DCIT, Circle - 4, Kolkata, Kolkata V. M/s. Kanchan Metals Pvt. Ltd., Kolkata

ITA 291/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54487 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-08-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 18-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Assessee Lawyers: S L KOCHAR
• Keywords: Capital asset; Bad and doubtful debts; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 43B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE . . , !' # # # # /AND $# , !' ) [BEFORE HONBLE SHRI S. V. MEHROTRA, AM & HONBLE S RI MAHAVIR SINGH, JM] #% #% #% #% / I.T.A NO. 291/KOL/2011 $&' () $&' () $&' () $&' ()/ // / ASSESSMENT YEAR: 2001-02 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. KANCH AN METALS PVT. LTD. CIRCLE-4, KOLKATA. (PAN-AABCK 3407 F) (+, /APPELLANT ) (-.+,/ RESPONDENT ) FOR THE APPELLANT: SHRI S. K. ROY FOR THE RESPONDENT: SHRI S. L. KOCHAR !/ / ORDER PER MAHAVIR SINGH, JM ( $# $# $# $#, , , , !' !' !' !' ) THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XIX, KOLKATA IN NO 472 / CIT(A)-XIX/ACIT, CIRCLE-4,KOL/08-09 DATED 03.09.201 0. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-4, KOLKATA U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2001-02 VIDE HIS ORDER DATED 27 .2.2004. 2. THIS APPEAL OF REVENUE IS TIME BARRED BY 74 DAYS . REVENUE HAS FILED CONDONATION PETITION STATING REASONS. ON QUERY FROM BENCH, LD. COUNSEL FAIRLY CONCEDED THE POSITION THAT DELAY CAN BE CONDONED. IN VIEW OF REASONS STATED A ND CONCESSION GIVEN BY LD. COUNSEL, WE CONDONE THE DELAY AND ADMIT THIS APPEAL. 3. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST ORDER OF CIT(A) DELETING DISALLOWANCE OF BAD DEBTS. FOR THIS, REVENUE RAISED THE FOLLOWI NG GROUND NO.1: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L D. CIT(A)-XIX, KOLKATA HAS ERRED IN LAW IN DIRECTING THE A.O. TO ALLOW THE CLAIM OF THE ASSESSEE AS TO WRITING OFF OF RS.9,50,338/- ON ACCOUNT OF LOANS AND ADVANCES WITH OUT APPRECIATING THE FACT THAT ASSESSEE COMPANY HAS CONTINUED TO HAVE TRANSACTIONS WITH SUBSIDIARY COMPANY INSPITE OF WRITING OFF OF BAD DEBT OF RS.9,50,338/-. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING OFFICER DISALLOWED CLAIM OF BAD DEBTS ON ACCOUNT OF LOAN AND ADVANCE WRITTEN OFF AT RS.9,50,338/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). CIT(A) ALLOWED THE CLAIM OF ASSESSEE VIDE PARA 6 OF HIS AP PELLATE ORDER AS UNDER: 2 ITA 291/K/2011 KANCHAN METALS PVT. LTD. A.Y.01-02 (6) I HAVE CONSIDERED THE SUBMISSION -OF THE APPEL LANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE BALANCE SHEET AND PROFIT & LO SS A/C FOR THE YEARS ENDED 31-03-2000 AND 31-03-2001 ALONGWITH RELEVANT COPIES OF LEDGER ACCO UNT AND THE COPIES OF AGREEMENTS. DURING THE YEAR UNDER CONSIDERATION THE APPELLANT HAS DEBITED A SUM OF RS.9,50,338/- AS LOAN AND ADVANCES WRITTEN OFF. THIS FACT IS ALSO MENTIONED IN SCHEDUL EXV UNDER THE HEAD NOTES & ACCOUNTING POLICIES. THE APPELLANT BESIDES OTHER BUSINESS ACT IVITIES WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF LEATHER GOODS. IN F.Y.1999-2000, T HE SUBSIDIARY COMPANY OF THE APPELLANT NAMED AS KANCHAN VANIJYA PVT. LTD AGREED TO PURCHASE THE LEATHER BUSINESS OF THE APPELLANT AND ACCORDINGLY AN AGREEMENT AND SUPPLEMENTARY AGREEMEN T WERE ENTERED INTO WHEREIN THE GROSS CONSIDERATION OF TRANSFER OF RAW MATERIALS, STORES, FINISHED GOODS AND OTHER ASSETS WAS DETERMINED AT RS.26,32,956/-. AFTER REDUCING THE SUNDRY LIABIL ITIES THE NET CONSIDERATION WAS DECIDED AT RS.18 LAKH. IT WAS AGREED UPON BETWEEN THE PARTIES THAT S UM OF RS.8 LAKH WOULD BE ACCOUNTED FOR BY ISSUING SHARES BY THE TRANSFEREE COMPANY AND BALANC E AMOUNT WOULD BE TREATED AS LOAN/TRADE ADVANCE BEARING INTEREST. THE EFFECT OF THIS TRANSF ER WAS GIVEN IN THE BOOKS OF ACCOUNTAND THE FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 31TO3-20 00. THE INTEREST INCOME WAS ALSO CREDITED TO THE PROFIT & LOSS A/C OF THE EARLIER YEAR AND YEAR UNDER APPEAL. SINCE, THE SUBSIDIARY COMPANY WAS CONTINUOUSLY INCURRING THE SUBSTANTIAL LOSSES, THE APPELLANT WAS NOT ABLE TO RECOVER THE ADVANCE AND INTEREST AMOUNT. THEREFORE, IT WAS DECIDED BY T HE APPELLANT TO WRITE OFF ADVANCE AND INTEREST TO TNE EXTENT OF RS.9,50,338/- DURING THE YEAR UNDER A PPEAL AND ACCORDINGLY CLAIMED DEDUCTION IN THE PROFIT & LOSS A/C. HOWEVER, THE AC HAS DISALLOWED T HE CLAIM FOR THE REASONS THAT IT WAS NOT SHOWN AS TO IN WHICH YEAR INCOME WAS OFFERED BY THE APPEL LANT AND THAT THE APPELLANT HAS FAILED TO PROVE THAT DEBT HAS ACTUALLY BECOME BAD. ON CAREFUL CONSI DERATION OF FACTS AND ON PERUSAL OF RELEVANT DOCUMENTS, I AM OF THE OPINION THAT THE AC HAS NOT CORRECTLY APPRECIATED THE CLAIM MADE BY THE APPELLANT. THERE IS NO DISPUTE THAT IN F.Y.1999-200 0 THE APPELLANT HAD TRANSFERRED ITS LEATHER MANUFACTURING BUSINESS TO ITS SUBSIDIARY, M/S. KANC HAN VANIJYA PVT LTD. THE APPELLANT EXECUTED AN AGREEMENT AND ALL THE RAW MATERIALS, STORES AND FIN ISHED GOODS ALONGWITH OTHER ASSETS WERE TRANSFERRED TO THE SUBSIDIARY AS ON 01-08-1999. ON TRANSFER OF STOCK OF RAW MATERIAL, STORES AND FINISHED GOODS, THE SALES TAX WAS ALSO PAID BY THE APPELLANT. THE NET CONSIDERATION OF TRANSFER AFTER REDUCING THE LIABILITIES WAS RS.18 LAKH, OUT THE NE T CONSIDERATION, THE TRANSFEREE COMPANY ISSUED SHARES FOR RS.8 IAKH AND BALANCE WAS KEPT AS LOAN/T RADE ADVANCE BEARING THE INTEREST. THE RELEVANT ENTRIES OF TRANSFER OF STOCKS AND ETC WERE MADE IN THE BOOKS OF ACCOUNT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 3 1-03-2000. THE INTEREST INCOME WAS CREDITED TO THE PROFIT & LOSS A/C ON ACCRUAL BASIS. THUS, THE IMPACT OF THE TRANSFER OF LEATHER BUSINESS HAD BEEN REFLECTED IN THE FINANCIAL STATEMENTS OF F.Y.1999- 2000. DURING THE YEAR UNDER APPEAL THE APPELLANT HAS WRITTEN OFF SUM OF RS.9,50,338/- ON ACCOUNT OF ADVANCE AND INTE REST IN ITS BOOKS OF ACCOUNT BECAUSE THE SUBSIDIARY WAS REGULARLY INCURRING SUBSTANTIAL LOSS ES AND THE APPELLANT WAS NOT ABLE TO REALIZED THE DEBT FROM THE SAID COMPANY. I AM OF THE OPINION THA T UNDER THE PRESENT PROVISIONS OF THE I.T. ACT, THERE IS NO REQUIREMENT THAT THE APPELLANT HAS TO P ROVE THAT THE DEBT HAS ACTUALLY BECOME THE BAD. IN VIEW OF ABOVE I AM OF THE CONSIDERED OPINION THA T THE APPELLANTS CLAIM OF WRITE UF SUM OF RS.9,50,338/- IS ALLOWABLE AS DEDUCTION AS BUSINESS LOSS/BAD DEBT. THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE APPELLANT. THE GROUND NO.3 IS ALLOWED. 5. WE FIND THAT THE ASSESSEE HAS SOLD ITS LEATHER U NIT TO ITS SUBSIDIARY KANCHAN VANIJYA PVT. LTD. (KVPL) FOR A CONSIDERATION OF RS.18 LACS AND O UT OF THIS, RS.9 LACS WAS PAID BY SUBSIDIARY BY MEANS OF ISSUE OF EQUITY SHARES AND BALANCE RS.9 LACS WAS TREATED AS LOAN GRANTED TO SUBSIDIARY. THE ASSESSEE PAID INTEREST ON THIS AD VANCE OF RS.9 LACS FOR AND FROM 1.8.1999 WHEREBY THIS LOAN WAS GRANTED IN TERMS OF SALE OF I TS LEATHER UNIT TO ITS SUBSIDIARY COMPANY. THE SUBSIDIARY KVPL DULY REFLECTED THIS AMOUNT OF RS. 9 LACS AS LOAN AND PAID INTEREST @ 5% P.A. FOR ASSESSMENT YEAR 2000-01, AND AGGREGATING THE SA ME AT RS.9,50,338/- AND DUE TO HEAVY 3 ITA 291/K/2011 KANCHAN METALS PVT. LTD. A.Y.01-02 LOSSES INCURRED BY KVPL, IT COULD NOT PAY OFF THE A DVANCE. THE ASSESSEE REALISED THAT IT WILL NOT BE ABLE TO RECOVER THE SUM GIVEN TO ITS SUBSIDIARY, HENCE IN VIEW OF PRUDENT THOUGHT, WRITE OFF THIS ADVANCE AND INTEREST IN ITS BOOKS OF ACCOUNT I N RELEVANT PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. WE ARE OF THE VIEW, THAT THIS ADVANCE IS OUT OF ASSESSEES OWN CAPITAL TAXED IN EARLIER YEARS AND THIS HAS BEE N WRITTEN OFF IN ITS BOOKS OF ACCOUNT DURING RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION. THOU GH IT IS A BUSINESS TRANSACTION AND ADVANCE WAS GIVEN IN TERMS OF TRANSFER OF ITS RUNNING BUSIN ESS TO A SUBSIDIARY AND SUBSIDIARY COULD NOT PAY OFF THIS DEBT, AS IT WAS INCURRING LOSSES, IT W AS WRITTEN OFF AS BAD DEBT. ONCE BAD DEBT IS WRITTEN OFF IN ITS BOOKS OF ACCOUNT, ASSESSEE IS EL IGIBLE FOR DEDUCTION. THIS FACT HAS NOT BEEN DENIED BY LOWER AUTHORITIES AND ONCE THE ASSESSEE H AS WRITTEN OFF THE BAD DEBTS IN ITS BOOKS OF ACCOUNT, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF T.R.F. LIMITED V. COMMISSIONER OF INCOME TAX [2010] 323 ITR 397 (SC) WHEREIN, THEIR LORDSHIPS HE LD AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE IN COME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RE LATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FAC T, HAS BECOME IRRECOVERABLE : IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE . RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HO NBLE APEX COURT, WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS PO INT AND DISMISS THIS GROUND OF THE REVENUES APPEAL. 6. NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST ORDER OF CIT(A) DELETING DISALLOWANCE OF INTEREST MADE BY ASSESSING OFFICER THAT THE ASSESSE E HAS ADVANCES INTEREST FREE TO ITS SUBSIDIARY OUT OF INERTEST BEARING LOANS. FOR THIS, REVENUE RA ISED THE FOLLOWING GROUND NO.2: 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A)-XIX, KOLKATA HAS ERRED IN LAW IN DIRECTING THE A.O. TO DELETE THE ADDITION OF RS.1,55,412/- ON ACCOUNT OF INTEREST ON INTEREST FREE LOAN ADVANCED WITHOUT CON SIDERING THE FACT THAT THE ONUS OF PROVING THAT THE INTEREST FREE LOAN WAS NOT GIVEN O UT OF INTEREST BEARING LOAN IS ON THE ASSESSEE. 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING OFFICER HAS DISALLOWED A SUM OF RS.1,55,412/- ON ACCOUNT OF INTEREST ON THIS SUM OF RS.8,63,400/- GIVEN BY ASSESSEE TO ITS OWN SUBSIDIARY AS INTEREST FREE LOAN. ACCORDING TO ASSESSING OFFICER, ASSESSEE HAS ALSO D EBITED INTEREST OF RS.9,15,061/- IN THE P&L ACCOUNT ON SECURED AND UNSECURED LOANS. ACCORDINGL Y, ASSESSING OFFICER WAS OF THE OPINION THAT ASSESSEE ADVANCED INTEREST FREE LOAN TO ITS SU BSIDIARY OUT OF INTEREST BEARING LOAN. HENCE, HE DISALLOWED BY CALCULATING INTEREST @ 18% ON LOAN AMOUNT OF RS.8,63,402/- AND ADDED TO THE 4 ITA 291/K/2011 KANCHAN METALS PVT. LTD. A.Y.01-02 RETURNED INCOME OF THE ASSESSEE. AGGRIEVED, ASSESS EE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE VIDE PARA 9 OF HIS AP PELLATE ORDER AS UNDER: 9. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE ASSESSMENT ORDER. IT IS OBSERVED THAT THE A.O. HAS MADE ADDITION OF R S.1,55,412/- ON ACCOUNT OF INTEREST BY HOLDING THAT THE APPELLANT HAS ADVANCED INTEREST FR EE LOAN TO ITS SUBSIDIARY COMPANY OUT OF THE INTEREST BEARING FUNDS. ON CAREFUL CONSIDER ATION OF FACTS, I AM OF THE OPINION THAT THE A.O. WAS NOT JUSTIFIED IN MAKING ADDITION OF RS .1,55,412/- BECAUSE THE LOAN ADVANCED BY THE APPELLANT WAS EARLIER INTEREST BEAR ING AND THE RATE OF INTEREST WAS 5%. SUBSEQUENTLY, IT WAS DECIDED BY THE APPELLANT NOT T O CHARGE INTEREST BECAUSE THE SUBSIDIARY COMPANY WAS NOT IN POSITION OF REPAY THE ADVANCE OR PAY THE INTEREST DUE TO HEAVY LOSSES. THUS, IT CANNOT BE SAID THAT THE LOA N WAS INTEREST FREE LOAN RIGHT FROM THE BEGINNING. FURTHER, THE LOAN ADVANCED BY THE APPEL LANT TO ITS SUBSIDIARY COMPANY WAS FOR THE PURPOSE OF BUSINESS AND FOR COMMERCIAL EXPE DIENCY, THEREFORE, IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF S. A. BUILDERS, 288 ITR 1 (SC) NO ADDITION CAN BE MADE IN THE HANDS OF APPELLANT ON A CCOUNT OF INTEREST. THE A.O. IS DIRECTED TO DELETE THE ADDITION OF RS.1,55,412/-. THE GROUND NO. 4 IS ALLOWED. 8. WE FIND THAT ASSESSEE HAS ADVANCED THIS LOAN AS INTEREST BEARING @ 5%, SUBSEQUENTLY IT WAS DECIDED NOT TO CHARGE ANY INTEREST FROM SUBSIDI ARY IN VIEW OF ITS FINANCIAL HEALTH AND REGULAR LOSSES INCURRED BY IT. FACTS WERE STATED B Y ASSESSEE THAT LOAN WAS ADVANCED TO ITS SUBSIDIARY FOR THE PURPOSE OF BUSINESS EXPEDIENCY A ND HENCE, NO INTEREST WAS CHARGED BECAUSE THERE WAS NO CHANCE OF RECOVERY OF INTEREST FROM IT S SUBSIDIARY COMPANY. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF S. A. BUILDERS (2007) 288 ITR 1 (SC). WE FIND THAT THE ASSESSEE TOOK A D ECISION NOT TO CHARGE INTEREST ON THIS ADVANCE BECAUSE ITS SUBSIDIARY WAS IN BAD FINANCIAL POSITION AND INCURRING REGULAR LOSSES, THEREBY IT WILL NOT BE ABLE TO REPAY THE LOAN. THI S BEING BUSINESS DECISION, AS HELD BY HONBLE APEX COURT IN THE CASE OF S A BUILDERS (SUPRA) THAT INTEREST FREE ADVANCE IS FOR THE PURPOSE OF BUSINESS AND FOR COMMERCIAL EXPEDIENCY, NO INTEREST DISALLOWANCE BE MADE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) AND THIS ISSUE OF REVENU ES APPEAL IS DISMISSED. 9. NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING DISALLOWANCE OF EMPLOYEES CONTRIBUTION AND EMPLOYERS CONTRIBUT ION AMOUNTING TO RS.66,204/- U/S. 43B OF THE ACT. FOR THIS, REVENUE RAISED THE FOLLOWING GR OUND NO.3: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L D. CIT(A)-XIX, KOLKATA HAS ERRED IN LAW IN DIRECTING THE ADDITION OF RS.66,204/- U/S. 4 3B READ WITH SECTIONS 36(1)(IV), 2(24) AND SECTION 36(1)(VA) SINCE THE LD. CIT(A) HAS INTE RPOLATED BETWEEN EMPLOYERS CONTRIBUTION AND EMPLOYEES CONTRIBUTION. 10. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT AO HAS NOTED THAT EMPLOYEES CONTRIBUT ION AND EMPLOYERS CONTRIBUTION TO PF AGGREGATING TO RS.66,204/- FOR MONTHS OF SEPTEMBER, 2000 AND MARCH, 2001 WAS PAID AFTER DUE DATES. HENCE, HE MADE DISALLOWANCE U/S. 43B R.W.S. 26(1)(IV), 2(24)(X) AND 36(1)(VA) OF THE 5 ITA 291/K/2011 KANCHAN METALS PVT. LTD. A.Y.01-02 ACT. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AS PF WAS DEPOSITED FOR THE MONTH OF SEPTEMBER, 2000 WHICH WAS DISBURSED ON 3.10.2000 ON 16.10.2000. THE PF FOR THE MONTH OF MARCH, 2001 WAS DEPOSITED ON 3.4.2001. WE FIND THA T THE PF WAS DEPOSITED WITHIN DUE DATES OF PF ACT OR WITHIN GRACE PERIOD AS CAN BE SEEN FROM T HESE FACTS, HENCE NO DISALLOWANCE CAN BE MADE. WE CONFIRM THE ORDER OF CIT(A). THIS ISSUE OF REVENUES APPEAL IS ALSO DISMISSED. 11. NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING DISALLOWANCE OF INTEREST ON CAR LOAN. FOR THIS, REVENUE RAISED THE FOLLOWING GROUND NO.4: 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A)-XIX, KOLKATA HAS ERRED IN LAW IN DIRECTING THE A.O. TO ALLOW ASSESSEES CL AIM S TO EXPENSE OF RS.1,52,708/- ON ACCOUNT OF INTEREST ON CAR LOAN WITHOUT CONSIDERING THE FACT THAT IN THE ASSESSMENT ORDER, THE A.O. ADDED THE SAME BECAUSE OF THE FACT THAT LOAN WAS TAKEN FOR THE PURPOSE OF MOTOR CAR WHICH IS A CAPITAL ASSET AND INTEREST DEBITED IN THE P&L ACCOUNT BY THE ASSESSEE ACCRUED ON SUCH LOAN. 12. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING OFFICER DISALLOWED THIS INTE REST PAID ON CAR LOAN ON THE BASIS THAT ASSESSEE HAS ACQUIRED CAPITAL ASSET HENCE IT IS A C APITAL EXPENDITURE. CIT(A) DELETED DISALLOWANCE BY HOLDING THAT INTEREST PAID ON CAR L OAN CANNOT BE TREATED AS CAPITAL EXPENDITURE AND DIRECTED TO ALLOW THE CLAIM OF ASSESSEE. WE FI ND THAT INTEREST EXPENDITURE ON CAR LOAN IS ALLOWABLE AS REVENUE EXPENDITURE PROVIDED THE ASSET IS USED FOR THE PURPOSE OF BUSINESS. IT IS THE CASE OF THE ASSESSEE THAT BORROWINGS WERE MADE FOR THE PURPOSE OF BUSINESS AND IN THE COURSE OF CARRYING ON BUSINESS IT PURCHASED A CAR A ND ACCORDINGLY PAID INTEREST ON CAR LOAN. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND ACCORD INGLY ALLOW THE CLAIM OF ASSESSEE BY HOLDING THAT INTEREST PAID IS REVENUE EXPENDITURE. THIS GR OUND OF APPEAL OF REVENUE IS ALSO DISMISSED. 13. NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING DISALLOWANCE ON ACCOUNT OF TRAVELLING EXPENSES. FOR THIS, REVEN UE RAISED THE FOLLOWING GROUND NO.5: 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A)-XIX, KOLKATA HAS ERRED IN LAW IN DIRECTING THE A.O. TO DELETE THE DISALLOW ANCE OF RS.25,000/- OUT OF RS.42,226/- ON ACCOUNT OF TRAVELLING EXPENSE WITHOUT ADMITTING THE ESSENCE OF ADDITION MADE BY THE A.O. 14. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING OFFICER DISALLOWED RS.17,266 /- AND RS.25,000/- OUT OF TRAVELLING EXPENSES OF WIFE OF DIRECTOR AND DIRECTOR RESPECTIV ELY. THE CIT(A) CONFIRMED DISALLOWANCE OF RS.17,266/- INCURRED ON WIFE OF DIRECTOR, WHEREAS E XPENDITURE ON ACCOUNT OF TRAVELLING IN RESPECT TO DIRECTOR AND ITS EMPLOYEES AT VARIOUS P LACES FOR THE PURPOSE OF BUSINESS WAS ALLOWED 6 ITA 291/K/2011 KANCHAN METALS PVT. LTD. A.Y.01-02 AMOUNTING TO RS.25,000/-. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND SAME IS UPHELD. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 16. ORDER PRONOUNCED IN OPEN COURT ON 12.8.2011 SD/- SD/- . . !' $# $# $# $# , !' (S. V. MEHROTRA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( 0 0 0 0 ) )) ) DATED : 12TH AUGUST, 2011 12 $&34 $5 JD.(SR.P.S.) !/ 6 -$$ 7(8- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT DCIT, CIRCLE-4, KOLKATA. 2 -.+, / RESPONDENT, M/S. KANCHAN METALS PVT. LTD.13/3, MA HENDRA ROY LANE, KOLKATA-700 046. 3 . $/& ( )/ THE CIT(A), KOLKATA 4. $/& / CIT, KOLKATA 5 . $> -$& / DR, KOLKATA BENCHES, KOLKATA . -$/ TRUE COPY, !/&?/ BY ORDER, #4 /ASSTT. REGISTRAR .