M/s. LODHA CORPORATION P. LTD., MUMBAI V. ITO Wd. 1(2)(2), MUMBAI

ITA 3763/MUM/2005

• Counselvise Citation: 376319914 RSA 2005
• Duration Of Justice: 6 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 10-04-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 18-05-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Unexplained cash credit; Business income; Depreciation; Income from undisclosed sources; Notional interest; Commercial expediency; Unabsorbed depreciation
• Section: 43B; 68

Judgement Text

ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 1 OF 15 IN THE INCOME TAX APPELLATE TRIBUNAL 'H' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ITA NO.3763/MUM/2005 & 2641/MUM/2008 (ASSESSMENT YEARS: 2001-02 & 2003-04) LODHA CORPORATION PVT. LTD C/O M/S. PUSHPA MOTORS VS INCOME TAX OFFICER WARD -1(2)(2) UDYOG MARG,KOTA 324 007 MUMBAI PAN AAACL 2577 J (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SUNIL HIRAWAT & SHRI M. SUBRAMANIAN DEPARTMENT BY: SHRI V. KRISHNAMOORTHY, DR DATE OF HEARING: 10/04/2012 DATE OF PRONOUNCEMENT: 04/05/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THESE ARE ASSSESSEES APPEAL AGAINST THE ORDERS OF THE CIT (A)- I MUMBAI DATED 14.9.2004 AND 13.02.2008 FOR AY 2001 -02 AND 2003-04. ASSESSEE HAS RAISED ELEVEN GROUNDS IN THE APPEAL IN AY 2001-02 ON VARIOUS ISSUES AND THREE GROUNDS IN AY 2 004-05. 2. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED D R IN DETAIL. AFTER HEARING THEM AND PERUSING THE PAPER B OOK ON RECORD, THE GROUNDS ARE DECIDED AS UNDER: ITA NO.3763/ MUM/2005 3. GROUND NOS.1 & 2 IN ASSESSEES APPEAL ARE GIVEN BE LOW: 1. THE LEARNED CIT (A) HAS ERRED IN UPHOLDING AOS DECISION REGARDING THE ASSESSMENT OF ` .12,82,226/- BEING THE INTEREST CHARGED ON THE BUSINESS ADVANCES MADE TO SSL MINING SECTION UNDER THE HEAD INCOME FROM OTHE R ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 2 OF 15 SOURCES. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE ASSESSED THE SAID SUM OF ` .12,82,226 UNDER THE HEAD PROFIT AND GAINS OF BUSINESS. 2. THE LEARNED CIT (A) HAS ERRED IN UPHOLDING AOS DECISION REGARDING THE ASSESSMENT OF ` .14,22,346/- BEING THE INTEREST CHARGED ON THE BUSINESS ADVANCES MADE TO SSL HUF UNDER THE HEAD INCOME FROM OTHER SOURCES. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE ASSESSED THE SAID SUM OF ` .14,22,346/- UNDER THE HEAD PROFIT AND GAINS OF BUSINESS. 4. BRIEFLY STATED, ASSESSEE HAD SHOWN INTEREST RECEIVE D IN THE PROFIT & LOSS A/C AND OFFERED IT AS BUSINESS INCOME . OUT OF THE SAME, AO CONSIDERED AN AMOUNT OF ` .27,04,572/- AS INCOME FROM OTHER SOURCES AND NOT AS BUSINESS INCOME. IT WAS TH E SUBMISSION OF ASSESSEE THAT THESE ARE OLD BALANCES WHICH WERE ADV ANCED IN EARLIER YEARS FOR BUSINESS CONSIDERATION AND THE SAME WAS A SSESSABLE AS BUSINESS INCOME. IT WAS FURTHER SUBMITTED THAT EVEN IN EARLIER YEARS THE INTEREST CHARGED FROM THE SAID PARTIES WAS ASSE SSED UNDER THE HEAD PROFITS & GAINS. 5. IT WAS FURTHER SUBMITTED THAT AN AMOUNT OF ` .12,82,226/- WAS CHARGED BY ASSESSEE COMPANY AND THE FUNDS WERE ADVA NCED TO M/S SSL MINING WAY BACK IN 1992, WHICH WAS TO BE REPAID ON OR BEFORE MARCH, 2002. IT WAS ALSO SUBMITTED THAT THE ADVANCE S WERE GIVEN TO M/S SSL MINES TO MECHANIZE/INCREASE MINING ACTIVITI ES SO AS TO SUPPLY DOLOMITE UPTO AN EXTENT OF 50,000 TONES PER YEAR TO ASSESSEES KHANJI UDYOG UNIT AT A FIXED RATE OF ` 57.25 PER TONE. SINCE THE ADVANCE WAS GIVEN IN THE COURSE OF BUSINE SS, THE INTEREST THEREOF IS BUSINESS INCOME. ASSESSEE ALSO SUBMITTED LIKEWISE INTEREST OF ` 14,22,346/- EARNED ON SSL (HUF) WHICH WAS ALSO SIMILARLY ADVANCED IN EARLIER YEARS ON BUSINESS CON SIDERATION. AO DID NOT AGREE AND TREATED THE INCOME AS INCOME FROM OTHER SOURCES THEREBY DENYING SET OFF OF CARRY FORWARD LOSSES. BE FORE THE CIT (A), ASSESSEE FURNISHED THE DETAILS OF ADVANCES TAKEN AN D GIVEN ALONG WITH THE DATE OF INTEREST, PERIOD OF INTEREST AND T OTAL AMOUNT OF ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 3 OF 15 INTEREST EARNED. THE CIT (A) AFTER CONSIDERING THE DETAILS PLACED ON RECORD, HOWEVER, DID NOT AGREE WITH ASSESSEE ON THE REASON THAT THE MONEY ADVANCED TO SSL MINING IS NOT BUSINESS ADVANC E, BUT IT WAS A DEPOSIT TO BE UTILIZED BY THEM FOR THEIR BUSINESS . HE CONSIDERED IT AS A TERM DEPOSIT/ LOAN. SIMILARLY WITH REFERENCE T O THE ADVANCES GIVEN TO SSL (HUF), IT WAS OPINED THAT MONEY WAS NO T GIVEN FOR BUSINESS CONSIDERATION. ACCORDINGLY, HE AFFIRMED TH E ORDERS OF AO. 6. BEFORE US IT WAS SUBMITTED THAT ASSESSEE WAS IN THE MINING BUSINESS IN EARLIER YEARS AND IN ORDER TO ENSURE SU PPLY OF DOLOMITE, MONEYS WERE ADVANCED FOR INCREASING THE CAPACITY OF M/S SSL MINES AND ALSO TO SSL (HUF) FOR SUPPLY OF ORE. THER EFORE, THE ADVANCES BEING MADE IN THE COURSE OF BUSINESS FOR T HE PURPOSE OF ASSESSEES BUSINESS INTEREST THEREOF IS TO BE CONSI DERED AS INCOME FROM BUSINESS. 7. THE LEARNED COUNSEL RELIED ON THE JUDGMENT OF THE H ON'BLE SUPREME COURT IN THE CASE OF SA BUILDERS LTD. VS. C IT 288 ITR 1 TO SUBMIT THAT AMOUNTS ARE ADVANCED FOR THE PURPOSE OF BUSINESS AND THEREFORE, COMMERCIAL EXPEDIENCY. THE INTEREST THER EON IS TO BE CONSIDERED AS BUSINESS INCOME. HE ALSO RELIED ON T HE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PARAMOUNT PREMISE S (P) LTD, 190 ITR 259 (BOM.) TO SUBMIT THAT THESE AMOUNTS ARE TO BE CONSIDERED AS BUSINESS INCOME. HE ALSO RELIED ON THE VARIOUS C ASE LAWS STATED BEFORE THE CIT (A) AND THE FACTS AS AVAILABLE ON RE CORD. THE LEARNED DR HOWEVER RELIED ON THE ORDERS OF AO AND THE CIT ( A). 8. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RECOR D. THERE IS NO DISPUTE WITH REFERENCE TO ADVANCE GIVEN TO SS L MINING AND SSL (HUF) IN THE COURSE OF BUSINESS IN EARLIER YEAR S FOR ASSESSEES MINING ACTIVITIES BEING DONE UNDER M/S KHANJI UDYOG . AS SEEN FROM THE ORDERS OF THE EARLIER YEARS AND LATER YEARS, TH E REVENUE HAS NEVER DISPUTED THE TREATMENT OF INTEREST UNDER THE HEAD BUSINESS. ONLY IN THIS YEAR IT WAS CONSIDERED THAT THE ADVANC ES MADE IN ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 4 OF 15 EARLIER YEARS ARE NOT FOR BUSINESS PURPOSES. CONSID ERING THE PAST RECORD OF ASSESSEE AND THE FACT THAT AMOUNTS WERE R ECEIVED IN THE COURSE OF ASSESSEES BUSINESS, WE ARE OF THE OPINIO N THAT INTEREST RECEIVED ON BUSINESS ADVANCES ARE TO BE CONSIDERED AS INCOME FROM THE BUSINESS. ACCORDINGLY, THE GROUNDS OF ASSESSEE ARE ALLOWED. AO IS DIRECTED TO TREAT THE AMOUNT AS INCOME FROM BUSI NESS. 9. GROUND NO.3 IN ASSESSEE APPEAL IS GIVEN BELOW: 3. THE LEARNED CIT (A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF ` .13,07,594/- BEING THE INTEREST PAID WITHOUT APPRECIATING THE CORRECT FACTS OF THE CASE. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISALLOWANCE OF ` .13,07,594/. 10. GROUND NO.3 PERTAINS TO DISALLOWANCE OF ` .13,07,594/- BEING THE INTEREST PAID. AO NOTICED THAT ASSESSEE HAS CLA IMED BANK INTEREST OF ` .21,894/- AND OTHERS AT ` .5,98,439/-. HOWEVER, CONSIDERING THAT ASSESSEE HAS ADVANCED MANY FUNDS O N WHICH INTEREST WAS NOT CHARGED PARTICULARLY SSL CAPITAL, CHOTA UDEPUR OF ` .15 LAKHS, AO CONSIDERED THAT ASSESSEE HAS ADVANCED FUNDS WITHOUT CHARGING INTEREST. AO ALSO NOTICED THAT THE ASSESSEE COMPANY PAID INTEREST AT 18%, WHEREAS IT HAS CHARGE D INTEREST AT 12% ON SOME ADVANCES. ACCORDINGLY HE WORKED OUT THE DISALLOWANCES AT ` .13,07,954/-. BEFORE THE CIT (A), ASSESSEE PLACED EVIDENCES ON RECORD AND SUBMITTED THAT ASSESSEE IS A DEALER IN TATA VEHICLE AND ALSO HAS A MINING DIVISION AT CHOTA UDE PUR, BARODA AND REAL ESTATE DIVISION AT KOTA AND INTEREST WERE PAID IN THE COURSE OF BUSINESS AND FURNISHED THE DETAILS OF INT EREST PAID. IT ALSO MADE LOT OF SUBMISSIONS WITH REFERENCE TO VARIOUS A MOUNTS AND HOW THE INTEREST PAID WAS FOR THE PURPOSE OF BUSINESS. IT WAS FURTHER SUBMITTED THAT AO DISALLOWED A SUM OF ` .13,07,594/- ON A NOTIONAL BASIS AS INTEREST PAYABLE, WHEREAS ASSESSEE HAS CHA RGED ONLY A LESSER AMOUNT IN THE PROFIT & LOSS A/C AND THE DIS ALLOWANCE PER SE IF EXCEED THE INTEREST CLAIMED IN THE PROFIT & LOSS A/C. THE CIT (A), ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 5 OF 15 HOWEVER, DID NOT AGREE AND CONFIRMED THE DISALLOWAN CES VIDE HIS ORDER IN PARA NO.8 RUNNING TO SIX PAGES INCLUDING V ARIOUS CASE LAWS RELIED UPON. 11. THE LEARNED COUNSEL SUBMITTED THAT FOLLOWING AMOUNT S WERE CLAIMED APART FROM BANK INTEREST IN THE PROFIT & LO SS A/C. ASSESSMENT YEAR 2001-02 PARTICULARS RATE OF INTEREST INTEREST AMOUNT PROVISION & PAID UNSECURED LOANS 18% 307,661 INTEREST PROVISION ON UNSECURED LOANS 18% 193,447 SMT. P.K. LODHA 18% 36,000 KOTA LEASING & FINANCING CO. 18% 19,792 VIMALCHAND SURANA 18% 26,186 GEM BUILDERS 18% 12,032 PRAKASHCHAND SURANA 18% 1,950 CHASIS PARTY AGAINST DELIVERY OF VEHICLE 12% 1,371 TOTAL 598,439 12. IT WAS SUBMITTED THAT AO WRONGLY DISALLOWED NOTIONA L INTEREST. IT WAS FURTHER SUBMITTED THAT ASSESSEE HA S CHARGED INTEREST AT 12% ON VARIOUS ADVANCES GIVEN INCLUDING ON FIXED DEPOSITS WITH TELCO BEING A BUSINESS DEPOSIT AND WAS EARNING 18% TO 24% ON THE CHASSIS SUPPLIED TO VARIOUS PARTIES AND TOTAL AMOUN T EARNED AND DISCLOSED IN THE INTEREST RECEIVABLE ACCOUNT WAS ` .33,02,952/-. AS AGAINST THIS A CLAIM OF INTEREST AS RECORDED BY AO HIMSELF IN THE ORDER WAS ` .5,98,439/- AND BANK INTEREST OF ` .21,894/-. IT WAS FURTHER SUBMITTED THAT MOST OF THE INTEREST WAS PAI D TOWARDS ASSESSEES BUSINESS IN DEALERSHIP OF TATA VEHICLE A ND THE CIT (A) ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 6 OF 15 WRONGLY CONSIDERED THE DISALLOWANCES ON EXTRANEOUS FACTORS. THE LEARNED DR HOWEVER RELIED ON THE DETAILED ORDER OF THE CIT (A). 13. WE HAVE PERUSED THE RECORD AND CONSIDERED THE RIVAL SUBMISSIONS. THERE IS ONLY ONE AMOUNT WHICH WAS ADV ANCED TO SSL CAPITAL ON WHICH NO INTEREST WAS CHARGED. THIS AMOU NT WAS ADVANCED IN EARLIER YEARS AND THERE IS NO SUCH DISA LLOWANCES BROUGHT TO OUR KNOWLEDGE DISALLOWED IN EARLIER YEAR S THAT IT IS NOT FOR THE PURPOSE OF BUSINESS. PROPORTIONATE DISALLOW ANCE WITHOUT ANY NEXUS WITH THE BORROWED FUNDS CANNOT BE MADE UNLESS THERE IS A CORRELATION BETWEEN THE INTEREST CLAIMED AND DIVERS ION OF FUNDS. AS SUBMITTED BY ASSESSEE, IT HAS RECEIVED INTEREST OF MORE THAN ` .30 LAKHS AND CLAIMED ONLY TO AN EXTENT OF ` .5.98 LAKHS + BANK INTEREST OF ` .21,894/-. CONSIDERING THE FACTS PLACED ON RECORD A ND THE EXPLANATION, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DISALLOW ANY AMOUNT UNDER THE HEAD AS NOTIONALLY WORKED OUT BY AO. HOWEVER, SINCE THE FACTS WERE NOT COMPLETELY EXAMIN ED BY AO WHETHER ANY BORROWED FUNDS WERE DIVERTED FOR NON-BU SINESS PURPOSES, WE ARE OF THE VIEW THAT AO CAN RE-EXAMINE THE ISSUE PARTICULARLY WITH REFERENCE TO THE AMOUNTS CLAIMED IN THE PROFIT & LOSS A/C, NATURE OF THE CLAIM AND WHETHER ANY INTER EST WAS CLAIMED ON BORROWED THE FUNDS WHICH WERE DIVERTED. UNLESS A NEXUS WAS ESTABLISHED, THE INTEREST CLAIM CANNOT BE DISALLOWE D. IN VIEW OF THIS, WE RESTORE THE ISSUE BACK TO THE FILE OF AO TO EXAM INE AND DISALLOW THE AMOUNTS ONLY OUT OF THE AMOUNTS CLAIMED BUT NOT ON NOTIONAL INTEREST BASIS AS WAS DONE EARLIER. WITH THESE DIRE CTIONS, THE ISSUE IN GROUND NO.3, IS RESTORED TO THE FILE OF AO FOR D ETAILED EXAMINATION OF THE FACTS AND DISALLOW THE INTEREST, IF ANY ACCO RDING TO THE LAW. GROUND 3 IS TREATED AS ALLOWED FOR STATISTICAL PURP OSES. 14. GROUND NO.4 RAISED BY ASSESSEE IS GIVEN BELOW: THE LEARNED CIT (A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF ` .19,82,876/- BEING THE INTEREST PAID/PAYABLE TO TATA FINANCE LTD ON TERM LOAN. UNDE R THE ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 7 OF 15 FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISALLOWANCE OF ` .19,82,876/-. 15. AO NOTICED THAT ASSESSEE CLAIMED AN AMOUNT OF ` .19,82,876/- AS INTEREST ON TFL LOANS. THE AMOUNT OF SAID INTERE ST ON TERM LOAN OF TATA FINANCE LTD WAS NOT CHARGED TO THE PROFIT & LOSS A/C. FROM THE DETAILS SUBMITTED IN THE COURSE OF THE ASSESSME NT PROCEEDINGS, AO NOTICED THAT ASSESSEE WORKED OUT INTEREST ON TFL LOAN AT 15% WHEREAS TFL HAS WORKED OUT INTEREST RECEIVABLE AT 1 8%. IT WAS THE CLAIM OF ASSESSEE THAT THE AMOUNTS WERE DISPUTED AN D THE SAID LIABILITY OF THE INTEREST WAS NOT PROVIDED IN THE B OOKS OF ACCOUNT. AO DID NOT ALLOW THE AMOUNT AS THE AMOUNT WAS DISPUTED AND THEREFORE, IT WAS ONLY A PROVISION MADE IN THE BOOK S. FURTHER ASSESSEE ALSO TRIED TO CONTRAVENE THE PROVISIONS OF SECTION 194A AS NO TDS WAS MADE. THEREFORE, ON THESE TWO REASONS, T HE AMOUNT WAS NOT ALLOWED. BEFORE THE CIT (A), IT WAS SUBMITTED T HAT AO GOT THE FACTS WRONGLY. IT WAS SUBMITTED THAT DUE TO LIFTING OF UNORDERED STOCK FROM TATA ELECTRICAL AND LOCOMOTIVES CO, ASSE SSEE COMPANY COULD NOT MAKE PAYMENT IN TIME, A HUGE AMOUNT OF OU TSTANDING DUE GOT ACCUMULATED AND IN ORDER TO ENABLE ASSESSEE COM PANY TO MAKE PAYMENTS, TFL CONVERTED THE SAID OUTSTANDING DUE IN TO A TERM LOAN AND ALLOWED ASSESSEE COMPANY TO MAKE PAYMENT FOR TH E SAID TERM LOAN IN INSTALLMENTS. OUT OF THE TOTAL TERM LOAN OF ` .3 CRORES, ASSESSEE COMPANY PAID AN AMOUNT OF ` .50 LAKHS IN THE CURRENT ACCOUNTING PERIOD AND THE BALANCE OF ` .2.5 CRORES WAS SHOWN AS PAYABLE AS ON 31.3.2001. IT WAS FURTHER SUBMITTED T HAT SINCE IT IS AN AMOUNT PAYABLE ON PURCHASE OF VEHICLES, THE INTERES T CHARGEABLE ON THE SAID PRINCIPLE SHOULD BE 15% AND THE PROVISION WAS MADE AT 15% ONLY AND NOT 18%. IT WAS SUBMITTED THAT EVEN TH OUGH THE TFL DEMANDED 18% FROM ASSESSEE, IT IS ONLY 15% PROVIDED AND THIS AMOUNT WAS A CRYSTALLIZED LIABILITY AND IT SHOULD B E ALLOWED. THE CIT (A) HOWEVER, CONFIRMED THE DISALLOWANCE ON THE REAS ON THAT THE DISPUTE OF 3% WAS CLAIMED WHICH IS A CONTINGENT LIA BILITY AND ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 8 OF 15 SECOND THE LIABILITY PAYABLE TO PUBLIC FINANCE CO. WAS ALSO DISALLOWABLE UNDER SECTION 43B. ACCORDINGLY, HE CON FIRMED THE DISALLOWANCE. ASSESSEE IS DISPUTING THE ABOVE. 16. AFTER HEARING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT BOTH AO AND THE CIT (A) PROCEEDED ON WRONG PREMISE. IT WAS THE SUBMISSION OF ASSESSEE THAT WHAT WAS CLAIMED WAS 15 % INTEREST AND NOT AT 18% RATE OF INTEREST. EVEN THOUGH ASSESS EE WAS DISPUTING 3% OF THE INTEREST DIFFERENCE, THE SAME W AS NOT PROVIDED NOR CLAIMED. EVEN THIS AMOUNT WAS ALSO PROVIDED AT THE END OF THE YEAR. WE ARE ALSO NOT SURE WHETHER THE TATA FINANCE LTD WAS DECLARED AS A PUBLIC FINANCE COMPANY SO AS TO CONSI DER THE DISALLOWANCE UNDER SECTION 43B, AS WAS STATED BY TH E CIT (A). FOR THESE REASONS, WE ARE OF THE OPINION THAT THE MATTE R SHOULD BE RE- EXAMINED BY AO WHETHER THE AMOUNT CLAIMED HAS CRYST ALLISED OR NOT. IT IS ALSO FURTHER SUBMITTED THAT ASSESSEE HAS MADE TDS AT THE TIME OF SETTLING THE ACCOUNT, SO PROVISIONS OF SECT ION 194A ARE NOT VIOLATED. SINCE THE CLAIM HAS TO BE EXAMINED ON THE FACTS, WE ARE OF THE OPINION THAT AO HAS TO EXAMINE THE ISSUES AFRES H WITHOUT PREJUDICE TO HIS EARLIER ORDERS, WHICH ARE SET ASID E. FOR THIS PURPOSE THE MATTER IS RESTORED TO THE FILE OF AO FOR NECESS ARY EXAMINATION OF FACTS AND DECIDING THE ISSUE AFRESH INCLUDING THE C LAIMS MADE IN THIS YEAR AND LATER YEARS AS SUBMITTED BEFORE US. 17. GROUND NOS.5 & 6 IN ASSESSEE APPEAL ARE GIVEN BELOW : 5. THE LEARNED CIT (A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF ` .39,601/- BEING THE PAYMENT MADE TO THE PROVIDENT FUND UNDER SECTION 43B OF THE I.T. AC T, 1961. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATT ER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISALLOWANC E OF ` .39,601/-. 6. THE LEARNED CIT (A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF ` .6,671/- BEING THE PAYMENT MADE TO ESIC UNDER SECTION 43B OF THE IT ACT, 1961. UNDER T HE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISALLOWANCE OF ` .6,671/-. ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 9 OF 15 18. GROUND NOS. 5 & 6 PERTAINS TO THE ISSUE OF DISALLOW ANCE UNDER SECTION 43B ON PAYMENT MADE TO PF & ESIC. THE ORDERS OF THE AUTHORITIES ARE NOT CLEAR WHETHER THE AMOUNTS W ERE PAID WITHIN THE DUE DATE OR AFTER THE DUE DATES OR BY THE TIME RETURNS WERE FILED. SINCE THE DETAILS ARE NOT AVAILABLE, WE ARE OF THE OPINION THAT THIS MATTER SHOULD BE EXAMINED BY AO AFRESH KEEPING IN M IND THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF ALOM EXTUSIONS LTD 319 ITR 306 (SC) AND IN THE C ASE OF CIT VS. AIMIL LTD. & ORS. [(2010) 321 ITR 508 (DEL)]. THE I SSUE IS RESTORED TO THE FILE OF AO TO DO ACCORDINGLY. GROUN DS ARE CONSIDERED AS ALLOWED. 19. GROUND NO.7 IS GIVEN BELOW: THE LEARNED CIT (A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF ` .96,625/- BEING THE EARLIER YEARS EXPENSES WITHOUT APPRECIATING THE CORRECT FACTS OF THE CASE. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATT ER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISALLOWANCE O F ` .96,625/-. 20. GROUND NO.7 PERTAINS TO THE DISALLOWANCE OF ` .96,625/- BEING THE EARLIER YEARS EXPENSES. AO OBSERVED THAT ASSES SEE HAS DEBITED AN AMOUNT OF ` .1,13,759/- AS EXPENDITURE OF EARLIER YEARS. ASSESS EE DISALLOWED EARLIER YEARS EXPENSES AFTER NETTING THE AMOUNT AT ` .17,134/-. AO HOWEVER, DISALLOWED A FURTHER SUM OF ` .96,625/-. BEFORE THE CIT (A) IT WAS SUBMITTED THAT AN AMOUNT OF ` .1,13,759 WAS DEBITED TO PROFIT & LOSS A/C AND THE COMPANY HA D CREDITED AN AMOUNT OF ` .75,345/- BEING THE EARLIER YEARS INCOME AND ONLY A SUM OF ` .38,414/- WAS DISALLOWABLE AND NOT THE ENTIRE SUM O F ` .1,13,759/-. THIS CONTENTION WAS NOT ACCEPTED BY AO , OR BY THE CIT (A). 21. AFTER CONSIDERING THE RIVAL CONTENTIONS AND EXAMINI NG THE DETAILS AS PER THE ORDERS, WE ARE OF THE OPINION TH AT BOTH AO AND THE CIT (A) WERE WRONG IN CONSIDERING THE ENTIRE PRIOR PERIOD EXPENSES ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 10 OF 15 AS DISALLOWABLE AMOUNT WHILE AT THE SAME TIME ACCEP TING THE INCOME OF ` .75,345/-. ASSESSEES CONTENTIONTHAT ONLY A SUM OF ` .38,414/- WAS DISALLOWABLE IS A VALID CONTENTION. T HEREFORE, WE DIRECT AO TO RESTRICT THE DISALLOWANCES TO THAT AMO UNT. IT WAS ALSO THE SUBMISSION THAT ASSESSEE ITSELF HAS DISALLOWED A SUM OF ` .17,134/- WHILE FILING THE RETURN OF INCOME. THIS A SPECT ALSO REQUIRES EXAMINATION AND IF SUCH AMOUNT WAS DISALLO WED, AO IS DIRECTED TO RESTRICT THE DISALLOWANCE ACCORDINGLY. THIS GROUND IS CONSIDERED ALLOWED. 22. GROUND NO.8 IN ASSESSEES APPEAL IS AS FOLLOWS: THE LEARNED CIT (A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF ` .26,238/- OUT OF THE TRANSPORTATION CHARGES. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISALLOWANCE OF ` .26,238/-. 23. THIS GROUND PERTAINS TO DISALLOWANCE OF ` .26,238/- OUT OF THE TRANSPORTATION CHARGES. ASSESSEE CLAIMED AN AMOUNT OF ` .2,62,479/- AS TRANSPORTATION CHARGES, WHICH WAS SU PPORTED BY CASH VOUCHERS. IN VIEW OF NON VERIFICATION OF THE D ETAILS, AO DISALLOWED 10% OF THE AMOUNT. IT WAS THE SUBMISSION THAT ASSESSEE HAS TO SPENT AMOUNT FOR TAKING THE DELIVERY OF VEHI CLES FROM TELCO CENTRAL DEPOT AT JAIPUR TO KOTA WHERE ASSESSEE HAS BRANCH OFFICE AND ASSESSEE HAS TO GIVE MONEY TO DRIVERS FOR DIESE L AND OTHER EXPENSES AND IT IS NOT POSSIBLE FOR OBTAINING VERIF IABLE EXPENSE BILLS. THE CIT (A) CONFIRMED THE SAME. 24. BEFORE US IT WAS SUBMITTED THAT THIS EXPENDITURE WA S NECESSARY FOR TAKING DELIVERY OF THE VEHICLES FROM THE TELCO UNIT TO ASSESSEES OFFICE AND THE EXPENDITURE WAS INCURRED ON THAT PURPOSE. IT WAS FURTHER SUBMITTED THAT THIS EXPENDITURE IS L ESS WHEN COMPARED TO LAST YEAR. CONSIDERING THE NATURE OF EX PENDITURE AND EXPLANATION PROVIDED, WE ARE OF THE OPINION THAT TH ERE IS NO NEED FOR DISALLOWING ANY AMOUNT CLAIMED OUT OF TRANSPORTATIO N CHARGES. AO ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 11 OF 15 IS DIRECTED TO ALLOW THE AMOUNT AS CLAIMED. GROUND IS ACCORDINGLY CONSIDERED AS ALLOWED. 25. GROUND NO.9 IN ASSESSEES APPEAL IS GIVEN BELOW: THE LEARNED CIT (A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF ` .22,114/- BEING THE DEPRECIATION CLAIMED. UNDER THE FACTS AND CIRCUMSTANCES OF THE M ATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISALLOWANC E OF ` .22,114/- 26. GROUND NO.9 PERTAINS TO DISALLOWANCE OF DEPRECIATIO N OF ` .22,114/- ON THE REASON THAT ASSESSEE COULD NOT FUR NISH VOUCHERS FOR PURCHASE OF ASSETS. AO DISALLOWED THE DEPRECIAT ION AMOUNTING TO ` .22,114/-. ASSESSEE FURNISHED THE COMPLETE DETAILS AS EXTRACTED FROM PARA 35 ONWARDS IN CIT (A) ORDERS. EVEN THEN, THE CIT (A) FOUND NO MERIT IN THE CONTENTION OF ASSESSEE AND CO NFIRMED THE DISALLOWANCE OF DEPRECIATION. 27. AFTER CONSIDERING THE SUBMISSIONS, WE ARE OF THE OP INION THAT THERE IS NO NEED TO DISALLOW THE DEPRECIATION ON TH E ASSETS PURCHASED LIKE CALCULATOR, MOBILE PHONE, COMPUTER, VEHICLES FOR WHICH THE DETAILS WERE FURNISHED BEFORE THE AUTHORI TIES. WHAT ELSE IS REQUIRED TO BE PROVIDED WAS NOT CLEAR EITHER FROM T HE ORDER OF THE CIT (A) OR AO. IN THESE CIRCUMSTANCES WE DIRECT THE AO TO ALLOW THE DEPRECIATION AS CLAIMED. GROUND IS CONSIDERED AS AL LOWED. 28. GROUND NO.10 IS GIVEN BELOW: 10. THE LEARNED CIT (A) HAD ERRED IN NOT ALLOWING SET OFF OF THE UNABSORBED DEPRECIATING PERTAINING TO THE ASSESSMENT YEAR 1993-94 AND 1994-95 AMOUNTING TO ` .7,00,115/- AGAINST THE ASSESSED POSITIVE INCOME. U NDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE ALLOWED THE SET OFF OF THE SAID SUM OF ` .7,00,115/- AGAINST THE ASSESSED POSITIVE INCOME AS PER THE RAT IO OF THE DECISIONS OF THE HON'BLE ITAT DELHI A BENCH I N THE CASE OF INCOME TAX OFFICER V/S. SELCHEM ENGINEERS P VT. LTD IN ITA NO.4904/DEL/1999 DATED 16 TH APRIL, 2004 (2004) 84 TTJ (DEL.)101 . ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 12 OF 15 29. GROUND NO.10 PERTAINS TO NOT ALLOWING THE SET OFF O F UNABSORBED DEPRECIATION. IT WAS THE CONTENTION THAT ASSESSEE IS ENTITLED FOR SET OFF OF DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1993-94 AND 1994-95 AMOUNTING TO ` .7,00,115/- AGAINST ASSESSEES INCOME. ASSESSEE RELIED ON THE DECISION OF THE ITAT A BENCH IN THE INCOME TAX OFFICER VS. SELCHEM ENGINEERS PVT. LTD I N ITA NO.4904/DEL/1999 DATED 16 TH APRIL, 2004 (2004) 84 TTJ (DEL.)101. SINCE THIS ISSUE IS ONE OF VERIFICATION OF RECORD A ND ALSO THE PROVISIONS OF LAW OF SET OFF, WE DIRECT AO TO EXAMI NE THE FACTS AND ALLOW THE SET OFF FOLLOWING THE PRINCIPLES LAID DOW N BY THE ABOVE REFERRED DECISION OF THE ITAT DELHI A BENCH (SUPR A). ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY TO MAKE SUBMISSIONS IN THIS REGARD. THIS GROUND IS RESTORED TO THE FILE OF AO TO EXAMIN E THE RECORD AND ALLOW THE SET OFF AS PER LAW, IF THERE IS POSITIVE INCOME. GROUND IS CONSIDERED ALLOWED. 30. GROUND NO.11 RAISED BY ASSESSEE IS GIVEN BELOW: 11. THE CIT (A) ERRED IN NOT ALLOWING CREDIT FOR T DS OF ` .67,643/- WITHOUT APPRECIATING THE CORRECT FACTS OF THE CASE. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATT ER, HE OUGHT TO HAVE ALLOWED THE CREDIT FOR THE SAME. 31. GROUND NO.11 PERTAINS TO ALLOWING THE CREDIT FOR TD S ` .67,643/-. THE CIT (A) ALREADY GAVE DIRECTIONS FOR VERIFICATION AND ALLOWING THE CREDIT. HOWEVER, IT WAS SUBMITTED THAT NO CREDIT WAS GIVEN. IT WAS SUBMITTED THAT AO ASKED FOR RECONCILI ATION AND ASSESSEE HAS FURNISHED NECESSARY DETAILS THAT THE I NCOME WAS CREDITED IN THE BOOKS OF ACCOUNT VIDE JB NO.268. SI NCE THE INCOME WAS ACCOUNTED FOR, AO HAS TO GIVE CREDIT FOR THE AM OUNT AS PER THE PROVISIONS OF SECTION 199 OF THE I.T. ACT. 32. AFTER EXAMINING THE SUBMISSIONS MADE BEFORE THE CIT (A) IN DETAIL WHICH ARE PLACED IN PAPER BOOK FROM PAGES 48 TO 51, WE ARE OF THE OPINION THAT THIS ISSUE ALSO REQUIRES EXAMINATI ON BY AO. IT WAS THE SUBMISSION THAT THE AMOUNTS ON WHICH TDS WAS MA DE WAS ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 13 OF 15 ALREADY ACCOUNTED IN THE BOOKS OF ACCOUNT OF ASSESS EE. IN CASE THE AMOUNTS ARE TAKEN TO THE RESPECTIVE ACCOUNTS AND AC COUNTED FOR, AO IS BOUND TO GIVE CREDIT FOR THE TDS MADE U/S 199 OF IT ACT. THEREFORE, AO IS DIRECTED TO EXAMINE THE FACTS AND ALLOW THE CLAIM. WITH THESE DIRECTIONS, THIS GROUND IS CONSIDERED AL LOWED. 33. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ITA NO.2641/MUM/2008 : 34. ASSESSEE HAS RAISED THE FOLLOWING THREE GROUNDS: GROUND NO:1 ON FACTS AND IN LAW, THE LEARNED CIT ( A) ERRED IN CONFIRMING THE DISALLOWANCE OF ` .50,59,173/- BEING THE INTEREST PAID/PAYABLE TO TATA FINANCE LTD . UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISALLOWANCE O F ` .50,59,173/-. GROUND NO.2. GROUND NO:1 ON FACTS AND IN LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF ENTIRE SUM OF ` .7,43,922/- BEING THE INTEREST/FINANCIAL CHARGES INCURRED IN THE COURSE OF BUSINESS. UNDER THE FACT S AND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID ADDITION OF ` .7,43,922/-. GROUND NO.3 ON FACTS AND IN LAW, THE LEARNED CIT (A ) ERRED IN CONFIRMING THE ADDITION OF ` .15,93,001/- UNDER SECTION 68 OF THE I.T. ACT, 1961. UNDER THE FACTS A ND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID ADDITION OF ` .15,93,001/-. 35. GROUND NO.1 PERTAINS TO INTEREST PAYABLE TO TATA FI NANCE LTD. AO DID NOT ALLOW THE INTEREST CLAIM OF ` .50,59,173/- WHICH IS NOT PROVIDED IN THE BOOKS OF ACCOUNT BUT CLAIMED AS A L IABILITY. THE CIT (A) HAS NOT ALLOWED THE CLAIM ON THE REASON THAT TH E AMOUNT WAS SETTLED IN THE LATER YEAR AND NOT LIABILITY OF THE YEAR. THIS ISSUE WAS CONSIDERED IN ITA NO.3763/MUM/2005 VIDE GROUND NO.4 WHEREIN ON SIMILAR FACTS IT WAS DECIDED THAT AO SHOULD EXAM INE THE ISSUE AFRESH WHETHER THE AMOUNTS HAVE BEEN CRYSTALLISED O R NOT DURING THE YEAR. CONSISTENT WITH THE ABOVE, THE ISSUE IN T HIS YEAR ALSO IS ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 14 OF 15 RESTORED TO THE FILE OF AO FOR FRESH EXAMINATION AN D DECISION. GROUND NO.1 IS ACCORDINGLY CONSIDERED ALLOWED. 36. GROUND NO.2 PERTAINS TO THE DISALLOWANCE OF INTERES T SUM OF ` .7,43,922/-. AO ON NOTICING THAT ASSESSEE HAS ADVAN CED FUNDS WITHOUT INTEREST DISALLOWED THE AMOUNT ON NOTIONAL BASIS WHICH THE CIT (A) HAS CONFIRMED. THIS ISSUE WAS DISCUSSED IN ITA NO.3763/MUM/2005 AT GROUND NO.3 AND THE MATTER WAS RESTORED TO THE FILE OF AO WITH CERTAIN DIRECTIONS. CONSISTE NT WITH THE STAND TAKEN THEREIN, SINCE, IT HAS A CONSEQUENTIAL EFFECT IN THIS YEAR AS WELL, WE ALSO RESTORE THIS ISSUE TO THE FILE OF AO FOR FRESH EXAMINATION AND TO DECIDE THE ISSUE IN THE LIGHT OF THE DIRECTIONS GIVEN IN EARLIER ASSESSMENT YEAR. THIS GROUND IS AL SO ALLOWED FOR STATISTICAL PURPOSES. 37. GROUND NO.3 PERTAINS TO THE ISSUE OF ADDITION UNDER SECTION 68 OF THE I.T. ACT. AO NOTICED THAT AN AMOUNT OF ` .20,67,043/- WAS RECEIVED BY ASSESSEE AND MADE AN ADDITION UNDER SEC TION 68. IT WAS THE SUBMISSION OF ASSESSEE THAT THE ADVANCES WERE R ECEIVED AGAINST THE SALE OF LAND AT CHOTA UDEPUR, A DIVISION OF LOD HA CORPORATION. THE LIST OF PERSONS FROM WHOM ADVANCES WERE TAKEN, WERE ALSO SUBMITTED BEFORE AO, BUT THESE WERE NOT BELIEVED. B EFORE THE CIT (A) FURTHER SUBMISSIONS WERE MADE AND THE CIT (A) CONFI RMED THE ADVANCES RECEIVED DURING THE YEAR TO THE EXTENT OF ` .15,93,001/- INSPITE OF SUBMITTING THAT ASSESSEE HAS SOLD AND AD JUSTED THE SAME IN LATER YEARS AND THE AMOUNTS CANNOT BE CONSIDERED AS UNEXPLAINED CASH CREDIT BEING TRADE RECEIPTS. 38. AFTER HEARING THE RIVAL SUBMISSIONS AND EXAMINATION OF THE RECORD, WE ARE OF THE VIEW THAT BOTH THE AUTHORITIE S HAVE WRONGLY CONSIDERED THE ADVANCES RECEIVED FOR SALE OF PROPER TY AS INCOME FROM UNDISCLOSED SOURCES. IT WAS THE SUBMISSION OF ASSESSEE THAT THE PROPERTIES WERE TRANSFERRED AND REGISTERED IN S UBSEQUENT YEARS AND THERE IS NO NEED FOR MAKING ANY ADDITION UNDER SECTION 68. ITA NO.3763 OF 2005 LODHA CORPORATION (P) LTD MUMBAI-H BENCH PAGE 15 OF 15 THERE WAS ALSO REASONING THAT LATE SHRI S.S. LODHA WHO WAS HANDLING THE MATTER WAS CONTINUOUSLY REMAINED HOSPI TALIZED AND EXPIRED LATER AND THEREFORE, PREPARATION OF SALE AG REEMENT REMAINED SUSPENDED DURING THE PERIOD. THESE MATTERS WERE NOT CONSIDERED IN THE RIGHT PERSPECTIVE. CONSIDERING THESE SUBMISSION S, WE ARE OF THE VIEW THAT AO SHOULD EXAMINE AFRESH WHETHER THE SALE PROCEEDS WERE RECORDED IN THE LATER YEARS AND IF THE ADVANCE PERT AINS TO THE SALE PROCEEDS OF THE PROPERTIES THE SAME CANNOT BE CONSI DERED AS INCOME UNDER SECTION 68. THESE ASPECTS REQUIRE EXAMINATION . THEREFORE, THIS ISSUE IS ALSO RESTORED TO THE FILE OF AO FOR F RESH EXAMINATION. ACCORDINGLY, THE APPEAL IS CONSIDERED ALLOWED FOR S TATISTICAL PURPOSES. 39. IN THE RESULT BOTH APPEALS ARE CONSIDERED ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MAY, 2012. SD/- SD/- ( S.S. GODARA ) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 4 TH MAY, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI