IN THE NATURE OF CURRENT ACCOUNT RECOVERABLE AND CONSEQUENTLY THE INTEREST ON THE OVER DRAFT WHICH W AS DISALLOWED BY THE ASSESSING OFFICER WAS DELETED. IT WAS THE SUBMISSION THAT TH E DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF S.A.BUILDERS LTD. V. C IT (A) AND ANOTHER, REPORTED IN 288 ITR 1, WOULD HAVE NO APPLICABILITY INSOFAR AS T HE COMMERCIAL EXPEDIENCY HAD NOT BEEN SHOWN. IT WAS THE SUBMITTED BY THE LEARNE D DR THAT HE HAD NO OBJECTION IF THE ISSUE IS RESTORED TO THE FILE OF T HE ASSESSING OFFICER FOR VERIFYING THE COMMERCIAL EXPEDIENCY. 9. IN REPLY, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ADVANCES HAD BEEN MADE OUT OF THE SURPLUS FUNDS GENERATED FR OM THE ASSESSEES BUSINESS AND THE AMOUNT DUE FROM SHRIRAM CHITS & INVESTMENTS (P) LTD. WAS IN FACT THE CURRENT ACCOUNT RECOVERABLE. IT WAS THE FURTHER S UBMISSION THAT THE OVER DRAFT TAKEN WAS UTILIZED FOR DEPOSITS TO BE MADE IN FAVOU R OF REGISTRAR OF CHITS FOR THE I.T.A. NOS. 1512 TO 1518/MDS/2010 7 ASSESSEES CHIT BUSINESS AND OTHER REGULAR BUSINESS TRANSACTIONS. IT WAS THE SUBMISSION THAT FOR THE ASSESSMENT YEAR 2004-05 THI S ISSUE HAD BEEN CONSIDERED BY THE LEARNED CIT(A) AND IT WAS CATEGORICALLY FOUN D THAT THE ASSESSEE WAS NOT USING THE OVER DRAFT AMOUNT FOR FUNDING THE GROUP C ONCERNS. IT WAS THE FURTHER SUBMISSION THAT NONE OF THE DUES AROSE ON ACCOUNT O F ANY SUMS GIVEN TO THE SISTER CONCERNS OUT OF THE ASSESSEES BORROWED FUND S. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. UNDI SPUTEDLY, THE AMOUNTS HAVE BEEN GIVEN TO THE SISTER CONCERNS. IT IS ALSO CATE GORICALLY SHOWN THAT THE AMOUNTS HAD NOT BEEN GIVEN OUT OF THE OVER DRAFT TAKEN BY T HE ASSESSEE. IN FACT, THE OVER DRAFT ACCOUNT IS TO AN EXTENT OF ` 2.27 CRORES AS ON 1.4.2003 AND THE CLOSING BALANCE AS ON 31.3.2004 WAS ONLY ` .22,97,207/-. IN FACT THE LEARNED CIT(A) FOR THE ASSESSMENT YEAR 2004-05 HAS ALSO CATEGORICALLY FOUND THAT THE RESERVES AND SURPLUS AS ON 31.3.2004 ITSELF WAS NEARLY ` 25 CRORES AND FOR 31.3.2003 IT WAS ` 18.5 CRORES. IT IS FURTHER NOTICED THAT THE OVER D RAFT ACCOUNT AS ON 31.3.2003 WAS ONLY ` . 2.27 CRORES. IT IS FURTHER NOTICES THAT THE DUES FROM THE SISTER CONCERNS ARE NOT FULLY DUES WHICH HAD ARISEN DURING THE RELE VANT ASSESSMENT YEAR. IT IS ALSO UNDISPUTED THAT THERE IS A CONTINUOUS BUSINESS CONNECTION BETWEEN THE ASSESSEE AND THE SISTER CONCERNS. THE CLAIM OF THE ASSESSEE THAT IT WAS EXITING THE CHIT BUSINESS HAS ALSO NOT BEEN DISPUTED. IN T HE CIRCUMSTANCES, WE ARE OF THE VIEW THAT AS NO INTEREST-BEARING FUNDS HAVE BEEN DI VERTED FOR NON-BUSINESS PURPOSES OR AS ADVANCE TO SISTER CONCERNS DURING TH E RELEVANT ASSESSMENT YEAR, I.T.A. NOS. 1512 TO 1518/MDS/2010 8 THE INTEREST ON THE OVER DRAFT ACCOUNT IS NOT DISAL LOWABLE. IN THE CIRCUMSTANCES THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE STA NDS CONFIRMED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO. 1512/MDS/2010 IS DISMISSED. 12. ITA NO. 1513/MDS/2010 THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-V, CHENNAI IN ITA NO. 410/07-08 DATED 23-06-2010 FOR THE ASSESSMENT YEAR 1998-99. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE ENTIRE AMOUNT OF DISALLOWANCE OF ` 50,18,909/- OF BROKERAGE EARNED WRITTEN OFF AND CLAIMED AS EXPENDI TURE. 2.2 THE LEARNED CIT(A) FAILED TO NOTE THAT THE HON 'BLE TRIBUNAL REMITTED THIS ISSUE TO THE FILE OF THE A.O IN ITA NO. 480/MDS/2002 ON 28/9/2006 OBSERVING SPECIFICALLY TH AT THE ASSESSEE IS INTERESTED IN CLAIMING THIS AMOUNT AS B USINESS EXPENDITURE AND NOT AS A BAD DEBT AND THAT THE ASSE SSEE HAS NOT NARRATED AS TO HOW THIS EXPENDITURE IS ALLOWABLE I. E., WHETHER IT IS INCURRED DUE TO ANY URGENCY OF BUSINESS OR NOT. 2.3 THE ASSESSEE VIDE LETTER DATED 5/11/2007 CLAIM ED BEFORE THE A.O THAT IT INCURRED EXPENDITURE BY THE WAY OF PAYMENT TO AGENTS IN RESPECT OF BROKERAGE AND COMMISSION AND I T APPROACHED M/S. SHRIRAM ASSET MANAGEMENT COMPANY LTD. AND SHRI RAM INVESTMENT SERVICES LTD. FOR REIMBURSEMENT. I.T.A. NOS. 1512 TO 1518/MDS/2010 9 2.4 HOWEVER BEFORE THE CIT(A) THE ASSESSEE CLAIMED THIS AMOUNT WAS OFFERED AS INCOME FOR THE A.Y 1996-97AND SINCE THE MUTUAL FUND FAILED, IT HAD WRITTEN OFF THE SAME DUR ING THE A.Y. IT IS SUBMITTED THAT THIS IS A NEW CLAIM PUT FORTH BY THE ASSESSEE IN THE SECOND ROUND OF APPELLATE PROCEEDINGS. THE CITR (A) FAILED TO APPRECIATE THIS ASPECT OF THE MATTER. 2.5 IT IS SUBMITTED THAT THE CONFUSION REGARDING T HE NATURE OF CLAIM MADE BY THE ASSESSEE STILL CONTINUES AND THE CIT(A) FAILED TO CONSIDER THAT. THE ASSESSEE HAS NOT GIVEN TILL DATE THE CLEAR PARTICULARS IN RESPECT OF THE CLAIM MADE BY HIM. 2.6 THE CIT(A) ERRED IN ACCEPTING THE CLAIM MADE B Y THE ASSESSEE THAT IT HAD OFFERED ` 50,18,909 AS MISCELLANEOUS INCOME FOR THE AY 1996-97. IT IS SUBMITTED THAT THIS CLAI M IS NOT SUBSTANTIATED BY THE BALANCE SHEET FILED BY THE ASS ESSEE AS NO SUCH SUM IS SHOWN AS RECEIVABLES FOR THE A.Y 1996-9 7. 2.7 IT IS SUBMITTED THAT IT IS NOT CLEAR FROM THE CIT(A)S ORDERS AS TO WHETHER THE ASSESSEE HAD CLAIMED THE A MOUNT AS BAD DEBTS OR BUSINESS LOSS. 2.8 HAVING REGARD TO THE DECISION OF THE HON'BLE H IGH COURT OF MADRAS IN THE CASE OF TUTICORIN SPINNING MILLS ( 261 ITR 291), THE CIT(A) SHOULD HAVE HELD THAT THE BUSINESS EXPEN DITURE U/S 37 (IF THE ASSESSEES CLAIM IS UNDER SECTION 37 AND TO BE ALLOWED ACCORDINGLY) COULD BE CLAIMED ONLY IN RELATION TO T HE YEAR IN WHICH IT PERTAINED TO. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. I.T.A. NOS. 1512 TO 1518/MDS/2010 10 13. GROUNDS NO. 21 TO 2.8 ARE AGAINST THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISAL LOWANCE OF BROKERAGE EARNED WHICH WAS WRITTEN OFF AS A BAD DEBT. IT WAS SUBMIT TED BY THE LEARNED DR THAT THE ASSESSEE HAD NOT SHOWN THE BROKERAGE AS INCOME. IT WAS THE FURTHER SUBMISSION THAT IN THE ASSESSMENT ORDER AGE PAGE 3, PARA 6, TH E ASSESSING OFFICER HAD CATEGORICALLY HELD THAT NO EVIDENCE HAD BEEN PRODUC ED TO SUPPORT THAT THE ASSESSEE HAD TAKEN LEGAL ACTION. IT WAS THE SUBMISS ION THAT THAT BEFORE THE ASSESSING OFFICER THE CLAIM OF THE ASSESSEE WAS THA T THE AMOUNT WAS EXPENDITURE INCURRED WITH REGARD TO THE COMMISSION THE ASSESSEE HAD TO RECEIVE. IT WAS THE FURTHER SUBMISSION THAT THE LEARNED CIT(A) HAD DELE TED THE ADDITION BY HOLDING THAT NO INITIATION OF LEGAL ACTION WAS REQUIRED AND IT WAS LEFT TO THE ASSESSEE TO WRITE OFF THE BAD DEBT WHICH WAS NOT RECOVERABLE. IT WAS THE FURTHER SUBMISSION THAT THE ASSESSEE HAD NOT SHOWN THAT THE AMOUNT OF BROKERAGE WRITTEN OFF AS BAD DEBT HAD BEEN OFFERED AS INCOME DURING ANY OF THE E ARLIER YEARS. 14. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAD SHOWN THIS AMOUNT OF ` . 50,18,909/- AS INCOME FOR THE YEAR ENDED 31.3.199 6 UNDER THE HEAD MISCELLANEOUS INCOME. IT WAS THE SUBMISSION THAT THIS AMOUNT WAS THE BROKERAGE RECEIVABLE FROM M/S. SHRIRAM MUTU AL FUND PRODUCTS. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD ALSO PRODUCED EVIDENCES TO SHOW THAT THE INCOME WAS OFFERED. HE VEHEMENTLY SUPPORTED THE OR DER OF THE LEARNED CIT(A). I.T.A. NOS. 1512 TO 1518/MDS/2010 11 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORDER OF THE LEARNED CIT(A) IN PARA 1(II) AT PAGE 3, SHOWS THAT THE LEARNED CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAS PRODUCED BEFORE THE LEARNED CIT(A) CORRESPONDENCE WITH M/S. SHRIRAM INVESTMENT SERVICE S LTD. AND M/S. SHRIRAM ASSET MANAGEMENT COMPANY REGARDING THE BROKERAGE DU E TO THE ASSESSEE AND LEDGER ACCOUNT COPY OF THE MISCELLANEOUS INCOME FOR THE ACCOUNTING YEAR ENDED 31.03.1996 WHICH HAD BEEN FILED BEFORE THE ASSESSIN G OFFICER AT THE TIME OF ASSESSMENT. HE HAS GIVEN A CATEGORICAL FINDING THA T THE THE ASSESSEE HAS EARNED THE INCOME FROM SELLING THE PRODUCTS OF SHRIRAM MUT UAL FUND AND THE SAME IS INCLUDED IN ITS INCOME BROUGHT TO TAX IN THE ASSESS MENT YEAR 1996-97. THIS FINDING OF THE LEARNED CIT(A) HAVING NOT BEEN DISPR OVED MUCH LESS THIS FINDING OF THE LEARNED CIT(A) HAVING NOT BEEN CHALLENGED IN TH E APPEAL , THE INCOME HAVING BEEN OFFERED FOR THE ASSESSMENT YEAR 19960-97 THE C LAIM OF BAD DEBT CANNOT NOW BE DENIED. THIS IS BECAUSE THERE IS NO LEGAL ACTIO N BEING TAKEN BY THE ASSESSEE. IN THE CIRCUMSTANCES THE ORDER OF THE LEARNED CIT(A ) STANDS CONFIRMED. 16. IN THE RESULT, THE REVENUES APPEAL IN ITA NO. 1513/MDS/2010 STANDS DISMISSED. 17. I.T.A. NO. 1514/MDS/2010: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-V, CHENNAI IN ITA NO. 457/06-07 DATED 23-06-2010 FOR THE ASSESSMENT YEAR 1999-2000 IN THE CASE OF M/S. SHRIRAM I.T.A. NOS. 1512 TO 1518/MDS/2010 12 CAPITAL TRUST P. LTD. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND FACTS OF THE CASE. 2.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE ADDITION OF ` 2,66,84,763 BEING MINIMUM GUARANTEE CHARGES TO ASSISTING COMPANIES RELYING ON HIS OWN ORDERS IN TH E CASE OF M/S. SHRIRAM PROPERTIES AND CONSTRUCTION FOR A.Y 2003-04 IN ITA NO. 99/2006-07 AND HON'BLE ITATS ORDERS IN THE CASE OF M/S. RAMBAL PROPERTIES P. LTD. ION ITA NOS. 1240/MS/2005 FOR A. YT 200-01 AND 2003-04. 2.2 IT IS SUBMITTED THAT THE DECISION OF THE CIT(A ) RELIED UPON BY THE CIT(A) IN THE HAS NOT BECOME FINAL AND APPEAL TO TH IS HON'BLE TRIBUNAL HAS BEEN FILED BY THE DEPARTMENT. 2.3 IT IS SUBMITTED THAT THE DECISION OF THE HON'B LE TRIBUNAL RELIED UPON BY THE CIT(A) IN THE HAS NOT BECOME FINAL AND APPEAL BEFORE THE HON'BLE HIGH COURT HAS BEEN FILED BY THE DEPARTMENT . 3.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O TO DELETE THE ENTIRE AMOUNT OF DISALLOWANCE OF ADMINISTRATION AND OTHER EXPENSES INTEREST & FINANCE CHARGES AND DEPRECIATION OF ` 26,63,531. 3.2 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED T HAT ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING A ND THE EXPENSES IDENTIFIABLE WITH THE PROJECT SHOULD BE ALLOWED ONL Y IN THE YEAR IN WHICH INCOME IS OFFERED. 3.3 HAVING REGARD TO THE DECISION OF THE ITAT MUMB AI IN THE CASE OF WALL STREET CONSTRUCTION LTD. (101 ITD 156) THE CIT (A) OUGHT TO HAVE AT LEAST IDENTIFIED EXPENSES IDENTIFIABLE WITH THE PROJECT. I.T.A. NOS. 1512 TO 1518/MDS/2010 13 4.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE D ISALLOWANCE OF ` 83,785 U/S 43B DELETED RELYING ON CIT(A)S ORDER IN ITA NO 457/2006- 07 IN A.Y 99-00. 4.2 HAVING REGARD TO THE DECISION OF THIS HON'BLE TRIBUNAL IN THE CASE OF M/S. REED RELAYS AND ELECTRONICS LTD FOR THE A.Y 2004-05 IN ITA NO. 2295/MDS/2008 WHEREIN IT WAS HELD THAT EMPLOYEES C ONTRIBUTION IS NOT COVERED U./S 43B THE CIT(A) OUGHT TO HAVE CONFIRMED THE ACTION OF THE A.O. 5.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O TO ASSESS ` 19.90 LAKHS AS INCOME FROM BUSINESS OUT OF ` 25.15 LAKHS OF INTEREST INCOME ASSESSED UNDER OTHER SOURCES. 5.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE ASSESSEE HAS DEPOSITED SURPLUS FUND AVAILABLE IN ITS REAL ESTATE BUSINESS. 6.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT T HE AMOUNT OF ` 2,66,84,763/- PAID TO ASSISTING COMPANIES AS MINIMU M GUARANTEE CHARGES AN ASCERTAINED LIABILITY AND HENCE CANNOT B E ADDED FOR COMPUTATION U/S 115JB. 6.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE EXACT LIABILITY WOULD BE ASCERTAINED AS PER AGREEMENT ONLY AFTER FI VE YEARS WHEN THE JOINT DEVELOPERS DEPENDING EXERCISE THEIR OPTION. 7. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 18. IN GROUNDS 2.1 TO 2.3 THE REVENUE HAS CHALLENGE D THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION REPRESENTING THE MINIMUM GUARANTEE CHARGES PAID FOR ASSISTING COMPAN IES. AT THE TIME OF HEARING I.T.A. NOS. 1512 TO 1518/MDS/2010 14 IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THIS IS SUE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 1961/MDS/2010 DATED 04-02-2011 FOR THE ASSE SSMENT YEAR 2002-03, WHEREIN THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAD, FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF T HE SISTER CONCERN OF THE ASSESSEE M/S. RAMBAL PROPERTIES PVT. LTD. IN ITA NO . 1240.MDS.2005 DATED 28-02- 2007 CONFIRMED THE FINDING OF THE LEARNED CIT(A) IN DELETING THE ADDITION. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2002-03, THE FINDING OF THE LEARNED CIT(A) STANDS CONFIRMED. 19. IN GROUNDS 3.1 TO 3.3 THE REVENUE HAS CHALLENGE D THE ACTION OF OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER T O DELETE THE DISALLOWANCE OF THE ADMINISTRATION AND OTHER EXPENSES BEING INTEREST IN FINANCE CHARGES AND DEPRECIATION. IT WAS THE SUBMITTED BY THE LEARNED DR THAT THE ASSESSEE WAS FOLLOWING A COMPLETED CONTRACT METHOD. IT WAS SUBM ITTED THAT THE EXPENSES WHICH HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER WAS ADMINISTRATIVE AND OTHER EXPENSES, INTEREST AND FINANCE CHARGES AND DEPRECIA TION RELATING TO THE PROJECTS WHICH WERE UNDER PROGRESS. IT WAS THE SUBMISSION T HAT ION VIEW OF THE DECISION OF THE MUMBAI SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF WALL STREET CONSTRUCTION LTD., REPORTED IN 101 ITD 156, THE IDE NTIFIABLE EXPENSES IN RELATION TO PROJECTS WHICH HAVE NOT BEEN COMPLETED WAS LIABLE T O BE DISALLOWED AND SUCH I.T.A. NOS. 1512 TO 1518/MDS/2010 15 EXPENSES WERE ALLOWABLE ONLY WHEN THE PROJECTS WERE COMPLETED AS THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD. IT WAS TH E SUBMISSION THAT HE HAD NO OBJECTION IF THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE- ADJUDICATION IN LINE WITH THE DECISION OF THE SPECI AL BENCH OF THIS TRIBUNAL IN THE CASE OF WALL STREET CONSTRUCTION LTD., REFERRED TO SUPRA. 20. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ADMINISTRATION AND OTHER EXPENSES, INTEREST, DEPREC IATION AND FINANCE CHARGES, WHICH HAVE BEEN DISALLOWED BY THE A.O, WERE GENERAL IN NATURE AND COULD NOT BE RELATED TO ANY PARTICULAR PROJECT. IT WAS THE FURT HER SUBMISSION THAT EVEN AS PER THE ACCOUNTING STANDARDS 7 ISSUED BY THE ICAI, THE EXPENDITURE OF GENERAL NATURE NOT ATTRIBUTABLE TO ANY SPECIFIC ACTIVITY HAS TO BE TAKEN AS THE PERIOD COST FOR THE RELEVANT ASSESSMENT YEAR. IT WAS THE SUBMISSION TH AT THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF MANGAL TIRTH ESTATE LTD. (2008) 171 TAXMAN 435 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ADMINISTRATION AND OTH ER EXPENSES, INTEREST & FINANCE CHARGES AND DEPRECIATION HAD BEEN TAKEN FROM THE P & L A/C OF THE ASSESSEE. THE ASSESSING OFFICER HAS GIVEN A CATEGORICAL FINDI NG THAT THESE WERE CARRIED FORWARD AS CAPITAL WORK-IN-PROGRESS. THE FACT THAT THESE AMOUNTS HAD BEEN TAKEN FROM THE P & L ACCOUNT CLEARLY SHOWS THAT THESE ARE NOTHING BUT THE REGULAR BUSINESS EXPENDITURE AND ARE NOT RELATED TO ANY SPE CIFIC PROJECTS. FURTHER A I.T.A. NOS. 1512 TO 1518/MDS/2010 16 PERUSAL OF THE STATEMENT OF FACTS FILED BEFORE THE LEARNED CIT(A) ALSO CLEARLY SHOWS THE BREAK-UP OF THE ADMINISTRATION EXPENSES, DEPRECIATION, INTEREST AND FINANCIAL CHARGES WHICH ARE NOT IN RELATION TO ANY SPECIFIC PROJECT. AS IT IS NOTICED THAT THE DISALLOWANCE IS NOT RELATED TO ANY SPECIFI C CONTRACT, WE ARE OF THE VIEW THAT THE SAME CANNOT BE DISALLOWED JUST BECAUSE THE ASSESSEE IS FOLLOWING THE COMPLETED CONTRACT METHOD. IT IS ONLY SUCH EXPEND ITURE WHICH IS RELATED TO ANY SPECIFIC IDENTIFIABLE EXPENDITURE RELATED TO THE PR OJECT, THAT CAN BE DISALLOWED. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FIND ING OF THE LEARNED CIT(A) IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERE NCE. 22. IN GROUNDS 4.1 AND 4.2 THE REVENUE HAS CHALLENG ED THE ACTION OF THE LEARNED CIT(A) IN RESPECT OF THE DISALLOWANCE MADE UNDER SE CTION 43B OF THE I.T. ACT, 1961 REPRESENTING THE EMPLOYEES CONTRIBUTION TO PF AND ESI. IT WAS SUBMITTED BY THE LEARNED DR THAT THE EMPLOYEES CONTRIBUTION TO PF AND ESI WAS LIABLE TO BE ALLOWED ONLY IF IT HAS BEEN PAID BEFORE THE DUE DAT E OF FILING THE RETURN. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAS GIVEN A BLANKET DEDUCTION TO THE ASSESSEE. IT WAS THE SUBMISSION THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION. 23. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE DECISIONS RELIED UPON BY THE LEARNED CIT(A) CLEARLY SHOWS THAT THE A MOUNTS REMITTED BEFORE THE I.T.A. NOS. 1512 TO 1518/MDS/2010 17 FILING OF THE RETURNS IN RESPECT OF THE PF AND ESI I S AN ALLOWABLE DEDUCTION. THE DATES OF PAYMENTS OF THE PF AND ESI ARE NOT BEFORE U S. IN THE CIRCUMSTANCES, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFI CER FOR RE-ADJUDICATION IN LINE WITH THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF CIT V. VINAY CEMENT LTD. REPORTED IN 213 CTR 268 AS ALSO THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. NEXUS COMPUTER P. LTD. REPORTED IN 313 ITR 144. IN THE CIRCUMSTANCES, GROUNDS 4.1 AND 4.2 IN THE REVEN UES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES 25. IN GROUNDS 5.1 AND 5.2 THE REVENUE HAS CHALLENG ED THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ASSESS ` 19.90 LAKHS AS INCOME FROM BUSINESS OUT OF ` 25.15 LAKHS OF INTEREST INCOME ASSESSED UNDER OTH ER SOURCES. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF TH E ASSESSING OFFICER. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD RECEIVED INTER EST INCOME AND THE SAME WAS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES . HOWEVER, THE LEARNED CIT(A) HAD TREATED THE INTEREST ON THE ADVANCE GIVE N TO M/S. SHRI HOUSING P. LTD. AS ALSO THE LOANS GIVEN TO THE DEPOSITORS ON THEIR DEPOSITS AS UNDER THE HEAD INCOME FROM BUSINESS. 26. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORDER OF THE LEARNED CIT(A) CLEARLY SHOWS THAT HE HAS CONSIDERED THE FACT THAT THE I.T.A. NOS. 1512 TO 1518/MDS/2010 18 MEMORANDUM AND ARTICLES OF ASSOCIATION CATEGORICALL Y PERMITTED THE ASSESSEE TO DO MONEY LENDING BUSINESS AND THAT THE ASSESSEE COM PANY IS DOING THE BUSINESS OF MONEY LENDING. ONCE IT IS FOUND THAT THE ASSESS EE IS DOING THE BUSINESS OF MONEY LENDING, THEN OBVIOUSLY THE INTEREST INCOME O N THE ADVANCES GIVEN BY THE ASSESSEE COMPANY IN THE COURSE OF THE BUSINESS CAN ONLY BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) IN DIRECTING THE ASSE SSING OFFICER TO TREAT THE INTEREST ON THE ADVANCES TO M/S. SHRI HOUSING P. LTD. AS ALS O ON THE LOANS GIVEN TO DEPOSITORS ON THEIR DEPOSITS BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS , IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INT ERFERENCE. 28. IN GROUNDS 6.1 AND 6.2 THE REVENUE HAS CHALLENG ED THE ACTION OF THE LEARNED CIT(A) IN HOLDING THAT THE AMOUNT PAID FOR ASSISTIN G COMPANIES AS MINIMUM GUARANTEE CHARGES IS AN ASCERTAINED LIABILITY. AT THE TIME OF HEARING IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THIS ISSUE WAS SQUARE LY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSES SEES OWN CASE IN ITA NO. 1961/MDS/2010 DATED 04-02-2011 FOR THE ASSESSMENT Y EAR 2002-03. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, THE FINDING OF THE LEARNED CIT(A) STANDS CONFIRMED. 29. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 1514/MDS/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NOS. 1512 TO 1518/MDS/2010 19 30. ITA NO. 1515/MDS/2010: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) IN ITA NO. 186/07-08 DATED 23-06-2010 FOR THE ASSESSMENT YEAR 2000-01 IN THE CASE OF M/S. SHRIRAM CAPITAL TRUST P. LTD. 31. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND FACTS OF THE CASE. 2.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE ADDITION OF ` 2,83,26,764 BEING MINIMUM GUARANTEE CHARGES TO ASSISTING COMPANIES RELYING ON HIS OWN ORDERS IN TH E ASSESSEES CASE FOR A.Y 1999-00 IN ITA NO.457/2006-07. 2.2 IT IS SUBMITTED THAT THE DECISION OF THE CIT(A ) RELIED UPON BY THE CIT(A) IN THE ASSESSEES CASE HAS NOT BECOME FINAL AND APPEAL TO THIS HON'BLE TRIBUNAL HAS BEEN FILED BY THE DEPARTMENT. 3.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A .O TO DELETE THE ENTIRE AMOUNT OF ADDITION OF ADMINISTRATIVE AND OTH ER EXPENSES OF ` 24.17 LAKHS. 3.2 THE CIT(A) RELIED ON HIS OWN ORDERS IN ASSESSEE S CASE FOR A.Y 1999-00 IN ITA NO. 457/2006-07. 3.3 IT IS SUBMITTED THAT THE DECISION OF THE CIT(A) RELIED UPON BY THE CIT(A) IN THE ASSESSEES CASE HAS NOT BECOME FINAL AND APPEAL TO THIS HON'BLE TRIBUNAL HAS BEEN FILED BY THE DEPARTMENT. 4.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE DI SALLOWANCE OF ` 8051 U/S 43B DELETED RELYING ON CIT(A)S ORDER IN I TA NO. 457/2006-07 IN A.Y 99-00. 4.2 HAVING REGARD TO THE DECISION OF THIS TRIBUNAL IN THE CASE OF M/S. REED RELAYS AND ELECTRONICS LTD FOR THE A.Y 2004-05 IN ITA I.T.A. NOS. 1512 TO 1518/MDS/2010 20 NO.2295/MDS/2008 WHEREIN IT WAS HELD THAT EMPLOYEE S CONTRIBUTION IS NOT COVERED U/S 43B THE CIT(A) OUGHT TO HAVE CONFIR MED THE ACTION OF THE A.O. 5.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A .O TO DELETE THE DISALLOWANCE OF BAD DEBTS OF ` 4,82,730 IN RESPECT OF M/S. NOVOCHEM LABORATORIES AND ` 17,122 IN THE CASE OF M/S BAFNA MOTORS. 5.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E ASSESSEE HAS NEITHER TAKEN THESE AMOUNT AS INCOME EARLIER NOR WA S IT INCURRED DURING THE YEAR TO BE CLAIMED AS AN EXPENSE. 6.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A O TO ASSESS ` 14.79 LAKHS AS INCOME FROM BUSINESS. 6.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E ASSESSEE HAS DEPOSITED SURPLUS FUND AVAILABLE IN ITS REAL ESTATE BUSINESS. 7.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT T HE AMOUNT OF ` 2,83,26,764/- PAID TO ASSISTING COMPANIES AS MINIMU M GUARANTEE CHARGES AN ASCERTAINED LIABILITY AND HENCE CANNOT B E ADDED FOR COMPUTATION U/S 115JB. 7.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE EXACT LIABILITY WOULD BE ASCERTAINED AS PER AGREEMENT ONLY AFTER FI VE YEARS WHEN THE JOINT DEVELOPERS DEPENDING EXERCISE THEIR OPTION. 8. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 32. IN GROUNDS 2.1 AND 2.2 THE REVENUE HAS CHALLENG ED THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION REPRESENTING MINIMUM GUARANTEE CHARGES. IT WAS FAIRLY AGREED BY BOTH SIDES THAT THIS ISSUE I.T.A. NOS. 1512 TO 1518/MDS/2010 21 WAS IDENTICAL TO GROUNDS 2.1 TO 2.3 OF THE REVENUE S APPEAL IN ITA NO. 1514/MDS/2010, SUPRA. IN THE CIRCUMSTANCES OUR FIN DING IN RESPECT OF GROUNDS 2.1 TO 2.3 IN ITA NBO. 1514/MDS/2010 WOULD BE APPLI CABLE HERE. 33. IN GROUNDS 3.1 TO 3.3 THE REVENUE HAS CHALLENG ED THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER T O DELETE THE ADDITION REPRESENTING THE ADMINISTRATION AND OTHER EXPENSES. IT WAS FAIRLY AGREED THAT THIS ISSUE WAS IDENTICAL TO GROUNDS 3.1 TO 3.3. OF THE R EVENUES APPEAL IN ITA NO. 1514/MDS/2010, SUPRA. IN THE CIRCUMSTANCES, OUR FI NDING IN REGARD TO GROUNDS NO. 3.1 TO 3.3 OF THE REVENUES APPEAL IN ITA NO. 1514/MDS/2010 WOULD APPLY TO THESE GROUNDS ALSO. 34. IN REGARD TO GROUNDS 4.1 AND 4.2 IT WAS FAIRLY AGREED THAT THIS ISSUE WAS IDENTICAL TO GROUND 4.1 AND 4.2 OF THE REVENUE S APPEAL IN ITA NO. 1514/MDS/2010, SUPRA. OUR FINDING IN GROUNDS 4.1 A ND 4.2 OF THE REVENUES APPEAL IN ITA NO. 1514/MDS/2010 WOULD APPLY HERE. 35. IN REGARD TO GROUND NOS. 5.1 AND 5.2 WHICH IS A GAINST THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER T O DELETE THE DISALLOWANCE OF BAD DEBTS IN RESPECT OF M/S. NOVOCHEM LABORATORIES AND M/S. BAFNA MOTORS IT WAS SUBMITTED BY THE LEARNED DR THAT THE AMOUNT HAD NO T BEEN SHOWN AS INCOME DURING THE EARLIER YEARS. HOWEVER, IT WAS AGREED B Y THE LEARNED DR THAT THE AMOUNT WRITTEN OFF WAS ON ACCOUNT OF THE NON-SUPPLY OF CONSTRUCTION MATERIALS. IT WAS SUBMITTED THAT THE SAME COULD NOT BE ALLOWED AS BAD DEBT. I.T.A. NOS. 1512 TO 1518/MDS/2010 22 36. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE AMOUNTS WERE DUES FROM THE TWO COMPANIES FOR THE SUPPLY OF MATERIALS AND THESE WERE ACTUALLY TRADE ADVANCES. IT WAS THE SUBMISSION THA T THE SAME WAS ALLOWABLE AS A BUSINESS EXPENDITURE. IT WAS THE SUBMISSION THAT T HE CLAIM WAS WRONGLY MADE AS A BAD DEBT. 37. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS NOTICED THAT THE EXPENDITURE CLAIMED IS IN FACT ADVANCES MADE BY THE ASSESSEE FOR THE PURCHASE OF CONSTRUCTION MATERIALS AND HAS ALSO BEEN RECORDED I N THE ASSESSMENT ORDER, THE SAME IS LIABLE TO BE ALLOWED U/S 37 AS THE SAME IS A BUSINESS EXPENDITURE.. IN THE CIRCUMSTANCES, THE ORDER OF THE LEARNED CIT(A) ON T HIS ISSUE STANDS MODIFIED AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SAME AS ADVANCE WRITTEN OFF U/S 37 OF THE ACT. 38. IN GROUNDS 6.1 AND 6.2 THE REVENUE HAS CHALLENG ED THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ASSESS THE AMOUNT OF ` 14.79 LAKHS AS INCOME FROM BUSINESS. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THIS INTEREST WAS THE INTEREST ON THE ADVANCE TO M/S. SHRI HOUSIN G (P) LTD. IT WAS FAIRLY AGREED THAT THE ISSUE WAS IDENTICAL TO GROUNDS 5.1 AND 5.2 OF THE REVENUES APPEAL IN ITA NO. 1514/MDS/2010. IN THE CIRCUMSTANCES, OUR FINDI NG IN RELATION TO GROUNDS 5.1 & 5.2 OF THE REVENUES APPEAL IN ITA NO.1514/MDS/20 10 WOULD APPLY TO THESE GROUNDS. I.T.A. NOS. 1512 TO 1518/MDS/2010 23 39. IN GROUNDS 7.1 AND 7.2 IT WAS FAIRLY AGREED THA T THE ISSUE WAS IDENTICAL TO GROUNDS 6.1 AND 6.2 OF THE REVENUES APPEAL IN ITA NO.1514/MDS/2010, SUPRA. IN THE CIRCUMSTANCES, OUR FINDING IN REGARD TO GROUNDS 6.1 AND 6.2 OF THE REVENUES APPEAL IN ITA NO.1514/MDS/2010 WOULD APPLY TO THESE GROUNDS ALSO. 40. IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO. 1515/MDS/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 41. ITA NO. 1516/MDS/2010: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) IN ITA NO. 9/06-07 DATED 23-06-2010 FOR THE ASSESSMENT YEAR 2003-04 IN THE CASE OF M/S. SHR IRAM CAPITAL TRUST P. LTD. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND FACTS OF THE CASE. 2.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE ADDITION OF ` 2,12,31,881 BEING MINIMUM GUARANTEE CHARGES TO ASSISTING COMPANIES RELYING ON HIS OWN ORDERS IN IT A NO.457/2006-07 FOR A.Y 1999-2000. 2.2 IT IS SUBMITTED THAT THE DECISION OF THE CIT(A ) RELIED UPON BY THE CIT(A) HAS NOT BECOME FINAL AND APPEAL TO THIS HON 'BLE TRIBUNAL HAS BEEN FILED BY THE DEPARTMENT. 3.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A .O TO DELETE THE ENTIRE AMOUNT OF ADDITION OF ADMINISTRATIVE AND OTH ER EXPENSES, INTEREST & FINANCE CHARGES AND DEPRECIATION OF ` 31,33,263 RELYING ON HIS ORDER FOR A.Y 99-2000 IN ITA NO. 457/06-07.. I.T.A. NOS. 1512 TO 1518/MDS/2010 24 3.2 IT IS SUBMITTED THAT THE DECISION OF THE CIT(A) RELIED UPON BY THE CIT(A) IN THE ASSESSEES CASE HAS NOT BECOME FINAL AND APPEAL TO THIS HON'BLE TRIBUNAL HAS BEEN FILED BY THE DEPARTMENT. 3.3 HAVING REGARD TO THE DECISION OF THE ITAT MUMBA I IN THE CASE OF WALL STREET CONSTRUCTION LTD. (101 ITD 156) THE CIT (A) OUGHT TO HAVE AT LEAST IDENTIFIED EXPENSES IDENTIFIABLE WITH THE PROJECT. 4.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A .O TO DELETE THE DISALLOWANCE OF BAD DEBTS OF ` 1,27,98,162 CONSISTING OF ADVANCE OF MONEY AND ADVANCES FOR MATERIALS. 4.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E ASSESSEE WAS NEITHER A MONEY LENDER NOR HAS TAKEN THE AMOUNT WRI TTEN OFF AS INCOME EARLIER TO BE ALLOWED AS BAD DEBTS AND THE A DVANCES FOR MATERIALS WRITTEN OFF WERE NOT IN THE NATURE OF EXP ENSES TO BE CONSIDERED U/S 37. 5.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT TH E AMOUNT OF ` 2,12,31,881/- PAID TO ASSISTING COMPANIES AS MINIMU M GUARANTEE CHARGES AN ASCERTAINED LIABILITY AND HENCE CANNOT B E ADDED FOR COMPUTATION U/S 115JB 5.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E EXACT LIABILITY WOULD BE ASCERTAINED AS PER AGREEMENT ONLY AFTER FI VE YEARS WHEN THE JOINT DEVELOPERS DEPENDING EXERCISE THEIR OPTION. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 42. IN REGARD TO GROUNDS 2.1 AND 2.2. IT WAS FAIRLY AGREED THAT THIS ISSUE WAS IDENTICAL TO THE GROUNDS NO. 2.1 TO 2.3OF THE REVEN UES APPEAL IN ITA NO. I.T.A. NOS. 1512 TO 1518/MDS/2010 25 1514/MDS/2010, SUPRA. IN THE CIRCUMSTANCES, OUR FI NDING IN RESPECT OF THE GROUNDS NO. 2.1 TO 2.3 IN ITA NO.1514/MDS/2010, SUP RA WOULD APPLY HERE IN RELATION TO THESE GROUNDS. 43. IN REGARD TO GROUNDS 3.1 TO 3.3 WHICH WERE AGAI NST THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF ADMINISTRATION AND OTHER EXPENSES, INTEREST & FINAN CE CHARGES AND DEPRECIATION, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THESE ISSU ES WERE IDENTICAL TO THE GROUNDS 3.1 TO 3.3 OF THE REVENUES APPEAL IN ITA NO.1514/M DS/2010. IN THE CIRCUMSTANCES, OUR FINDING WITH REGARD TO GROUNDS 3 .1 TO 3.3. OF THE REVENUES APPEAL IN ITA NO.1514/MDS/2010 WOULD APPLY IN RELAT ION TO THESE GROUNDS. 40. IN REGARD TO GROUNDS 4.1 AND 4.2 IT WAS FAIRLY AGREED THAT THE ISSUE WAS IDENTICAL TO GROUNDS 5.1 AND 5.2 OF THE REVENUES A PPEAL IN ITA NO. 1515/MDS/2010. IN THE CIRCUMSTANCES, OUR FINDING I N RELATION TO GROUNDS 5.1 AND 5.2 OF THE REVENUES APPEAL IN ITA NO.1515/MDS/2010 WOULD APPLY TO THESE GROUNDS ALSO. 44. IN REGARD TO GROUNDS 5.1 AND 5.2 IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS IDENTICAL TO GROUNDS 6.1 AND 6.2 OF R EVENUES APPEAL IN ITA NO. 1514/MDS/2010. IN THE CIRCUMSTANCES, OUR FINDING I N REGARD TO GROUNDS 6.1 AND 6.2 OF THE REVENUES APPEAL IN ITA NO. 5014/MDS/201 0 WOULD APPLY TO THESE GROUNDS. 45. IN THE RESULT, THE REVENUES APPEAL IN ITA NO. 1516/MDS/2010 IS DISMISSED. I.T.A. NOS. 1512 TO 1518/MDS/2010 26 46. ITA NO. 1517/MDS/2010 : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-V, CHENNAI IN ITA NO.624/06-07 DATED 23- 06-2010 FOR THE ASSESSMENT YEAR 2004-05 IN THE CASE OF M/S. SHRIRAM CAPITAL TRUST P. LTD. 47. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND FACTS OF THE CASE. 2.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE ADDITION OF ` 51,64,563 BEING MINIMUM GUARANTEE CHARGES TO ASSIS TING COMPANIES RELYING ON HIS OWN ORDERS IN ITA NO.457/2 006-07 FOR A.Y 99-2000. 2.2 IT IS SUBMITTED THAT THE DECISION OF THE CIT(A ) RELIED UPON BY THE CIT(A) HAS NOT BECOME FINAL AND APPEAL TO THIS HON 'BLE TRIBUNAL HAS BEEN FILED BY THE DEPARTMENT. 3.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A .O TO DELETE THE ENTIRE AMOUNT OF ADDITION OF ADMINISTRATIVE AND OTH ER EXPENSES, INTEREST & FINANCE CHARGES AND DEPRECIATION OF ` 12,34,686 RELYING ON HIS ORDER FOR A.Y 99-2000 IN ITA NO. 457/06-07. 3.2 IT IS SUBMITTED THAT THE DECISION OF THE CIT(A) RELIED UPON BY THE CIT(A) HAS NOT BECOME FINAL AND APPEAL TO THIS HON' BLE TRIBUNAL HAS BEEN FILED BY THE DEPARTMENT. 3.3 HAVING REGARD TO THE DECISION OF THE ITAT MUMBA I IN THE CASE OF WALL STREET CONSTRUCTION LTD. (101 ITD 156) THE CIT (A) OUGHT TO HAVE AT LEAST IDENTIFIED EXPENSES IDENTIFIABLE WITH THE PROJECT. I.T.A. NOS. 1512 TO 1518/MDS/2010 27 4.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE D ISALLOWANCE OF ` 1,199 U/S 43B DELETED RELYING ON CIT(A)S ORDER IN ITA NO 457/2006-07 IN A.Y 99-00. 4.2 HAVING REGARD TO THE DECISION OF THIS HON'BLE TRIBUNAL IN THE CASE OF M/S. REED RELAYS AND ELECTRONICS LTD FOR THE A.Y 2004-05 IN ITA NO. 2295/MDS/2008 WHEREIN IT WAS HELD THAT EMPLOYEES C ONTRIBUTION IS NOT COVERED U./S 43B THE CIT(A) OUGHT TO HAVE CONFIRMED THE ACTION OF THE A.O. 5.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE D ISALLOWANCE OF ` 2.20 CRORES PAID AS COMPENSATION TO M/S DBS PROPERT IES LTD. 5.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE COMPENSATION WAS PAID FOR BREACH OF CONTRACT IN RESPECT OF A NEW VENTURE WITH M/S DBS PROPERTIES WHICH IS CAPITAL IN NATURE. 5.3 FURTHER HAVING REGARD TO THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF SWADESHI COTTON MILLS CO. (63 ITR 65) AND HON'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF JAIPUR MINER AL DEVELOPMENT SYNDICATE (216 ITR 469), THE CIT(A) OUGHT TO HAVE H ELD THE AMOUNT PAID AS COMPENSATION AS CAPITAL ONLY. 6.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE D ISALLOWANCE OF LEGAL CHARGES OF ` 27,20,130 WHICH DID NOT PERTAIN TO THE RELEVANT PR EVIOUS YEAR. 6.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HERE WAS NO DISPUTE OVER PAYMENT OF LEGAL CHARGES WHICH MUST HAVE BEEN CLAIMED ONLY ON THE A.Y TO WHICH IT RELATES TO. 7.1 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT T HE AMOUNT OF ` 51,64,568/-PAID TO ASSISTING COMPANIES AS MINIMUM G UARANTEE CHARGES AN ASCERTAINED LIABILITY AND HENCE CANNOT B E ADDED FOR COMPUTATION U/S 115JB. I.T.A. NOS. 1512 TO 1518/MDS/2010 28 7.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE EXACT LIABILITY WOULD BE ASCERTAINED AS PER AGREEMENT ONLY AFTER FI VE YEARS WHEN THE JOINT DEVELOPERS DEPENDING EXERCISE THEIR OPTION. 8. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 48. IN REGARD TO GROUNDS 2.1 AND 2.2 IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THESE ISSUES WERE IDENTICAL TO GROUNDS 2.1 TO 2.3 O F THE REVENUES APPEAL IN ITA NO.1514/MDS/2010. IN THE CIRCUMSTANCES, OUR FINDIN G WITH REGARD TO THE GROUNDS 2.1 TO 2.3 OF THE REVENUES APPEAL IN ITA NO.1514/M DS/2010 WOULD APPLY TO THESE GROUNDS. 49. IN REGARD TO GROUNDS 3.1 TO 3.3 IT WAS FAIRLY A GREED THAT THE ISSUE WAS IDENTICAL TO GROUNDS 3.1 TO 3.3 OF THE REVENUES AP PEAL IN ITA NO.1514/MDS/2010. IN THE CIRCUMSTANCES, OUR FINDING IN GROUNDS NO. 3. 1 TO 3.3 OF THE REVENUES APPEAL IN ITA NO. 1514/MDS/2010 WOULD APPLY HERE. 50. IN REGARD TO GROUNDS 4.1 AND 4.2 IT WAS FAIRLY AGREED THAT THE ISSUE WAS IDENTICAL TO GROUNDS 4.1 AND 4.2 OF THE REVENUES A PPEAL IN ITA NO. 1514/MDS./2010. IN THE CIRCUMSTANCES, OUR FINDING IN RESPECT OF GROUNDS 4.1 AND 4.2 IN ITA NO. 1514/MDS./2010 WOULD APPLY TO THESE GROUNDS ALSO. 51. IN REGARD TO GROUNDS 5.1 TO 5.3 AND 6.1 & 6.2 I T WAS SUBMITTED BY THE LEARNED DR THAT THE ASSESSEE HAD ENTERED INTO AN AG REEMENT WITH M/S. DBS I.T.A. NOS. 1512 TO 1518/MDS/2010 29 PROPERTIES IN REGARD TO THE DEVELOPMENT OF PROPERTY . THE PROJECT DID NOT GO THROUGH. THE ASSESSEE HAD RECEIVED ADVANCE FROM M/ S. DBS PROPERTIES. THE ISSUE REACHED THE COURT AND THE ASSESSEE WAS DIRECT ED TO REFUND THE ADVANCE PAID AS ALSO A COMPENSATION OF ` 2.2 CRORES TO M/S. DBS PROPERTIES. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD HELD THAT THE COMPENSATION PAID BY THE ASSESSEE OF ` 2.2 CRORES TO M/S. DBS PROPERTIES WAS NOT LIABLE T O BE ALLOWED AS REVENUE EXPENDITURE AS THE PAYMENT WAS NOT MADE WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS NOR WAS IT PAID FOR EARNING ANY PROFITS OR FURTHERING OR PROTECTING ITS DAY-TODAY BUSINESS. HE VEHEMENTLY S UPPORTED THE ORDER OF THE ASSESSING OFFICER. 52. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 53. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S UNDISPUTED THAT THE LIABILITY TO PAY COMPENSATION HAS ARISEN ON ACCOUNT OF THE CO NTRACT ENTERED INTO BY THE ASSESSEE WITH M/S. DBS PROPERTIES FOR THE DEVELOPME NT OF THE PROPERTY. THE ASSESSEE IS IN THE BUSINESS OF PROPERTY DEVELOPMENT . THE LITIGATION HAS ARISEN ON ACCOUNT OF THE ASSESSEES INABILITY TO COMPLETE THE PROJECT, MORE SO A BREACH OF THE CONTRACT. THIS LIABILITY HAS ARISEN ONLY ON AC COUNT OF THE ASSESSEES BUSINESS COMMITMENTS WHICH IT HAS FAILED TO COMPLETE ON ACCO UNT OF THE DELAY IN GETTING PERMISSIONS FROM VARIOUS DEPARTMENTS WHICH RESULTED IN THE ASSESSEE NOT BEING ABLE TO MAINTAIN THE STIPULATED TIME FRAME AS SPECI FIED IN THE AGREEMENT BETWEEN I.T.A. NOS. 1512 TO 1518/MDS/2010 30 THE ASSESSEE AND M/S. DBS PROPERTIES. THE AGREEMEN T HAD BEEN TERMINATED BY M/S. DBS PROPERTIES. THUS IT IS NOTICED THAT THE L IABILITY HAS ARISEN ONLY ON ACCOUNT OF THE BUSINESS ACTIVITIES OF THE ASSESSEE AND CONSEQUENTLY THE SAME IS LIABLE TO BE ALLOWED AS A BUSINESS EXPENDITURE AS T HE SAME HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS OF THE ASSESSEE. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENC E. 54. IN REGARD TO GROUNDS 7.1 AND 7.2 IT WAS FAIRLY AGREED THAT THE ISSUE WAS IDENTICAL TO GROUNDS 6.1 AND 6.2 OF THE REVENUES A PPEAL IN ITA NO.1514/MDS/2010. IN THE CIRCUMSTANCES, OUR FINDIN G WITH REGARD TO GROUNDS 6.1 AND 6.2 OF THE REVENUES APPEAL IN ITA NO. 1514/MDS /2010 WOULD APPLY HERE. 55. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 1517/MDS/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 56. ITA NO. 1518/MDS/2010: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-V, CHENNAI IN ITA NO. 188/07-08 DATED 23-067-2010 FOR THE ASSESSMENT YEAR 2005-06 IN THE CASE OF M/S. SHGRIRAM CAPITAL TRUST P. LTD. 57. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND FACTS OF THE CASE. I.T.A. NOS. 1512 TO 1518/MDS/2010 31 2.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O TO DELETE THE ENTIRE AMOUNT OF ADDITION OF ADMINISTRATIVE AND OTH ER EXPENSES OF ` 19,16,910. 2.2 THE CIT(A) RELIED ON HIS OWN ORDERS IN ASSESSE ES CASE FOR A.Y 1999-00 IN ITA NO. 457/2006-07. 2.3 IT IS SUBMITTED THAT THE DECISION OF THE CIT(A ) RELIED UPON BY THE CIT(A) HAS NOT BECOME FINAL AND APPEAL TO THIS HON' BLE TRIBUNAL HAS BEEN FILED BY THE DEPARTMENT. 3.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE DISALLOWANCE OF BAD DEBTS OF ` 1,06,61,349 IN RESPECT OF MONEY ADVANCED IN RESPECT OF M/S. SHRIRAM COFFEE & TEA PL ANTATION PVT. LTD. AND ` 2,18,007 OF TRADE ADVANCES WRITTEN OFF U/S 37. 3.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE ASSESSEE IS NEITHER A MONEY LENDER NOR HAS TAKEN THESE AMOUNT A S INCOME EARLIER TO BE TREATED AS BAD DEBTS AND THE AMOUNTS WRITTEN OFF IF NOT AN EXPENDITURE TO FALL WITHIN SECTION 37. 3.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE ASSESSEE IN ITS REPLY FILED ON 5/11/2007 BEFORE THE AO STATED THAT IT WANTED TO ENTER AND PROMOTE TEA AND COFFEE INDUSTRIES AND MONEY ADV ANCED TO PROMOTE AN INDUSTRY IS ONLY LOSS OF CAPITAL. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCE D AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 58. IN GROUNDS 2.1 TO 2.3 THE REVENUE HAS CHALLENGE D THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION ON ACCOUNT OF ADMINISTRATIVE AND OTHER EXPENSES. IT WAS FAIRLY A GREED BY BOTH THE SIDES THAT THE I.T.A. NOS. 1512 TO 1518/MDS/2010 32 ISSUE WAS IDENTICAL TO THE GROUNDS 3.1 TO 3.3 OF TH E REVENUES APPEAL IN ITA NO.1514/MDS/2010. IN THE CIRCUMSTANCES, OUR FINDIN G IN REGARD TO GROUNDS 3.1 TO 3.3 OF REVENUES APPEAL IN ITA NO. 1514/MDS/2010 WO ULD APPLY HERE. 53. IN REGARD TO GROUND 3.1 TO 3.3 WHICH IS AGAINST THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF THE BAD DEBTS IN RESPECT OF THE MONIES ADVANCED TO M/S. SHR IRAM COFFEE & TEA PLANTATION PVT. LTD. AND TRADE ADVANCES WRITTEN OFF U/S 37, IT WAS SUBMITTED THAT THE ASSESSEE HAD WANTED TO ENTER THE BUSINESS OF TEA A COFFEE INDUSTRY AND CONSEQUENTLY HAD MADE ADVANCES TO M/S. SHRIRAM COFF EE & TEA PLANTATION PVT. LTD. IT WAS THE SUBMISSION THAT THE AMOUNT WAS PAI D TO M/S. SHRIRAM COFFEE & TEA PLANTATION PVT. LTD. PRIOR TO 1999 AND AS M/S. SHRIRAM COFFEE & TEA PLANTATION PVT. LTD. DID NOT TAKE OFF, THE ASSESSEE HAD WRITTE N OFF THE SAME AS BAD DEBT. IT WAS THE SUBMISSION THAT AS THE ASSESSEE HAD ATTEMPT ED TO ENTER THE BUSINESS OF TEA AND COFFEE INDUSTRY, THE WRITE OFF OF THE AMOUN T WAS LIABLE TO BE TREATED AS A CAPITAL LOSS IN VIEW OF THE DECISION OF THE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT V. R. CHIDAMBARANATHA MUDALIAR, REPORTED IN 240 ITR 552. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS NOT DOING THE BUSI NESS OF MONEY LENDING. HE VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 59. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE WAS DOING THE BUSINESS OF MONEY LENDING. IT WAS TH E FURTHER SUBMISSION THAT THE AMOUNT WAS AN ADVANCE GIVEN TO M/S. SHRIRAM COFFEE & TEA PLANTATION PVT. LTD. I.T.A. NOS. 1512 TO 1518/MDS/2010 33 AND AS THE ASSESSEE COULD NOT GET BACK THE AMOUNT F ROM M/S. SHRIRAM COFFEE & TEA PLANTATION PVT. LTD., THE SAME HAD BEEN WRITTEN OFF AS BUSINESS EXPENDITURE. IT WAS THE FURTHER SUBMISSION THAT THE ASSESSEE HAD NOT DECIDED TO TAKE ANY LEGAL ACTION AS THERE WAS NO HOPE OF GETTING ANY RECOVERY FROM M/S. SHRIRAM COFFEE & TEA PLANTATION PVT. LTD. WHOSE NAME HAD ALSO BEEN C HANGED TO M/S. SUDHARMA ESTATE PVT. LTD. 60. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE FACT THAT THE ASSESSEE WAS ALSO DOING MONEY LENDING ACTIVITIES CANNOT BE DISPU TED IN VIEW OF THE FACT THAT FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-01 THE ASSE SSEE HAS LENT MONEY TO M/S. SHRI HOUSING PVT. LTD. THE INTEREST INCOME FR OM THE SAME HAS ALSO BEEN ASSESSED AS INCOME FROM BUSINESS. THE ASSESSEE HAS ALSO GIVEN LOANS TO DEPOSITORS AGAINST THE DEPOSITS AND THE INTEREST TH EREON HAS ALSO BEEN ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THUS IT CAN NOT BE SAID THAT THE ASSESSEE IS NOT IN THE BUSINESS OF MONEY LENDING. THE ASSES SEE HAS NOT INVESTED ITS FUNDS IN ACQUIRING SHARE CAPITAL OF M/S. SHRIRAM COFFEE & TEA PLANTATION P. LTD. THE ASSESSEE HAS ONLY ADVANCED THE MONEY TO M/S. SHRIRA M COFFEE & TEA PLANTATION PVT. LTD. M/S. SHRIRAM COFFEE & TEA PLANTATION PVT . LTD. HAS NOT BEEN ABLE TO RETURN THE MONEY NOR HAS THE ASSESSEE BEEN ABLE TO RECOVER THE SAID AMOUNT. OBVIOUSLY, THIS WOULD BE A BAD DEBT WHICH HAS ARISE N IN THE COURSE F THE BUSINESS ACTIVITIES AND THUS WOULD BE AN ALLOWABLE EXPENDITU RE. THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V. R. CHIDAMBARANATHA MUDALIAR, I.T.A. NOS. 1512 TO 1518/MDS/2010 34 SUPRA, RELIED ON BY THE LEARNED DR WOULD HAVE NO A PPLICABILITY INSOFAR AS THE HON'BLE JURISDICTIONAL HIGH COURT HAS DECIDED THE I SSUE WHEREIN THE ASSESSEE THEREIN HAD ATTEMPTED TO START A NEW BUSINESS AND T HE CAPITAL WAS LOST. IN THE PRESENT CASE THE ASSESSEE HAS NOT STARTED ANY BUSIN ESS. THE ASSESSEE HAS ONLY GIVEN AN ADVANCE IN THE COURSE OF ITS BUSINESS TO M /S. SHRIRAM COFFEE & TEA PLANTATION PVT. LTD. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE IS ON A RIGHT FOOT ING AND DOES NOT CALL FOR ANY INTERFERENCE. 61. IN THE CIRCUMSTANCES, THE APPEAL OF THE REVENU E IN ITA NO. 1518/MDS/2010 STANDS DISMISSED. 62. IN THE RESULT, THE APPEALS OF THE REVENUE IN IT A NOS. 1512, 1513, 1516 & 1518/MDS/2010 STAND DISMISSED AND THE APPEALS OF TH E REVENUE IN ITA NOS. 1514, 1515 & 1517/MDS/2010 ARE PARTLY ALLOWED FOR S TATISTICAL PURPOSES. 63. THE ORDER WAS PRONOUNCED IN THE COURT ON 24/06 /2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 24 TH JUNE, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./ GUARD FILE