Peninsular Plantations Ltd, Trivandrum V. ACIT, Trivandrum

ITA 174/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69034 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 06-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 05-04-2013
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: JOSEPH MARKOS
• Keywords: Business income; Business expenditure; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 174/COCH/2013 ASSESSMENT YEAR : 2007-08 THE PENINSULAR PLANTATIONS LTD., PATTOM PALACE P.O., THIRUVANANTHAPURAM-695 004. [PAN: AAACT 9419M] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1(1), THIRUVANANTHAPURAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI JOSEPH MARKOS, SR. ADV. & SHRI ABRAHAM JOSEPH MARKOS, ADV. REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 07/08/2013 DATE OF PRONOUNCEMENT 06/11/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 21-01-2013 PASSED BY THE LD. CIT(A), THIRUVANANTHAPURAM AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS ASSAILING THE DECISION OF THE LD . CIT(A) IN CONFIRMING THE DISALLOWANCE OF BAD DEBTS CLAIM MADE BY THE ASSESSE E. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF DEALING IN SHARES. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF BAD DEBTS WRITTEN OFF BY IT TO THE TUNE OF RS.53,76,274/-. THE ASSESSING OFFICER NOTICED THAT THE ABOVE SAID AMOUNT CONSISTED OF PRINCIPLE AMOUNT OF RS.30.00 LAKHS GIVEN BY THE ASS ESSEE-COMPANY AS INTER-CORPORATE LOAN TO ANOTHER PUBLIC LIMITED COMPANY NAMED M/S PE ERMADE TEA COMPANY LIMITED AND I.T.A. NO.174/COCH/2013 2 INTEREST AMOUNT OF RS. 23,76,274/- ACCRUED ON THE A BOVE SAID LOAN AMOUNT. THE ASSESSING OFFICER NOTICED THAT THE BAD DEBTS CLAIME D U/S. 36(1)(VII) OF THE ACT CAN BE ALLOWED ONLY IF THE CONDITIONS SPECIFIED U/S. 36(2) (I) IS COMPLIED WITH. THE CONDITIONS SPECIFIED IN SEC. 36(2)(I) ARE THAT (A) THE DEBT OR PART THEREOF HAS BEEN TAKEN INTO IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT O F SUCH DEBTS OR PART THEREOF ARE WRITTEN OFF OR IN THE EARLIER PREVIOUS YEAR OR (B) IT REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY LENDING. THE AO HELD THAT THE INTER CORPORATE DEPOSIT MADE B Y THE ASSESSEE CANNOT BE CONSIDERED AS HAVING BEEN LENT IN THE ORDINARY COUR SE OF THE BUSINESS OF BANKING OR MONEY LENDING. THE ASSESSING OFFICER HAS ALSO OBSE RVED THAT THE ASSESSEE COULD NOT FURNISH ANY DOCUMENTARY EVIDENCE TO SHOW THAT THE I NTEREST PROVISION OF RS.23,76,274/- HAS BEEN ACCOUNTED AS INCOME IN THE PREVIOUS YEARS. ACCORDINGLY, THE ASSESSING OFFICER REJECTED THE ENTIRE CLAIM OF BAD DEBTS AND ADDED TH E SUM OF RS. 53,76,274/- TO THE TOTAL INCOME RETURNED BY THE ASSESSEE. 4. THE LD. CIT(A) ALSO CONFIRMED THE SAID DISALLOWA NCE. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE-COMPANY IS AN INVESTMENT COMPANY AND IT IS IN EXISTENCE FOR MORE THAN 70 YEARS. ITS MAIN BUSINESSES ARE: (A) INVESTMENT IN SHARES, MUTUAL FUND AND OTHER SE CURITIES. (B) PLACING SURPLUS FUNDS IN FIXED DEPOSITS OF BAN KS. (C) LENDING MONEY IN THE FORM OF INTER-CORPORATE D EPOSITS TO OTHER CORPORATE BODIES. HE FURTHER SUBMITTED THAT THE BUSINESS INCOME OF TH E ASSESSEE-COMPANY CONSISTED OF INTEREST INCOME, DIVIDEND INCOME AND PROFIT ON SALE OF SHARES. HE FURTHER SUBMITTED THAT THE PROVISIONS OF SEC. 372(A) OF THE COMPANIES ACT PERMIT COMPANIES TO GIVE INTER- CORPORATE LOANS. HE FURTHER SUBMITTED THAT CLAUSE 22 OF THE OBJECT CLAUSE OF THE I.T.A. NO.174/COCH/2013 3 COMPANY, WHICH READS AS UNDER, AUTHORISES THE COMPA NY TO MAKE SUCH KIND OF INVESTMENTS. 22. TO INVEST OR DEAL WITH THE MONIES OF THE COMP ANY, NOT IMMEDIATELY REQUIRED, UPON SUCH SECURITIES AND IN SUCH MANNER AS MAY, FROM TIME TO TIME BE DETERMINED. ACCORDINGLY, HE SUBMITTED THAT THE ASSESSEE-COMPANY ADVANCED A SUM OF RS. 30.00 LAKHS IN THE FINANCIAL YEAR 1996-97 IN TERMS OF THE OBJECT CLAUSE OF THE COMPANY AND ALSO IN ACCORDANCE WITH THE PROVISIONS OF COMPANIES ACT. THE ASSESSEE-COMPANY HAS ALSO ACCOUNTED FOR ACCRUED INTEREST INCOME FROM THE ABOVE SAID LOAN BY MAKING PROVISION IN EVERY YEAR AS DETAILED BELOW: ASSESSMENT YEAR RS. 2006-2007 2,10,000/- 2005-2006 2,10,000/- 2004-2005 2,10,000/- 2003-2004 2,10,000/- 2002-2003 2,10,000/- 2001-2002 3,90,000/- 2000-2001 3,76,274/- 1999-2000 2,10,000/- 1998-1999 2,10,000/- 1997-1998 1,40,000/- TOTAL 23,76,274/ - 5.1 THE LD. COUNSEL FURTHER SUBMITTED THAT THE BOAR D OF DIRECTORS OF THE COMPANY, IN ITS MEETING HELD ON 24-05-2006, NOTICED THAT THE CO MPANY TO WHOM THE ADVANCE WAS GIVEN, VIZ., M/S PEERMADE TEA COMPANY LTD, HAS FALL EN IN DEEP FINANCIAL CRISIS AND FURTHER, THE ESTATES BELONGING TO IT HAVE REMAINED CLOSED SINCE 2000. FURTHER, IT WAS NOTICED BY THE BOARD OF DIRECTORS THAT PROPERTY OF THE ABOVE SAID COMPANY HAS GONE INTO THE CONTROL OF WORKMEN AND UNIONS. IT WAS ALS O NOTED BY THE BOARD THAT THE ACCUMULATED LOSS OF THE SAID COMPANY STOOD AT RS. 9 .34 CRORES. ACCORDINGLY, THE BOARD OF DIRECTORS FELT THAT THE POSSIBILITY OF THE REVIV AL OF THE SAID COMPANY IS REMOTE AND HENCE, THE AMOUNT ADVANCED BY THE ASSESSEE-COMPANY MAY NOT BE RECOVERABLE. ACCORDINGLY, THE BOARD HAS DECIDED TO WRITE OFF THE LOAN IN THE BOOKS OF THE ACCOUNTS OF I.T.A. NO.174/COCH/2013 4 THE ASSESSEE-COMPANY. IN THIS REGARD, HE INVITED O UR ATTENTION TO THE COPY OF BOARD RESOLUTION SUBMITTED BY HIM. 5.2 THE LD. COUNSEL SUBMITTED THAT THE PROVISIO NS OF SEC. 36(1)(VII) OF THE ACT, SUBJECT TO SEC. 36(2), STATES THAT THE BAD DEBT IS ALLOWABLE IF IT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE-COMPANY HEREIN HAS WRITTEN OFF THE ABOVE S AID AMOUNT IN ITS BOOKS OF ACCOUNTS AS IRRECOVERABLE. HE SUBMITTED THAT THE P ROVISIONS OF SEC. 36(2) STATES THAT THE DEDUCTION PRESCRIBED U/S 36(1)(VII) IS ADMISSIB LE IF THE AMOUNT HAS ALREADY BEEN OFFERED AS INCOME IN THE SAME YEAR OR IN ANY OF THE PREVIOUS YEARS OR IS LENT IN THE ORDINARY COURSE OF BUSINESS OF LENDING MONEY. THE LD. COUNSEL SUBMITTED THAT THE TAX AUTHORITIES HAVE TAKEN THE VIEW THAT THE LENDING OF MONEY IS NOT PART OF THE BUSINESS ACTIVITIES OF THE ASSESSEE, WITHOUT CONSIDERING THE ACTIVITIES CARRIED ON BY THE ASSESSEE COMPANY. HE SUBMITTED THAT THE ASSESSEE-COMPANY HAS LENT THE ABOVE STATED AMOUNT OF RS.30.00 LAKHS IN THE ORDINARY COURSE OF BUSINES S, I.E., IN ACCORDANCE WITH THE OBJECT CLAUSE, WHICH IS EXTRACTED ABOVE. ACCORDINGLY, TH E LD A.R CONTENDED THAT THE PRINCIPAL AMOUNT OF RS. 30.00 LAKHS IS LIABLE FOR DEDUCTION U /S. 36(1)(VII) OF THE ACT. HE FURTHER SUBMITTED THAT THE INTEREST ACCRUED ON THE SAID LOA N HAS BEEN OFFERED BY THE ASSESSEE FOR INCOME TAX PURPOSES UNDER THE HEAD INCOME FROM BUSINESS IN THE EARLIER YEARS, AS PER THE TABLE EXTRACTED ABOVE. HENCE THE CONDITION SPECIFIED U/S 36(2) HAS BEEN COMPLIED WITH IN RESPECT OF THE INTEREST AMOUNT ALS O. ACCORDINGLY HE SUBMITTED THAT THE ACCRUED INTEREST OF RS. 23,76,274/- WRITTEN OFF BY THE ASSESSEE IS ALSO ELIGIBLE FOR DEDUCTION U/S. 36(1)(VII) OF THE ACT. 5.3 THE LD. COUNSEL FURTHER PLACED RELIANCE ON THE FOLLOWING CASE LAW TO SUPPORT HIS CONTENTIONS: (A) GOETZE (INDIA) LTD. VS. DY. CIT (2008) 25 SOT 171 (DELHI). (B) POYSHA OXYGEN (P) LTD. VS. ASSTT. CI T (2008) 19 SOT 711 (DELHI) TM (C) ITW SIGNODE INDIA LTD. VS. DY. CIT (2007) 11 0 TTJ (HYD.) 170. I.T.A. NO.174/COCH/2013 5 6. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE A SSESSEE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO PROVE ITS SUBMISSION THAT IN TEREST ACCRUED ON THE ABOVE SAID LOAN WAS OFFERED TO INCOME TAX WHILE COMPUTING THE INCOM E OF THE EARLIER YEARS. FURTHER, CLAUSE 22 OF THE OBJECTS CLAUSE ONLY AUTHORISES THE ASSESSEE TO INVEST OR DEAL WITH THE MONIES NOT IMMEDIATELY REQUIRED, I.E., ONLY SURPLUS AMOUNTS ONLY. HENCE THE ASSESSEE COMPANY HAS ONLY INVESTED ITS SURPLUS FUNDS FOR MAK ING INTER CORPORATE DEPOSIT AND HENCE THE SAME CANNOT BE CONSIDERED AS MONEY LENDIN G ACTIVITY OF THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREF ULLY PERUSED THE RECORD. THE ADMITTED FACT IS THAT THE ASSESSEE HEREIN HAS ADVAN CED A SUM OF RS.30.00 LAKHS TO ANOTHER PUBLIC LIMITED COMPANY IN THE FINANCIAL YEA R 1996-97. ACCORDING TO THE ASSESSEE, IT HAS ACCOUNTED FOR INTEREST INCOME ARIS ING FROM THE ABOVE SAID ADVANCE FOM FINANCIAL YEAR 1996-97 TO THE FINANCIAL YEAR 2005-0 6 AND OFFERED THE SAME AS BUSINESS INCOME. THE AGGREGATE AMOUNT OF INTEREST SO OFFERED WORKS OUT TO RS.23,76,274/-. THE CONTENTION OF THE ASSESSEE IS THAT THE BAD DEBT CLA IM OF RS.30.00 LAKHS IS ALLOWANCE U/S 36(1)(VII) OF THE ACT, SINCE IT HAS ADVANCED THE SA ID AMOUNT OF RS. 30 LAKHS IN THE REGULAR COURSE OF ITS BUSINESS AS REQUIRED U/S 36(2 )(I) OF THE ACT AND FURTHER IT HAS WRITTEN OFF THE SAME IN ITS BOOKS OF ACCOUNTS AS RE QUIRED U/S 36(1)(VII) OF THE ACT. WITH REGARD TO THE INTEREST COMPONENT OF RS.23,76,274/-, THE SUBMISSION OF THE ASSESSEE IS THAT IT HAS OFFERED THE SAID AMOUNT AS ITS INCOME A ND HENCE THE CONDITION SPECIFIED IN SEC. 36(2)(I) STANDS SATISFIED WITH REGARD TO THIS AMOUNT ALSO. 8. THE ASSESSEE HAS PLACED RELIANCE ON THE THREE CA SE LAWS REFERRED SUPRA. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE. IN THE CASE OF GOETZE (INDIA) LTD. SUPRA, WE NOTICE THAT THE DELHI BENCH OF THE TRIBUNAL HAS GIVEN A CLEAR FINDING IN PARAGRAPH 8 OF ITS ORDER THAT IN THE FAC TS PREVAILING IN THAT CASE IT CANNOT BE SAID THAT LENDING OF MONEY WAS ONLY A CASUAL ACTIVI TY OR ONE TIME PLACING OF FIXED DEPOSITS. IT WAS FURTHER STATED THAT THE ASSESSEE WAS CARRYING ON THE SAME BY WAY OF REGULAR BUSINESS ACTIVITY. I.T.A. NO.174/COCH/2013 6 9 IN THE CASE OF POYSHA OXYGEN (P) LTD.(SUPRA), THE THIRD MEMBER HAS GIVEN A CATEGORICAL FINDING THAT THE SEQUENCE OF EVENTS AND THE DOCUMENTS PROVED THAT THE TRANSACTION WAS A LOAN TRANSACTION AND NOT A TRANSA CTION OF INVESTMENT. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE HEAD NOTES REPORT ED IN 19 SOT 711 IN THE ABOVE SAID CASE: BUSINESS EXPENDITUREBAD DEBTSTRANSACTION IN ORDI NARY COURSE OF MONEY LENDING BUSINESSASSESSEE COMPANY AUTHORISED TO DO MONEY LENDING BUSINESS UNDER ITS OTHER OBJECTS OF MEMORANDUM OF ASSOCIAT ION, ENTERED INTO A TRIPARTITE AGREEMENT WITH F AND G, IN WHICH ASSESSEE WAS D ESCRIBED AS LENDER, F AS BORROWER AND G AS GUARANTORUNDER THIS AGREEMENT, ASSESSEE ADVANCED A LOAN OF RS. 1 CRORE TO F FOR BOOKING MARUTI CARS @ 30. 5 PER CENT PER ANNUM INTEREST SUCH INTEREST ASSESSED AS BUSINESS INCOME IN EARLIE R YEARSON FAILURE TO REALISE THE PRINCIPAL AMOUNT FROM F, A FRESH AGREEMENT WA S ENTERED INTO UNDER WHICH G BECAME PRINCIPAL BORROWERAS NOTING COULD BE RE ALISED FROM G DESPITE BEST EFFORTS, ASSESSEE WROTE OFF THE PRINCIPAL AMOUNT OF RS. 1 CRORE AND INTEREST THEREON IN THE ASSESSMENT YEAR IN QUESTION AND CLAI MED THE SAME AS BAD DEBTS ALLOWABLE DESCRIPTION OF ASSESSEE AS LENDER, OF F AS BORROW ER AND OF G AS GUARANTOR IN THE AGREEMENT WAS INCONSISTENT WITH THE CLAIM THAT THE TRANSACTION WAS AN INVESTMENT AND NOT A MONEY-L ENDING TRANSACTIONIN THE PREAMBLE TO THE TRIPARTITE AGREE MENT, IT HAS BEEN STATED THAT THE BORROWER AND THE GUARANTOR HAD APPR OACHED THE ASSESSEE FOR THE GRANT OF LOANSECONDLY, THE RATE O F INTEREST FOR WHICH THE ASSESSEE ADVANCED THE MONEY WAS 30.5 PER CENT P ER ANNUM, ALSO INDICATES THAT THE AMOUNT WAS NOT AN INVESTMENT IN F AS UPFRONT INTEREST WAS DEDUCTED AND ONLY THE BALANCE WAS GIVE N AS A LOAN THIRDLY, THE ADVANCE WAS AUTHORISED BY THE BOARD RE SOLUTION WHICH WAS PRIOR TO THE DATE OF THE TRIPARTITE AGREEMENTFOURT HLY AND MOST IMPORTANTLY, THE INTEREST ON THE ADVANCE OF RS. 1 C RORE WAS ASSESSED IN THE ASST. YRS. 1996-97 AND 1997-98 AS BUSINESS INCO ME IN ASSESSMENTS COMPLETED UNDER S. 143(3) THE FACT THAT THE OBJECT OF LENDING OR ADVANCING MONIES HAS BEEN PLACED UNDER THE OTHER OBJECTS CO ULD HARDLY BE OF ANY RELEVANCEAS TO WHAT HAPPENED TO MARUTI CARS WAS AL SO IRRELEVANTTHERE WAS NO MATERIAL TO SUGGEST THAT ASSESSEE RECOUPED ITSEL F BY REALISING THE SECURITY IN THE SHAPE OF CARS OR POWER OF ATTORNEYWHERE MONIES ARE LENT IN THE ORDINARY COURSE OF THE BUSINESS, THE CONDITION STIPULATED IN S. 36(2)(I) IS SATISFIED IF THE INTEREST FROM THE MONIES LENT WAS ASSESSED AS BUSIN ESS INCOME IN THE EARLIER YEARS OR EVEN IN THE YEAR IN WHICH THE BAD DEBT IS WRITTEN OFFEVEN IN THE ORDER PASSED BY AO FOR THE YEAR UNDER APPEAL TO GIVE EFFE CT TO THE DIRECTIONS OF THE CIT(A), HE HAD ALLOWED DEDUCTION IN RESPECT OF THE INTEREST, WHICH WAS THE INTEREST FOR THE VERY YEAR UNDER APPEAL AND NO APPE AL WAS FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A)FACT THAT TH E ADVANCE WAS DESCRIBED BY ASSESSEE AS INTER-CORPORATE DEPOSIT WOULD NOT BE DECISIVE OF THE QUESTION I.T.A. NO.174/COCH/2013 7 WHETHER IT WAS GIVEN IN THE COURSE OF THE MONEY-LEN DING BUSINESS OF THE ASSESSEE FOR PURPOSES OF INCOME-TAX PROCEEDINGSTHE FACT THAT IT WAS A SINGLE TRANSACTION WAS NOT AN IMPEDIMENT TO IT BEING CALLE D MONEY-LENDING BUSINESS THE TRANSACTION RELATING TO THE ADVANCE OF INTER CO RPORATE DEPOSIT OF RS. 1 CRORE BY THE ASSESSEE WAS A LOAN TRANSACTION AND REPRESEN TED MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF MONEY-LENDING CA RRIED ON BY THE ASSESSEE THEREFORE, THE CLAIM OF THE ASSESSEE FOR BAD DEBTS OF RS. 1 CRORE WAS ALLOWABLE IN VIEW OF THE PROVISIONS CONTAINED IN S. 36(1)(VII) R /W S. 36(2)(I) 10. IN THE CASE OF ITW SIGNODE INDIA LTD.(SUPRA), W E NOTICE THAT THE TRIBUNAL HAS DECIDED THE ISSUE ON THE BASIS OF COMMERCIAL EXPEDI ENCY, WHICH IS NOT A CASE HEREIN. 11. ACCORDINGLY, IN OUR VIEW, THE ASSESSEE COUL D NOT PLACE RELIANCE ON THE ABOVE SAID CASE LAW ALSO. 12. IN THE INSTANT CASE, THE ASSESSEE HAS NOT FURNI SHED ANY MATERIAL TO SHOW THAT THE AMOUNT OF RS. 30.00 LAKHS WAS ADVANCED IN THE REGUL AR COURSE OF BUSINESS ACTIVITY OF LENDING MONEY. THE AGREEMENT, IF ANY, ENTERED BETW EEN THE ASSESSEE COMPANY AND M/S PEERMADE TEA COMPANY LTD WAS NOT FURNISHED TO P ROVE THAT IT WAS A LOAN TRANSACTION. INSTEAD, WE NOTICE THAT THE ASSESSEE HAS SIMPLY PLACED RELIANCE ON CLAUSE 22 OF THE OBJECT CLAUSE TO CONTEND THAT IT IS AUTHO RISED BY MEMORANDUM OF ASSOCIATION TO CARRY ON MONEY LENDING ACTIVITY. HOWEVER, THE T RIBUNAL IN THE CASE OF POYSHA OXYGEN (P) LTD. (SUPRA) HAS HELD THAT THE OBJECT CL AUSES MENTIONED IN THE MEMORANDUM OF ASSOCIATION ARE NOT RELEVANT FOR CONS IDERING WHETHER THE ACTIVITY UNDERTAKEN BY THE LIMITED COMPANY AMOUNTS TO BUSINE SS ACTIVITY OR NOT. THE HEAD NOTES REPORTED IN 19 SOT 711 ARE EXTRACTED BELOW, F OR THE SAKE OF CONVENIENCE. BUSINESS INCOMEBUSINESSRELEVANCY OF MEMORANDUM O F ASSOCIATION OF COMPANYIN CONSIDERING WHETHER AN ACTIVITY UNDERTAK EN BY A LIMITED COMPANY AMOUNTS TO BUSINESS OR NOT IT IS IRRELEVANT TO CONS IDER WHETHER IT IS WITHIN ITS POWERS UNDER ITS MEMORANDUM OF ASSOCIATIONCITS OF INLAND REVENUE VS. HYNDLAND INVESTMENT CO. LTD. (1929) 14 TAX CAS. 694 , KISHAN PRASAD & CO. LTD. VS. CIT (1955) 27 ITR 49 (SC), CIT VS. P.K.N. CO. LTD. (1966) 60 ITR 65 (SC) AND CIT VS. J.K. EASTERN INDUSTRIES (P) LTD. (1965) 55 ITR 376 (CAL) RELIED ON. I.T.A. NO.174/COCH/2013 8 13. IT IS A WELL SETTLED PROPOSITION THAT THE NAT URE OF TRANSACTION SHALL ORDINARILY BE DECIDED BY ASCERTAINING THE INTENTION OF THE PARTIE S ENTERING INTO THE TRANSACTION. THE INTENTION OF THE PARTIES COULD BE ASCERTAINING ON T HE BASIS OF EVIDENCES AVAILABLE ON RECORD AND ALSO ON THE BASIS OF SURROUNDING CIRCUMS TANCES. IN THE CASE OF POYSHA OXYGEN (P) LTD.(SUPRA), THE THIRD MEMBER HAS HELD T HAT THE FACT THAT IT WAS A SINGLE TRANSACTION WAS NOT AN IMPEDIMENT TO IT BEING CALLE D MONEY-LENDING BUSINESS. HENCE A SINGLE TRANSACTION OF ADVANCING MONEY COULD ALSO FA LL IN THE CATEGORY OF MONEY LENDING TRANSACTION, PROVIDED THE INTENTION OF THE PARTIES ARE MADE CLEAR IN THAT REGARD. IN THE INSTANT CASE, AS STATED EARLIER, NO MATERIAL WAS PL ACED BEFORE US TO SHOW THAT THE AMOUNT OF RS. 30.00 LAKHS WAS ADVANCED WITH THE INT ENTION OF LENDING MONEY IN THE ORDINARY COURSE OF BUSINESS AND NOT AS INVESTMENT. THE ASSESSEE HAS ALSO NOT SHOWN THAT HE WAS CARRYING ON THIS KIND OF TRANSACTIONS R EPEATEDLY. HENCE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR VIEW, THE CONDITI ON LAID DOWN U/S. 36(2)(I) HAS NOT BEEN SATISFIED BY THE ASSESSEE IN THIS REGARD. AC CORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD. CIT(A) IN REJECTING THE BAD DEBT CLAIM OF RS. 30.00LAKHS U/S. 36(1)(VII) OF THE ACT. 14. WE NOTICE THAT THE TAX AUTHORITIES HAVE REJECTE D THE BAD DEBT CLAIM OF INTEREST AMOUNT OF RS. 23,76,274/-. THE ASSESSEE HAS FILED BEFORE US A PAPER BOOK, WHEREIN HE HAS ATTACHED ACCOUNT COPIES OF INTEREST RECEIVED AC COUNT FOR FINANCIAL YEARS 1996-97 TO 2005-06 RELATING TO THE ASSESSMENT YEARS 1997-98 TO 2006-07 RESPECTIVELY. THE CONTENTION OF THE ASSESSEE IS THAT IT HAS ACCOUNTED FOR THE ACCRUED INTEREST IN ALL THE YEARS AND OFFERED THE SAME FOR TAXATION. WE NOTICE THAT THIS ASPECT HAS NOT BEEN EXAMINED BY THE TAX AUTHORITIES. THEY HAVE REJECTE D THE CLAIM OF THE ASSESSEE ONLY FOR THE REASON THAT THE ASSESSEE COULD NOT SUBSTANTIATE THAT THE INTEREST AMOUNT WAS OFFERED FOR TAX IN THE EARLIER YEARS. SINCE THE AS SESSEE HAS FILED THE COPIES OF THE INTEREST RECEIVED ACCOUNT FOR VARIOUS YEARS, IN OUR VIEW, THIS MATTER REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. A CCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE SAME AFRESH AND TAK E APPROPRIATE DECISION IN ACCORDANCE WITH LAW. I.T.A. NO.174/COCH/2013 9 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 06-1 1-2013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 6TH NOVEMBER, 2013 GJ COPY TO: 1. THE PENINSULAR PLANTATIONS LTD., PATTOM PALACE P .O., THIRUVANANTHAPURAM-695 004. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(1), THIRUVANANTHAPURAM. 3 THE COMMISSIONER OF INCOME-TAX(APPEALS), THIRUVAN ANTHAPURAM. 4.THE COMMISSIONER OF INCOME-TAX, THIRUVANANTHAPURA M. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN