ACIT circle 16 (1), V. Tulip Star Hotels Ltd,

ITA 2834/DEL/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8029 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 17-06-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 05-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K TIWARI
• Assessee Lawyers: G C SRIVASTAVA; PUNEET GUPTA
• Keywords: Business expenditure; Wholly owned subsidiary; Bad and doubtful debts; Commercial expediency; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H : NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESI DENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO. 2834/DEL/2007 ASSESSMENT YEAR : 2004-05 ASSTT. COMMISSIONER OF INCOME- TAX, CIRCLE 16(1), NEW DELHI. VS. M/S TULIP STAR HOTELS LTD., INDRA PLACE, H BLOCK, CONNAUGHT CIRCUS, NEW DELHI 110 001. PAN: AAACC1072F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.C. SRIVASTAVA & SHRI PUNEET GU PTA, CA REVENUE BY : SHRI V.K. TIWARI, CIT, DR O R D E R PER I.P. BANSAL, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER OF THE CIT (A) DATED 29 TH MARCH, 2007 FOR ASSESSMENT YEAR 2004-05. GROUND NO. 1 OF THE APPEAL READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.5,10,1 7,424/- MADE BY THE A.O. ON ACCOUNT OF INTEREST CLAIMED BY THE ASSESSEE ON LOAN TAKEN FOR ACQUISITION OF SHARES OF ITS SUBSIDIARY COMPANY NAMELY M/S TULIP STAR HOSPITALIT Y SERVICES LTD. 2. AT THE OUTSET IT WAS SUBMITTED THAT THIS ISSUE I S COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04 VIDE ORDER DATED 8 TH AUGUST, 2008 IN ITA NO.3005/DEL/06 WHEREIN ITA NO.2834/DEL/2007 2 THE ORDER OF THE CIT (A) DELETING THE SIMILAR ADDIT ION WAS UPHELD. A COPY OF THE SAID ORDER WAS PLACED ON OUR RECORD AND IT WAS ALSO GIVEN TO LD. DR. 3. LD. DR, HOWEVER, RELIED ON THE ORDER OF THE ASSE SSING OFFICER AND PLEADED THAT SUCH CLAIM OF THE ASSESSEE COULD NOT BE ACCEPT ED AND INTEREST WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED ON RECORD. IT IS SEEN FROM THE AS SESSMENT ORDER THAT INTEREST LIABILITY OF RS.5,10,17,424/- WAS INCURRED BY THE A SSESSEE ON THE CAPITAL BORROWED FOR SUBSCRIPTION TO THE EQUITY CAPITAL OF ITS SUBSI DIARY, NAMELY, M/S TULIP STAR HOSPITALITY SERVICES LTD., WHICH ACQUIRED CENTAUR H OTEL, JUHU BEACH, MUMBAI AND NOW FUNCTIONING AS HOTEL THE TULIP STAR, MUMB AI. THE ASSESSEE COMPANY HAS INVESTED A SUM OF RS.22 CRORE FOR THE ACQUISITI ON OF 50% OF THE SHARES OF THE SUBSIDIARY COMPANY. THE ASSESSEE COMPANY HAD BORRO WED THE FUNDS FROM VARIOUS INSTITUTIONS FOR INVESTING IN ITS SUBSIDIAR Y COMPANY ON WHICH SUCH INTEREST LIABILITY WAS CLAIMED. IT WAS CLAIMED BY THE ASSES SEE THAT FOR ASSESSMENT YEAR 2003-04 LD. CIT (A) HAS DECIDED THIS ISSUE IN FAVOU R OF THE ASSESSEE AND, THEREFORE, SUCH CLAIM OF THE ASSESSEE WAS ALLOWABLE . HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT SUCH SUBMISSION OF THE ASSES SEE AND THE SAME WAS DISALLOWED. 5. WE HAVE PERUSED THE AFOREMENTIONED ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE WHICH IS DATED 8 TH AUGUST, 2008 IN WHICH THE FACTS ARE STATED TO BE SIMILAR TO THE FACTS OF THE PRESENT CASE AND FOR TH E SAKE OF COMPLETENESS THE SAID ORDER IN ITS ENTIRETY IS REPRODUCED:- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT (A) XXXIX IN APPEAL NO.56/2006-07 DATE D 14.07.2006 FOR THE A.Y. 2003-04. SHRI L.M. PANDEY, LD. CIT DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI ARVIND SONDE, ADV OCATE REPRESENTED ON BEHALF OF THE ASSESSEE. THE ONLY IS SUE IN THIS APPEAL IS AGAINST THE ACTION OF THE LD. CIT (A) IN DELETING THE ITA NO.2834/DEL/2007 3 ADDITION MADE ON ACCOUNT OF THE INTEREST LIABILITY WHICH HAD BEEN DISALLOWED BY THE A.O. ON THE GROUND THAT THE INTER EST HAD BEEN PAID ON THE BORROWINGS UTILIZED FOR NON-BUSINESS PU RPOSES. 2. THE FACTS THAT HAVE LED TO THIS APPEAL ARE THAT THE ASSESSEE IS A COMPANY WHICH IS INCORPORATED ON 10.9.87 AND W AS ENGAGED IN THE BUSINESS OF MONEY CHANGING, LEASE INCOME, HIRE PURCHASE INCOME AND HAVING INCOME FROM HOTEL. THE MONEY CHA NGING BUSINESS OF THE ASSESSEE WAS THE MAIN SOURCE OF INC OME, WHICH WAS CONDUCTED UNDER THE NAME, AND STYLE OF COX AND KINGS FOREIGN SERVICES. DURING THE YEAR THE ASSESSEE HAD SOLD THE MONEY CHANGING BUSINESS OF THE ASSESSEE AS A GROUP CONCERN FOR A SLUMP SALE CONSIDERATION OF 350 LAKHS. THIS HAD RE SULTED IN CAPITAL GAINS, WHICH WAS SET OFF AGAINST THE BUSINESS LOSS OF THE ASSESSEE. THE BUSINESS LOSS WAS ON ACCOUNT OF AN INTEREST LIA BILITY ON THE BORROWED CAPITAL FOR THE SUBSCRIPTION TO THE EQUITY CAPITAL OF ITS SUBSIDIARY NAMELY M/S TULIP STAR HOSPITALITY SERVIC ES LTD. THROUGH WHICH THE ASSESSEE HAD ACQUIRED THE CENTAUR HOTEL A T JUHU BEACH, MUMBAI AND WHICH HAD BEEN RENAMED AS THE TULIP STA R, MUMBAI. THE A.O. WAS OF THE VIEW THAT THE BORROW ED CAPITAL WAS FOR THE SUBSCRIPTION IN THE SHARES OF ANOTHER COMPA NY AND CONSEQUENTLY, IT WAS NOT A BUSINESS TRANSACTION OF THE ASSESSEE. IN THE CIRCUMSTANCES, THE A.O. HAD DISALLOWED THE INTE REST PAID ON THE BORROWED CAPITAL, HOLDING THE SAME TO BE NOT FOR TH E PURPOSE OF BUSINESS. THE ALTERNATE CLAIM OF THE ASSESSEE THAT THE INTEREST EXPENSES WAS LIABLE TO BE ALLOWED, AS THE DIVIDEND INCOME WAS ASSESSABLE UNDER SECTION 56(2)(I) WAS ALSO NOT ENTE RTAINED BY THE A.O. 3. AGGRIEVED, THE ASSESSEE HAD FILED FIRST APPEAL T O THE CIT (A) WHO HAD HELD THAT THE ASSESSEE WAS ENTITLED TO THE DEDUCTION OF INTEREST ON THE MONEY BORROWED FOR INVESTMENT IN TH E EQUITY SHARES OF THE SUBSIDIARY COMPANY UNDER SECTION 36(1)(II) O F THE INCOME-TAX ACT. THE LD. CIT (A) HAD ALSO ACCEPTED THE ALTERNA TE PLEA OF THE ASSESSEE THAT THE SAME COULD BE ALLOWED UNDER SECTI ON 57(III) IF IT IS PRESUMED THAT THE LOANS WERE TAKEN BY THE ASSESSEE WITH THE INTENTION TO ACQUIRE CONTROL OVER THE SUBSIDIARY CO MPANY. FOR THIS PROPOSITION, HE HAD RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RAJENDRA PRASAD MOODI REPORTED IN 115 ITR 519 WHEREIN THE HON'BLE SUPREME COURT HAD H ELD THAT INTEREST ON MONEYS BORROWED FOR INVESTMENT IN SHARE S THAT HAD NOT YIELDED ANY DIVIDEND WAS ADMISSIBLE AS A DEDUCTION UNDER SECTION 57(III) OF THE IT ACT. 4. AGGRIEVED THE REVENUE HAS FILED THIS APPEAL. IT WAS THE SUBMISSION BY THE LD. DR THAT THE INVESTMENT IN THE EQUITY SHARES ITA NO.2834/DEL/2007 4 OF THE SUBSIDIARY WAS NOT THE BUSINESS OF THE ASSES SEE. IT WAS THE SUBMISSION THAT THERE WAS NO NEXUS BETWEEN THE EXPE NDITURE AND THE BUSINESS OF THE ASSESSEE. IT WAS THE SUBMISSIO N THAT EVEN THOUGH IT IS TRUE THAT THE ASSESSEE HAD DERIVED INC OME FROM THE OPERATION OF HOTEL STILL THE MONIES, WHICH HAD BEEN BORROWED, HAD BEEN USED FOR THE PURPOSE OF ACQUIRING INTEREST IN A SUBSIDIARY COMPANY, WHICH WAS IN THE BUSINESS OF RUNNING A HOT EL, IT WAS THE SUBMISSION THAT ACQUIRING THE INTEREST IN THE SUBSI DIARY WAS NOT THE BUSINESS OF THE ASSESSEE. IT WAS HIS FURTHER SUBMI SSION THAT AS THERE WAS NO NEXUS BETWEEN THE BORROWING OF THE CAP ITAL BY THE ASSESSEE FOR THE PURPOSE OF SUBSCRIBING TO THE EQUI TY OF THE SUBSIDIARY COMPANY AND THE HOTEL BUSINESS THAT WAS BEING RUN BY THE ASSESSEE, THE INTEREST EXPENDITURE WAS NOT LIAB LE TO BE ALLOWED. 5. IN REPLY, THE LD. AR SUBMITTED THAT THE SOURCE O F INCOME OF THE ASSESSEE WAS BY THE MANAGEMENT OF THE HOTELS. IT WAS THE SUBMISSION THAT BY SUBSCRIBING TO THE SHARE CAPITAL OF THE SUBSIDIARY, THE ASSESSEE HAD RETAINED THE HOLDING I NTEREST IN THE SUBSIDIARY. THE BUSINESS OF THE SUBSIDIARY AND THA T OF THE ASSESSEE WERE IDENTICAL, WHICH WAS RUNNING OF HOTEL S, AND CONSEQUENTLY THE SAME WERE LIABLE TO BE ALLOWED. H E DREW ATTENTION TO PAGE 198 OF THE PAPER BOOK WHICH IS A COPY OF THE DIRECTORS REPORT FOR THE YEAR ENDING 31 ST MARCH, 2002 WHEREIN THE DIRECTORS HAD CLARIFIED THAT THE COMPANY HAS SUCCE SSFULLY BID FOR THE ACQUISITION OF CENTAUR HOTEL, JUHU BEACH, MUMBA I AS A GOING CONCERN FROM THE HOTEL CORPORATION OF INDIA LTD., A ND CONSIDERING THE FINANCIAL OUTLAY REQUIRED FOR THE ABOVE ACQUISI TION AND WITH A VIEW TO PROVIDE STRUCTURAL FLEXIBILITY THE ACQUISIT ION OF THE HOTEL WAS MADE ON 31 ST MAY, 2002 THROUGH A SPECIAL PURPOSE VEHICLE TULIP HOSPITALITY SERVICES LTD., WHICH IS FOR THE PRESENT THE WHOLLY OWNED SUBSIDIARY OF THE COMPANY. HE FURTHER DREW ATTENT ION TO PAGE 227 OF THE PAPER BOOK WHERE ALSO IN THE DIRECTORS REPOR T FOR THE YEAR ENDING OF 31 ST MARCH, 2002 THE FUNCTIONING OF THE SUBSIDIARY TULI P HOSPITALITY SERVICES LTD., HAS BEEN DISCUSSED. IT WAS, THUS, THE SUBMISSION THAT IT WAS ONLY FOR THE PURPOSE OF PROV IDING STRUCTURAL FLEXIBILITY, THE ACQUISITION OF THE CENTAUR HOTEL H AD BEEN ROUTED THROUGH THE SPECIAL PURPOSE VEHICLE, NAMELY, THE WH OLLY OWNED SUBSIDIARY M/S TULIP HOSPITALITY SERVICES LTD. AND IT WAS FOR SUBSCRIBING TO THE CAPITAL OF THE SPECIAL PURPOSE V EHICLE THAT THE LOAN HAD BEEN BORROWED. HE FURTHER RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. REPORTED IN 288 ITR 1 WHEREIN IT HAD BEEN HELD THAT IF THE BORR OWED FUNDS HAD BEEN ADVANCED ON ACCOUNT OF COMMERCIAL EXPEDIENCY T HEN THE INTEREST ON THE BORROWED LOANS WAS ELIGIBLE FOR DED UCTION. ITA NO.2834/DEL/2007 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS RESPECTFULLY NOTICED THAT THE ASSESSEE AFTER EXISTING FROM THE M ONEY CHANGING BUSINESS HAS ALSO DONE THE BUSINESS OF RUNNING AND MANAGING HOTELS. FOR THE EFFECTIVE CONTROLLING OF THE NEW H OTELS ACQUIRED BY THE ASSESSEE UNDER ITS MANAGEMENT IT HAD INVESTED I N A WHOLLY OWNED SUBSIDIARY NAMELY TULIP STAR HOSPITALITY SERV ICES LTD. THUS, IT IS NOTICED THAT THE ASSESSEE COMPANY DURING THE RELEVANT ASSESSMENT YEAR WAS IN THE BUSINESS OF OWNING AND M ANAGING HOTELS. ALSO THE CAPITAL BORROWED FOR THE INVESTME NT IN THE EQUITY CAPITAL OF THE SUBSIDIARY COMPANY NAMELY TULIP STAR HOSPITALITY SERVICES WHICH WAS A SPECIAL PURPOSE VEHICLE FOR TH E PURPOSE OF PROVIDING THE STRUCTURAL FLEXIBILITY IN THE ASSESSE ES BUSINESS OF RUNNING HOTELS WAS FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. IT IS FURTHER NOTICED THAT THE HON'BLE SUPREME COUR T IN THE CASE OF S.A. BUILDERS REFERRED TO SUPRA HAS CATEGORICALLY H ELD THAT WHERE IT IS OBVIOUS THAT A HOLDING COMPANY HAS A DEEP INTERE ST IN ITS SUBSIDIARY AND HENCE IF THE HOLDING COMPANY ADVANCE S BORROWED MONEY TO A SUBSIDIARY AND THE SAME IS USED BY THE S UBSIDIARY FOR SOME BUSINESS PURPOSES, THE ASSESSEE WOULD IN OUR O PINION, ORDINARILY BE ENTITLED TO DEDUCTION OF INTEREST ON ITS BORROWED LOANS. HERE IT IS NOTICED THAT THE ASSESSEE COMPANY BEING THE HOLDING COMPANY HAS A DEEP INTEREST IN THE SUBSIDIARY COMPA NY BEING THE SPECIAL PURPOSE VEHICLE NAMELY M/S TULIP STAR HOSPI TALITY SERVICES LTD. THE ASSESSEE COMPANY HAS BORROWED FUNDS FOR I NVESTING IN THE EQUITY CAPITAL OF THE SAID SPECIAL PURPOSE VEHI CLE. THE SAID SUBSIDIARY HAS USED THE SAID FUNDS FOR THE PURPOSE OF ACQUIRING THE CENTAUR HOTEL, JUHU BEACH, MUMBI AND IS RUNNING THE SAME UNDER THE NAME AND STYLE OF TULIP STAR. THUS, IT IS NOTI CED THAT THE FUNDS BORROWED BY THE ASSESSEE FOR THE PURPOSE OF ACQUIRI NG THE EQUITY CAPITAL IN THE SUBSIDIARY M/S TULIP STAR HOSPITALIT Y SERVICES LTD., WAS FOR THE CONTROL IN THE MANAGEMENT OF THE SUBSID IARY COMPANY AS ALSO FOR BETTER STRUCTURAL FLEXIBILITY IN THE FU NCTIONING OF THE HOTEL BUSINESS OF THE ASSESSEE AND THUS IT IS NOTICED THA T THE PRINCIPLES AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CA SE OF S.A. BUILDERS LTD. REFERRED TO SUPRA SQUARELY APPLY TO T HE ASSESSEES CASE. IN THE CIRCUMSTANCES, THE FINDING OF THE LD. CIT (A) IN DIRECTING THE A.O. TO ALLOW THE INTEREST EXPENSES A S A BUSINESS EXPENDITURE IS UPHELD. IT IS FURTHER NOTICED THAT THE REVENUE HAS NOT SPECIFICALLY CHALLENGED THE FINDING OF THE LD. CIT (A) IN REGARD TO THE ALTERNATE PLEA THAT THE INTEREST EXPENDITURE IS LIA BLE TO BE ALLOWED EVEN UNDER SECTION 57 (III) AFTER CONSIDERING THE D ECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RAJENDRA PRASA D MODI REFERRED TO SUPRA. 7. IN THE CIRCUMSTANCES, THE APPEAL OF THE REVENUE IS DISMISSED. 8. PRONOUNCED IN THE OPEN COURT ON 08.08.2008. ITA NO.2834/DEL/2007 6 6. IN THIS VIEW OF THE SITUATION, AS FACTS ARE SAME , RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2003-04, WE FIND NO MERIT IN THIS GROUND AND T HE SAME IS DISMISSED. 7. GROUND NO.2 OF THE APPEAL READ AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.54,10, 000/- MADE BY THE A.O. ON ACCOUNT OF BAD DEBTS. 8. THE ASSESSEE HAD DEBITED A SUM OF RS.54,10,000/- IN THE PROFIT & LOSS ACCOUNT ON ACCOUNT OF BAD DEBTS. IT WAS SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF MONEY LENDING, HOTEL OPERATION AND TRAD ING IN SHARES. THE SAID AMOUNT WAS RECEIVABLE FROM BANZAI ESTATE PVT. LTD. (BANZAI). IT WAS SUBMITTED THAT THE ASSESSEE HAD PROVIDED A SUM OF RS.1,15,00, 000/- IN JANUARY, 2002 TO BANZAI AS INTER-CORPORATE DEPOSIT. IT WAS MUTUALLY DECIDED BETWEEN BOTH THE PARTIES THAT THE ASSESSEE WAS ENTITLED TO CHARGE I NTEREST @ 18% FROM BANZAL. AS THE ASSESSEE WAS IN THE BUSINESS OF MONEY LENDIN G, TO PROVIDE SUCH FUNDS WAS A NORMAL BUSINESS ACTIVITY OF THE ASSESSEE. TH E ASSESSEE HAS BEEN CHARGING INTEREST ON THE SAID DEPOSIT FROM TIME TO TIME WHICH WAS AS FOLLOWS:- SR.NO. ASSESSMENT YEAR AMOUNT CHARGED (RS.) AMOUNT RECOVERED (RS.) 1. 2000-01 3,38,892/- 3,38,892 2. 2001-02 20,70,000 8,00,000 3. 2002-03 20,70,000 - 4. 2003-04 20,70,000 - TOTAL 65,48,892 9. IT WAS SUBMITTED THAT THE ASSESSEE HAS BEEN MAIN TAINING THE BOOKS OF ACCOUNT ON MERCANTILE BASIS. THE ASSESSEE CONTINUE D TO CHARGE INTEREST OF RS.20,70,000/- IN THE NEXT THREE YEARS AND THE ENTI RE SUM OF RS.65,48,892/- WAS CREDITED TO PROFIT & LOSS ACCOUNT IN THE RESPECTIVE YEAR WHICH WAS ALSO CHARGED TO ITA NO.2834/DEL/2007 7 INCOME-TAX IN THE RELEVANT YEARS. THUS, IT WAS SUB MITTED THAT ASSESSEE FULFILLED AL THE CONDITIONS WHICH ARE LAID DOWN FOR ALLOWANCE OF BAD DEBT. THE ASSESSING OFFICER DID NOT ACCEPT SUCH SUBMISSION OF THE ASSES SEE AND ADDED THE SAME ON THE GROUND THAT THE ASSESSEE DID NOT PROVIDE DOCUME NTARY EVIDENCE IN RESPECT OF ITS CLAIM FOR BAD DEBT. THE COPIES OF LEDGER ACCO UNT SUBMITTED BY THE ASSESSEE IS NOT SUFFICIENT. FOR CLAIMING DEDUCTION U/S 36(2 ) CERTAIN CONDITIONS ARE TO BE FULFILLED AND ONE OF THE BASIC CONDITION IS THAT TH E DEBT SHOULD BECOME BAD DURING THE YEAR. ACCORDING TO THE FACTS, SAID DEBT DID NO T BECOME IRRECOVERABLE DURING THE YEAR AND IT IS IN THIS MANNER THE CLAIM OF THE ASSESSEE WAS DISALLOWED. LD. CIT (A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE AGAI NST WHICH THE DEPARTMENT IS AGGRIEVED, HENCE, IN APPEAL. 10. AT THE OUTSET, IT WAS SUBMITTED BY THE LD. AR T HAT THIS ISSUE IS NO MORE RES INTEGRA AS THE SAME IS COVERED BY THE DECISION OF JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VS. MORGAN SECURITIES & CREDITS (P) LTD 292 ITR 339 (DEL). RELIANCE WAS ALSO PLACED ON UNREPORTED DECISION OF HONBLE B OMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXAT ION) VS. OMAN INTERNATIONAL BANK TO CONTEND THAT LD. CIT (A) WAS RIGHT IN DELET ING THE ADDITION. 11. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER O F THE ASSESSING OFFICER. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF THE MATERIAL PLACED ON RECORD. IT IS NOT DISPUTED THA T ONE OF THE BUSINESS ACTIVITIES OF THE ASSESSEE WAS MONEY LENDING. DURING THE COURSE OF BUSINESS ASSESSEE HAD ADVANCED INTER-CORPORATE DEPOSIT ON WHICH INTEREST WAS SHOWN TO BE RECEIVED BY THE ASSESSEE IN EARLIER YEARS AND PART OF SUCH DEBT WAS WRITTEN OFF. THE DISALLOWANCE IS MADE BY THE ASSESSING OFFICER ONLY ON THE GROUND THAT DEBT HAS NOT BEEN SHOWN TO BE IRRECOVERABLE DURING THE YEAR UNDER CONSIDERATION. ACCORDING TO THE LAW EXPLAINED BY HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF CIT VS. MORGAN SECURITIES & CREDITS (P) LTD. (SUPRA ), THE NECESSITY OF SHOWING THE DEBT TO HAVE BECOME IRRECOVERABLE DURING THE RE LEVANT ACCOUNTING YEAR IS NO ITA NO.2834/DEL/2007 8 MORE A CONDITION AFTER THE AMENDMENT WITH EFFECT FR OM 01.04.89. THE RELEVANT OBSERVATIONS OF THEIR LORDSHIPS FROM THE SAID DECIS ION ARE REPRODUCED BELOW:- 13. IN THIS VIEW OF THE SITUATION, WE FIND NO INFIR MITY IN THE ORDER OF THE LD. CIT (A) VIDE WHICH THE IMPUGNED ADDITION HAS BEEN DELET ED. THIS GROUND OF THE REVENUE IS DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. . 15. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26.06 .2009. [G.E. VEERABHADRAPPA] [I.P. BANSAL] VICE PRESIDENT JUDICIAL MEMBER DATED, 26.06.2009. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES