M/S CIFCO FINANCE LTD., MUMBAI V. DY CIT (OSD II), MUMBAI

ITA 3992/MUM/2001

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3674 (ITAT-MUMBAI)
• Duration Of Justice: 18 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 1996-1997
• Appeal Filed On: 12-06-2001
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Rule of consistency; Additional evidence; Bad and doubtful debts; Right to appeal; Tax effect; Commercial expediency; Capital expenditure; Set aside
• Section: 143(3); 192; 131; 2

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH MUMB AI BEFORE SHRI PAWAN SINGH JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 3992/MUM/2001 (ASSESSMENT YEAR 1996-97 ) M/S CIFCO FINANCE LTD. BHUPEN CHAMBERS, GROUND FLOOR, UNIT- I, DALAL STREET, FORT, MUMBAI- 400001. PAN: AAACC1765F VS. DCIT (OSD II), CENTRAL SECTION, C.G. O. BUILD ING ANNEXC, 101, M.K. MARG, MUMBAI-400020. APPELLANT RESPONDE NT ITA NO. 4080/MUM/2001 (ASSESSMENT YEAR 1996-97 ) DCIT (OSD II), CENTRAL SECTION, C.G. O. BUILDING ANNEXC, 101, M.K. MARG, MUMBAI-400020 VS. M/S CIFCO FINANCE LTD. BHUPEN CHAMBERS, GROUND FLOOR, UNIT-I, DALAL STREET, FORT, MUMBAI- 400001. PAN: AAACC1765F APPELLANT RESPONDE NT ITA NO. 4045/MUM/2005 (ASSESSMENT YEAR 1997-98 ) M/S CIFCO FINANCE L TD. BHUPEN CHAMBERS, GROUND FLOOR, UNIT- I, DALAL STREET, FORT, MUMBAI- 400001. PAN: AAACC1765F VS. DCIT (OSD II), CENTRAL SECTION, C.G. O. BUILDING ANNEXC, 101, M.K. MARG, MUMBAI-400020. APPELLANT RESPONDE NT ITA NO. 4532/MUM/2005 (ASSESSMENT YEAR 1997-98 ) DCIT (OSD II), CENTRAL SECTION, C.G. O. BUILDING ANNEXC, 101, M.K. MARG, MUMBAI - 400020 VS. M/S CIFCO FINANCE LTD. BHUPEN CHAMBERS, GROUND FLOOR, UNIT-I, DA LAL STREET, FORT, MUMBAI- 400001. PAN: AAACC1765F APPELLANT RESPONDE NT APPELLANT BY : SHRI VIPUL JOSHI WITH SHRI MUKUL PANDYA (AR ) RESPONDENT BY : SHRI ASHISH POPHARE (DR) DATE OF HEARING : 22.08.2019 DATE OF PRONOUNCEMEN T : 01.11.2019 IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 2 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE SET OF FOUR CROSS APPEALS ARE DIRECTED AGAINS T THE ORDER OF LD. CIT(A)-V, MUMBAI DATED 04.04.2001 FOR ASSESSMENT YE AR 1996-97 & DATED 13.04.2000 FOR ASSESSMENT YEAR 1997-98. IN AL L APPEALS, THE PARTIES HAVE RAISED CERTAIN COMMON GROUNDS OF APPEA L, THEREFORE, ALL THE APPEALS WERE CLUBBED, HEARD TOGETHER AND ARE DECIDE D BY A COMMON ORDER. FOR APPRECIATION OF FACTS THE APPEALS FOR AY 1996-97 ARE TREATED AS LEAD CASES. IN APPEAL FOR ASSESSMENT YEAR 1996- 97, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1A. ON FACTS AND IN LAW, THE HONOURABLE COMMISSIO NER OF INCOME TAX (APPEALS), CENTRAL V. MUMBAI (CIT(A)) FAILED TO APP RECIATE THAT THE AMOUNT OF ADVANCE RECEIVED FROM KENIL- WORTH INVESTMENTS L IMITED WAS WITHOUT ANY ST1PULATION AS TO PAYMENT OF INTEREST AND THERE FORE THE APPELLANT COULD NOT HAVE PROVIDED INTEREST IN THE EARLIER YEARS AND THEREBY ERRED IN CONFIRMING DISALLOWANCE OUT OF INTEREST OF RS. 1,73 ,24,918/-. LB. ON FACTS AND IN LAW, THE CIT(A) ERRED IN CONFIR MING DISALLOWANCE OUT OF INTEREST OF RS. 1,73.24,918/- ON THE GROUND THAT SU CH DISALLOWANCE WAS CONFIRMED BY HIM IN ANOTHER CASE WITHOUT APPRECIATI NG THE FACT THAT THE FACTS IN BOTH THE ABOVE CASES WERE CLEARLY DISTINGUISHABL E. LC. ON FACTS AND IN LAW, THE CIT(A), ERRED IN CONFI RMING DISALLOWANCE OUT OF INTEREST OF RS. 1,73,24,918/- WITHOUT APPRECIATI NG THE FACT THAT THE LIABILITY TO PAY INTEREST AROSE FOR THE FIRST TIME ON BASIS O F ORDER OF THE SPECIAL COURT AND AS THE APPELLANT WAS FOLLOWING ACCRUAL METHOD O F ACCOUNTING THE ENTIRE INTEREST WAS ALLOWABLE EXPENSES FOR THE YEAR. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 3 THE APPELLANT, THEREFORE, PRAYS THAT THE ORDER OF T HE CIT(A) BE SET ASIDE AND THE ASSESSING OFFICER BE DIRECTED TO DELE TE THE DISALLOWANCE OF INTEREST OF RS. 1,73,24.918/-. 2A. THE CIT(A) ERRED IN FACTS AND IN LAW IN CONFIR MING DISALLOWANCE OF RS. 72,321/- OUT OF BAD DEBTS IN RESPECT OF AMOUNT DUE FROM ARCOT FINANCE LIMITED ON THE GROUND THAT NO DETAILS WERE FILED IN COURSE OF ASSESSMENT PROCEEDINGS. 2B. THE CIT(A) ERRED IN FACTS AND IN LAW IN NOT ACC EPTING AFFIDAVIT FILED OF MANAGING DIRECTOR OF THE APPELLANT AS AN ADDITIONAL EVIDENCE AND THEREBY CONFIRMING DISALLOWANCE OF RS. 72,321/- OUT OF BAD DEBTS. THE APPELLANT, THEREFORE, PRAYS THAT THE ORDER OF C IT(A) BE SET ASIDE AND THE ASSESSING OFFICER BE DIRECTED TO DELE TE THE DISALLOWANCE OF RS. 72,321/- OUT OF INTEREST PAID. 3. ON FACTS AND IN LAW, THE CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS. 16,85,250/- OUT OF INTEREST EXPENSES IN RESPECT OF ADVANCE GIVEN TO CIFCO PROPERTIES PRIVATE LIMITED AND CIFCO TRAVEL PRIVATE LIMITED IGNORING THE FACTS THAT THE ADVANCES GIVEN WERE FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. THE APPELLANT, THEREFORE, PRAYS THAT THE ORDER OF C IT (A) BE SET ASIDE AND ASSESSING OFFICER BE DIRECTED TO DELETE T HE DISALLOWANCE OUT OF INTEREST EXPENSES OF RS. 16,85,250/-. 4. WITHOUT PREJUDICE TO GROUND NO.3, ON FACTS AND IN L AW, THE CITCA) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST @ 21% INSTEAD OF @ 15% IN RESPECT OF ADVANCES GIVEN TO CIFCO PROPERTIES PRIVA TE LIMITED AND CIFCO TRAVELS PRIVATE LIMITED. THE APPELLANT, THEREFORE, PRAYS THAT THE ORDER OF T HE CIT(A) BE SET ASIDE AND THE ASSESSING OFFICER BE DIRECTED TO WORK OUT DISALLOWANCE OF INTEREST @ 15% . 5A. ON FACTS AND IN LAW, THE CIT(A) ERRED IN TREATI NG LEASE ARRANGEMENT ENTERED WITH KORES INDIA LIMITED. AS A FINANCIAL DI SALLOWING AND THEREBY ARRANGEMENT RS. 15,46,140/- OUT OF DEPRECIATION CLA IM FOR THE YEAR IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 4 UPHOLDING THE FINDING OF THE ASSESSING OFFICER RECO RDED IN ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 1995-96. 5B. ON FACTS AND IN LAW, THE CIT(A) ERRED IN HOLDIN G THAT THE FINDING MADE IN ASSESSMENT FOR ASSESSMENT YEAR 1995-96 CAN SAID TO HAVE REACHED FINALITY AS THE APPELLANT HAD FILED APPLICATION UND ER KAR VIVAD SAMADHAN SCHEME AND THEREBY CONFIRMING DISALLOWANCE OF RS. 1 5,46,140/- OUT OF CLAIM OF DEPRECIATION IN RESPECT OF LEASE ARRANGEME NT WITH KORES INDIA LIMITED. 5C. ON FACTS AND LAW, THE LD. CIT(A) ERRED IN NOT A LLOWING DEPRECIATION TREATING AFTER THE LEASE EVEN ARRANGEMENT WITH KORE S INDIA LIMITED AS A FINANCIAL ARRANGEMENT. 5D. ON FACTS AND LAW, THE CIT(A) ERRED IN HOLDING T HAT DEPRECIATION ON CERTAIN ASSETS LEASED IN EARLIER YEARS, BE ALLOWED ONLY IF SUCH ASSETS WERE IN EXISTENCE IN THE PREVIOUS YEAR AND ALSO BEEN PUT TO USE. THE APPELLANT, THEREFORE, PRAYS THAT THE ORDER OF C IT(A) BE SET ASIDE AND THE ASSESSING OFFICER BE DIRECTED TO ALLO W DEPRECIATION OF RS. 17,15,727/-. 6A. ON FACTS AND IN LAW, THE CIT(A) ERRED IN CONFIR MING DISALLOWANCE OF RS. 41,87,500/- OUT OF DEPRECIATION IN RESPECT OF L EASE TO PRAKASH INDUSTRIES LIMITED ON THE SAME REASONS MENTIONED WHILE DISALLO WING DEPRECIATION IN RESPECT OF LEASE AGREEMENT WITH KORES INDIA LIMITED . 6B. ON FACTS AND IN LAW, THE CIT(A) ERRED IN HOLDIN G THAT THE FINDING MADE IN ASSESSMENT FOR ASSESSMENT YEAR 1995-96 CAN SAID TO HAVE REACHED FINALITY AS THE APPELLANT HAD FILED APPLICATION UND ER KAR VIVAD SAMADHAN SCHEME AND THEREBY CONFIRMING DISALLOWANCE OF RS. 4 1,87,500/- OUT OF CLAIM OF DEPRECIATION. 6C. ON FACTS AND IN LAW, THE CIT(A) ERRED IN NOT AL LOWING DEPRECIATION EVEN AFTER TREATING THE LEASE AGREEMENT WITH PRAKASH IND USTRIES LIMITED AS A FINANCIAL ARRANGEMENT. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 5 THE APPELLANT, THEREFORE, PRAYS THAT THE ORDER OF T HE CIT(A) BE SET ASIDE AND THE ASSESSING OFFICER BE DIRECTED TO ALLO W THE CLAIM OF DEPRECIATION OF RS. 41,87,500/- IN RESPECT OF LEASE AGREEMENT WITH PRAKASH INDUSTRIES LIMITED. 7. WITHOUT PREJUDICE TO APPEAL FILED IN CASE OF OCE ANIC INVESTMENTS LIMITED, ON FACTS AND IN LAW, THE CIT(A) ERRED IN NOT DELETI NG INCOME RELATING TO INCOME FROM SALE OF SHARES OF PANCHMAHAL CEMENTS LI MITED AFTER UPHOLDING IN CASE OF OCEANIC INVESTMENTS LIMITED TH AT NO SUCH TRANSACTIONS EXISTED. THE APPELLANT, THEREFORE, PRAYS THAT THE ORDER OF T HE CIT(A) BE SET ASIDE AND THE ASSESSING OFFICER BE DIRECTED TO DELE TE THE INCOME OF RS. 22,50,000/- FROM ASSESSED INCOME. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF FINANCE AND LEASING. THE RETURN OF INCO ME WAS FILED BY ASSESSEE ON 30.11.1996 DECLARING LOSS. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SEC TION 143(3) ON 31.03.1999. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE VARIOUS ADDITIONS/DISALLOWANCES CONSISTING INT EREST DISALLOWANCE OF RS. 2.30 CRORE, DISALLOWANCE OF BAD-DEBTS OF RS. 17,83,092/-, DISALLOWANCE OF INTEREST ON ACCOUNT OF FREE ADVANCE GIVEN TO ITS ASSOCIATE/GROUP COMPANY, DISALLOWANCE ON DEPRECIATI ON ON LEASE HOLD ASSET, TAXED THE PROFIT ON SALE OF SHARES OF PANCHM AHAL CEMENTS LTD. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE WAS GRAN TED RELIEF ON DISALLOWANCE OF WRITE OFF, PARTIAL RELIEF ON DISALL OWANCE ON ACCOUNT OF INTEREST FREE ADVANCES TO ITS GROUP CONCERN AND PAR TIAL RELIEF ON THE LEASE HOLD ASSETS. AGGRIEVED BY THE ORDER OF LD. CIT(A), BOTH THE PARTIES HAVE IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 6 FILED THEIR RESPECTIVE APPEALS BY RAISING THE GROUN DS OF APPEAL AS NARRATED ABOVE. 3. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED AUTHO RISED REPRESENTATIVE (LD. AR) FOR THE ASSESSEE AND LEARNED DEPARTMENTAL REPRESENTATIVE (LD DR) FOR THE REVENUE AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. GROUND NO.1 IN ASSESSEES APPEAL RELAT ES TO DISALLOWANCE OF INTEREST PAYABLE TO KENILWORTH. THE LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT THE ASSESSEE CLAIMED I NTEREST EXPENSES OF RS. 2.30 CRORE INTEREST PAYABLE ON AMOUNT ADVANCED BY KENILWORTH INVESTMENT PVT. LTD.. THE ASSESSING OFFICER ALLOWED ONLY RS. 57.60 LAKHS AND DISALLOWED REMAINING OF RS. 1.73 CRORE. T HE ASSESSING OFFICER DISALLOWED BY TAKING VIEW THAT INTEREST LIA BILITY PERTAINS TO PERIOD FROM 25.03.1992 TO 31.03.1995 AND NOT OF CUR RENT YEARS. ONLY INTEREST OF RS. 57.60 LAKHS PERTAINS TO THE YEAR UN DER ASSESSMENT, IS ALLOWABLE. THE LD. CIT(A) CONFIRMED THE ACTION OF A SSESSING OFFICER BY REFERRING THAT THE SIMILAR CONTROVERSY WAS IN A APP EAL OF SMT. ADITI DALAL WHICH WAS DECIDED AGAINST THE ASSESSEE BY LD. CIT(A) VIDE HIS ORDER DATED 25.081999. 4. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSE E RECEIVED RS. 2.88 CRORE AS INTEREST FREE LOANS FROM KENILWORTH IN EAR LIER YEARS. AS PER THE ORDER OF SPECIAL COURT DATED 05.07.1995, THE ASSESS EE TO REPAY THE PRINCIPLE AMOUNT + INTEREST @ 20% P.A. FOR THE PERI OD STARTING FROM IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 7 25.03.1992 (FROM THE DATE OF RECEIPT OF ADVANCE). T HUS, THE INTEREST LIABILITY OF RS. 2,30,84,918/-, WHICH INCLUDES RS. 1,73,24,918/- FOR EARLIER YEARS WAS PAID BY THE ASSESSEE. THE LD. AR OF THE ASSESSEE SUBMITS THAT THERE WAS NO STIPULATION ON INTEREST I N THE AGREEMENT WHILE TAKING ADVANCE AND THEREFORE, NO INTEREST HAD ACCRU ED IN EARLIER YEARS. THE ASSESSING OFFICER ERRONEOUSLY RELIED ON THE ORD ER OF MASSORE TOBACCO COMPANY LTD. VS. CIT [115 ITR 698 (KAR.)] A ND SARAYA SUGAR MILLS P. LTD. VS. DCIT [117 ITR 344]. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT IN ASSESSEES GROUP CONCERN I.E. CIFCO LTD., THE LD. CIT(A) ALLOWED THE INTEREST IN ASSESSMENT YEAR 1996-97 VID E ORDER DATED 04.03.2004, COPY OF THE ORDER IS PLACED ON RECORD, AND NO APPEAL IS FILED BY THE REVENUE AGAINST THE ALLOWANCE ON SUCH INTERE ST. IN CASE OF ADITI DALAL WHERE THE ASSESSING OFFICER HAD RELIED ON THE SAME TWO DECISIONS AND LD. CIT(A) ALSO BASED HIS DECISION, THE TRIBUNA L ALLOWED THE CLAIM OF ADITI DALAL IN ITA NO. 4750/MUM/2001, COPY OF WH ICH IS PLACED ON RECORD. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE RELIED ON THE ORDER OF LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE ASSESSMENT , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED AN AMOU NT OF RS. 2,35,92,606/- FROM PROFIT & LOSS A/C ON ACCOUNT OF INTEREST LIABILITY. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 8 THE INTEREST LIABILITY CONSIST OF INTEREST LIABILIT Y @ 20% P.A. FROM 25.03.1992 TO 31.03.1995 OF RS. 1,73,24,918/- AND O NLY RS. 57,60,000/- PERTAINS TO THE RELEVANT FINANCIAL YEAR UNDER CONSI DERATION. ON SHOW- CAUSE, THE ASSESSEE EXPLAINED THAT THEY HAVE RECEIV ED INTEREST FREE LOAN OF RS. 2.88 CRORE FROM M/S KENILWORTH INVESTMENT IN 1991. M/S KENILWORTH HAD RECEIVED ALMOST IDENTICAL AMOUNT FRO M DHANRAJ MILLS PVT. LTD., A COMPANY BELONGING TO KILLIC NIKSON /BR RUIA GROUP, M/S DHANRAJ MILLS PVT. LTD. WAS DECLARED A NOTIFIED ENT ITY IN THE SECURITY SCAM OF 1992. THE SPECIAL COURT CONSTITUTED FOR TRI AL OF SCAM RELATED MATTERS PASSED ORDER DIRECTING THE ASSESSEE TO MAKE THE PAYMENT OF INTEREST AMOUNTING TO RS. 2.88 CRORE TO DHANRAJ MI LLS PVT. LTD. WITH 20% INTEREST THEREON W.E.F. 25.03.1992 TO 31.03.199 6. THE ASSESSING OFFICER ALLOWED ONLY 20% INTEREST ON RS. 2.88 CRORE FOR RELEVANT PERIOD I.E. 01.04.1995 TO 31.03.1996 AND REMAINING CLAIM O F RS. 1,73,24,918/- WAS DISALLOWED HOLDING THAT EXPENSES DO NOT RELATE TO THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER BY TAKING VIEW THAT A SIMILAR CONTROVERSY/DISPUTE H AD ARISEN BEFORE HIM IN CASE OF SMT. ADITI ASIM DALAL AND VIDE ORDER DAT ED 25.08.1999 IN CIT(A) CENT.V/DCIT(OSD)/6/99-2000 WAS DECIDED AGAIN ST THE ASSESSEE. THE LD. CIT(A) HAS NOT GIVEN ANY INDEPENDENT FINDIN G. WE HAVE NOTED THAT THE CO-ORDINATE BENCH OF TRIBUNAL ALLOWED THE APPEAL OF ADITI ASIM IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 9 DALAL IN ITA NO. 4814/MUM/1999 DATED 07.07.2004 BY PASSING THE FOLLOWING ORDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PER USED THE MATERIALS ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE L OAN WAS ADVANCED BY SHRI BHUPENDRA C. DALAL TO THE ASSESSEE, INTEREST FREE B ECAUSE AS PER THE AFFIDAVIT OF SHRI BHUPENDRA C. DALAL IS APPEARING ON PAGE NO. 32 OF THE PAPER BOOK. IT IS SPECIFICALLY MENTIONED BY HIM THAT THERE IS N O INTEREST CHARGEABLE TO HER I.E. ASSESSEE, IN VIEW OF THIS, IT IS APPARENT THAT THERE WAS NO LIABILITY IN EARLIER YEARS FOR MAKING PAYMENT OF INTEREST ON ACC OUNT OF T HIS LOAN FROM SHRI HUPENDRA C. DALAL. THE LIABILITY HAS ARISEN ON 07.06.95 BY THE ORDER OF THE SPECIAL COURT. WE FIND THAT IN THE CASE OF BRIH AN MAHARASHTRA SUGAR SYNDICATE LTD. (SUPRA) IT WAS HELD BY THE HONBLE J URISDICTIONAL HIGH COURT THAT IN ORDER TO BE ALLOWABLE AS A DEDUCTION UNDER MAHARASHTRA AGRICULTURAL INCOME TAX ACT, 1992, EXPENDITURE IN QUESTION MUST BE INCURRED IN THE RELEVANT PREVIOUS YEAR. AGAIN EXPENDITURE MUST BE O NE WHICH IS INCURRED FOR THE PURPOSE OF DERIVING AGRICULTURAL INCOME FROM LA ND AND MUST NOT BE IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENDITU RE. THERE IS NOTHING IN THE SECTION, WHICH WOULD IMPOSE A CONDITION THAT IN ORD ER TO BE ALLOWABLE AS A DEDUCTION, THE EXPENDITURE MUST HAVE BEEN INCURRED IN ORDER TO EARN THE INCOME OF THE RELEVANT PREVIOUS YEAR OR MUST RELATE TO THE INCOME OF THE PREVIOUS YEAR. SIMILARLY, WE FIND THAT IN THE RELEV ANT SECTION IN THE INCOME TAX ACT I.E. 36(1)(III), THE REQUIREMENT IS THAT TH E INTEREST SHOULD BE PAYABLE IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF B USINESS. IN THE PRESENT CASE, THIS IS NOT THE CASE OF THE REVENUE THAT THE AMOUNT WAS NOT BORROWED FOR THE PURPOSE OF BUSINESS BECAUSE THE INTEREST RE LATABLE TO THE CURRENT YEAR HAS BEEN ALLOWED AND DISALLOWANCE WAS MADE ONLY OF THAT PORTION WHICH PERTAINS TO THE EARLIER YEARS. WE ARE OF THE CONSID ERED OPINION THAT BECAUSE ORIGINALLY THE AMOUNT WAS BORROWED INTEREST FREE, T HERE WAS NO INTEREST LIABILITY; AND HENCE, THE SAME COULD NOT BE ACCOUNT ED FOR IN THE EARLIER YEARS. LIABILITY TO PAY INTEREST FROM 1.4.92 @ 24% PER ANN UM HAS ARISEN ON 7.6.95 ONLY AS PER THE ORDER OF THE SPECIAL COURT; AND HEN CE, IN OUR CONSIDERED OPINION, THE SAME IS ALLOWABLE IN FULL IN THIS YEAR ONLY. THIS GROUND OF THE ASSESSEE IS ALLOWED. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 10 7. FURTHER BY CONSIDERING THE DECISION OF ADITI ASIM D ALAL (SUPRA) THE SIMILAR RELIEF WAS ALLOWED IN NILDEEP INVESTMENT CO MPANY FOR SAME ASSESSMENT YEAR ON ALMOST SIMILAR SET OF FACT IN IT A NO. 3290, 3291/MUM/2002 DATED 11.06.2006. CONSIDERING THE CON SISTENT DECISION OF CO-ORDINATE BENCH, WHEREIN SIMILAR INTEREST DISA LLOWANCE WAS DIRECTED TO BE DELETED, THEREFORE, FOLLOWING THE DECISION OF CO-ORDINATE BENCH (SUPRA), WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS. 1,73,24,918/-. IN THE RESULT, GROUND NO.1 OF THE AP PEAL IS ALLOWED. 8. GROUND NO.2 RELATES TO DISALLOWANCE OF BAD-DEBT OF RS. 72,321/-. THE LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSING OFFICER D ISALLOWED BY TAKING VIEW THAT NO EVIDENCE TO SHOW EFFORTS OF RECOVERY W AS FURNISHED BY ASSESSEE. THE ASSESSEE NEEDS TO PROVE THAT DEBT HAD BECOME BAD. THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER BY TAKING VIEW THAT NO SUBMISSION IN RESPECT OF BAD-DEBT IS MADE BY ASS ESSEE. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE CLAIM OF BAD-DEBT OF RS. 72,321/- RELATES TO ARCOT FINANCE. THE ASSESSEE IN THE STATEMENT OF FAC T FURNISHED BEFORE THE LD. CIT(A) SPECIFICALLY STATED THAT INTEREST ACCRUE D FOR EARLIER YEARS, AND NOT RECEIVED, STILL OFFERED TO TAX IN RESPECTIVE YE ARS. THE PRINCIPLE AMOUNT WAS ALREADY RECEIVED IN THE PAST. THE LD. AR FURTHER SUBMITS THAT BREAKUP OF WRITE OFF IS GIVEN IN THE COMPUTATION OF INCOME. THE LD. AR FURTHER SUBMITS THAT SIMILAR RELIEF ON ACCOUNT OF B ED DEBTS, WAS ALLOWED TO THE ASSESSEE BY THE TRIBUNAL FOR ASSESSMENT YEAR 1992-93 IN ITA NO. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 11 2541,2765/MUM/1996 VIDE ORDER DATED 17.10.2008 AND AGAIN IN AY 1993-94 IN ITA NO. 5437/MUM/1997 DATED 17.10.2008 A ND AGAIN FOR AY 2005-06 IN ITA NO. 678/MUM/2009 DATED 12.03.2010 , HOWEVER, NO ORDER FOR ORDER GIVING EFFECT TO THE ORDER OF LD. C IT(A) IS PASSED BY ASSESSING OFFICER. THE LD. AR SUBMITS THAT IN THE B USINESS OF FINANCE ADVANCES WERE GIVEN IN THE REGULAR COURSE OF BUSINE SS. THE INTEREST INCOME WAS TAXED ON ACCRUAL BASIS. THE RECOVERY OF INTEREST INCOME HAD BECOME TIME BARRED. AS PER COMMERCIAL EXPEDIENCY, B OARD OF DIRECT OF THE ASSESSEE DECIDED TO WRITE OFF THE SAID AMOUNT. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DBDT CIRCULAR NO. 551 DATED 23.01.1990 AND THE DECISION OF HONBL E SUPREME COURT IN TRF LTD. VS. CIT (323 ITR 397) AND THE CIRCULAR NO. 12 OF 2016 ACCEPTING THE RATIO OF DECISION OF HONBLE SUPREME COURT (SUPRA). IN ALTERNATIVE, THE LD. AR OF THE ASSESSEE CLAIMED AS BUSINESS LOSS. 9. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RELIE D UPON THE ORDER LOWER AUTHORITIES. 10. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE DECISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR VARIOUS YEARS AS REFERRE D BY LD. AR IN HIS SUBMISSION. THE LD. CIT(A) WHILE DISCUSSING THIS IS SUE IN PARA-6 OF HIS ORDER RECORDED THAT THE ASSESSEE HAS NOT MADE ANY S UBMISSION REGARDING THE WRITE OFF OF RS. 72,321/- IN RESPECT OF ARCOT F INANCE LTD. AND IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 12 CONFIRMED THE DISALLOWANCE OF WRITE OFF ACCORDINGLY . WE HAVE NOTED THAT IN PARA-3 OF STATEMENT OF FACT FILED BEFORE THE LD. CIT(A), THE ASSESSEE HAS SPECIFICALLY STATED IN THE FACT RELATED TO GROU ND NO.2 THAT INTEREST ACCRUED ON THE ADVANCE TO ARCOT FINANCE LTD. WAS OF FERED TO TAX. IN OUR VIEW, THE ASSESSEE HAS FULFILLED THE CONDITION AND DISCHARGE ITS ONUS BY SPECIFICALLY PLEADING THAT INTEREST ACCRUED ON THE WRITE OFF AMOUNT WAS SHOWN IN EARLIER YEARS. WE HAVE ALSO NOTED THAT THE ASSESSEE HAS CLEARLY STATED THAT THE WRITE OFF AMOUNT RELATES TO INTERES T AND THAT PRINCIPLE AMOUNT WAS ALREADY PAID. IT IS SETTLED LAW THAT NO SUIT LIE FOR RECOVERY OF INTEREST. WE HAVE FURTHER NOTED THAT THE ASSESSEE W AS ALLOWED WRITE OFF OF CLAIM IN RESPECT OF OTHER DEBTOR. THEREFORE, IN VIEW OF THE AFORESAID DISCUSSION, WE DIRECT THE ASSESSING OFFICER TO DELE TE THE DISALLOWANCE OF RS. 72,321/-. IN THE RESULT, GROUND NO.2 OF THE APP EAL IS ALLOWED. 11. GROUND NO.3 & 4 RELATES TO DISALLOWANCE OUT OF INTE REST ON ACCOUNT OF INTEREST FREE ADVANCES. THE LD. AR OF THE ASSESSEE SUBMITS THAT INTEREST FREE ADVANCES WERE GIVEN TO CIFCO PROPERTIES PVT. L TD. AND CIFCO TRAVEL PVT. LTD., THE ASSOCIATE/GROUP CONCERN. THE ASSESSE E GAVE ADVANCE OF RS. 40.25 LAKHS TO CIFCO TRAVEL PVT. LTD. AND RS. 40 LA KHS TO CIFCO PROPERTIES PVT. LTD. THE ASSESSEE GAVE INTEREST FRE E ADVANCES. THE ASSESSEE WAS REQUIRED TO FURNISH THE ACCOUNTS OF TH ESE COMPANIES. THE ASSESSEE FILED DETAILS REPLY DATED 11.01.1999 AND 1 0.03.1999. THE ASSESSEE IN ITS REPLY WITH REGARD TO ADVANCE TO CIF CO TRAVEL PVT. LTD. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 13 STATED THAT REASON FOR NOT CHARGING INTEREST WAS TH AT THE SUBSIDIARY HAD TAKEN AGENCY OF MODILUFT ARCHANA AIRWAYS WITH REGAR D TO CIFCO PROPERTIES, THE ASSESSEE STATED THAT THE AMOUNT WAS PAID FOR MAKING ADVANCE FOR PURCHASE OF PROPERTY. THE ASSESSING OFF ICER NOT ACCEPTED THE REPLY OF ASSESSEE HOLDING THAT NO CONVINCING RE ASON WAS GIVEN FOR ADVANCING TO CIFCO TRAVEL. FOR CIFCO PROPERTY, THE ASSESSING OFFICER CONCLUDED THAT NO AGREEMENT IS FURNISHED. THE LD. C IT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER AND UPHELD THE DISALLOW ANCE OF 21% OF INTEREST. THE LD. AR SUBMITS THAT THE ASSESSEE WANT ED TO DIVERSIFY ITS TRAVEL BUSINESS AND THE SUBSIDIARY HAS TAKEN AGENCY OF MODILUFT ARCHANA AIRWAYS. THE LD. AR FOR THE ASSESSEE SUBMITS THAT A DVANCE WAS GIVEN IN FEBRUARY 1996 AND RECEIVED BACK IN SEPTEMBER 1997. REGARDING CIFCO PROPERTY, THE LD. AR SUBMITS THAT ADVANCE WAS GIVEN FOR PURCHASE OF PROPERTY AT BEENA COMPLEX, ANDHERI, THE PLAN DID NO T MATERIALISED AND THE AMOUNT WAS RECOVERED. THE LD. AR SUBMITS THAT T HE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS TO GIVE ADVANCE TO I TS SUBSIDIARIES. THE ASSESSING OFFICER HAS NOT ESTABLISHED THE NEXUS OF INTEREST BEARING FUNDS AND ADVANCES. IN ALTERNATIVE AND WITHOUT PREJUDICED SUBMISSION, THE LD. AR SUBMITS THAT THE DISALLOWED RATE OF INTEREST IS HIGHLY EXCESS, THE INTEREST PAID BETWEEN 15% TO 21%, FUNDS WERE NOT US ED FOR ENTIRE PERIOD. THE ASSESSEE HAS APPLIED FOR RECTIFICATION VIDE APPLICATION DATED 07.04.2000, THE ASSESSING OFFICER CONSIDERED IT IN HIS ORDER GIVING EFFECT IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 14 TO CIT(A) ORDER AND NO APPEAL IS FILED BY DEPARTMEN T. IN PAST NO SUCH DISALLOWANCE WAS MADE ON SIMILAR ADVANCES. 12. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 13. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D PERUSED THE RECORD. WE HAVE NOTED THAT IN ORDER GIVING EFFECT, THE ASSESSING OFFICER VIDE HIS ORDER DATED 23.01.2012. THE ASSESSING OFFI CER OUT OF INTEREST OF RS. 8,45,280/- IN RESPECT OF CIFCO TRAVEL DELETED R S. 8,20,395/- AND IN RESPECT OF DISALLOWANCE OF CIFCO PROPERTIES OF RS. 8,40,000/-, THE ASSESSING OFFICER REDUCED/DELETED RS. 7,54,849/-. A CCORDINGLY, ONLY DISPUTE LEFT WITH REGARD TO CIFCO TRAVEL AT RS. 24, 855/- AND FOR CIFCO PROPERTIES RS. 85,151/-. CONSIDERING THE SUBMISSION OF THE ASSESSEE THAT ASSESSEE HAS ADVANCED MONEY TO ITS SISTER CONCERN/S UBSIDIARY, FROM THE INTEREST FREE FUNDS AVAILABLE FOR BUSINESS EXPEDIEN CIES. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY NEXUS OF INTE REST BEARING FUND AND THE ADVANCES GIVEN TO SISTER CONCERN. 14. WE HAVE NOTED THAT THE HONBLE HIGH COURT IN ASSESS EES GROUP CASE/SISTER CONCERN IN CIT VS CIFCO LTD VIDE ITA N O. 1355 OF 2018 DATED 13.02.2009, WHILE CONSIDERING THE QUESTION O F LAW WHETHER TRIBUNAL WAS JUSTIFIED IN ALLOWING THE APPEAL OF AS SESSEE AND DIRECTING THE ASSESSING OFFICER TO DELETE THE INTEREST CHARGE D ON INTEREST FREE ADVANCES DIVERTED TO GROUP CONCERN HELD THAT IN EAR LIER YEARS, THE INTEREST IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 15 HAD NOT BEEN DISALLOWED BY THE TRIBUNAL IN ULTIMATE CONCLUSION WAS RIGHT IN HOLDING THAT THE LOAN WAS TAKEN WAS NOT US ED TO GIVE A LOAN TO SISTER COMPANY. ADMITTEDLY, THE LOAN ADVANCED FROM SURPLUS OF THE COMPANY. IT IS OPEN TO A COMPANY ON THE GROUND OF C OMMERCIAL EXPEDIENCY TO ADVANCE LOAN TO ITS SISTER COMPANY AN D DISMISSED THE APPEAL OF REVENUE. 15. CONSIDERING THESE FACTS, IN OUR OPINION, WHEN IN EA RLIER YEAR ALSO, THE INTEREST HAS NOT BEEN ALLOWED, THE ACTION OF ASSESS ING OFFICER WAS NOT JUSTIFIED IN DISALLOWANCE OF INTEREST IN RESPECT O F CIFCO TRAVEL & CIFCO PROPERTIES. IN VIEW OF THE AFORESAID DISCUSSION AN D KEEPING IN VIEW THAT SUBSTANTIAL INTEREST DISALLOWANCE HAS BEEN DELETED BY ASSESSING OFFICER WHILE GIVING EFFECT TO THE ORDER OF LD. CIT(A). THE REFORE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ENTIRE DISALLOWANCE . 16. IN THE RESULT, GROUND NOS. 3 & 4 OF THE APPEAL ARE ALLOWED. 17. GROUND NO.5A TO 5C RELATES TO ISSUE OF DEPRECIATION BY TREATING THE LEASE AGREEMENT WITH KORES INDIA LTD. AS A FINANCIAL AGRE EMENT. THE LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSEE CLAIMED DEPRECIA TION ON LEASE HOLD ASSET INSTALLED AT KORES INDIA LTD. THE ASSESSEE CL AIMED 50% OF DEPRECIATION IN AY 1995-96. THE ASSESSING OFFICER D ISALLOWED BY TAKING VIEW THAT THE MACHINERY WAS NOT PUT TO USE A ND WERE INSTALLED ON 08.05.1995. FOR THE YEAR UNDER CONSIDERATION, THE A SSESSING OFFICER SIMPLY FOLLOWED THE ORDER OF AY 1995-96 BY TAKING V IEW THAT NO NEW IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 16 MATERIAL WAS FURNISHED. THE ASSESSING OFFICER CONSI DERED THE FINANCIAL CHARGES AT 24% OF RS. 7,42,147/-. HOWEVER, THE LEAS E RENT OFFERED WAS RS. 7,23,600/-. THE DIFFERENCE OF RS. 18,574/- ADDE D AS A FINANCE CHARGES, NO DEPRECIATION WAS ALLOWED. THE LD. CIT(A ) UPHELD THE ACTION OF ASSESSING OFFICER HOLDING THAT DISALLOWANCE IN A SSESSMENT ORDER FOR AY 1995-96 ATTAINS FINALITY. THE LD. CIT(A) DIRECTE D THAT LEASE RENTAL OF RS. 7,23,600/- TO BE BIFURCATED INTO PRINCIPLE AND FINANCIAL CHARGES BY THE ASSESSING OFFICER AND FINANCIAL CHARGES ONLY TO BE TAXED. 18. THE LD. AR OF THE ASSESSEE SUBMITS THAT MATTER FOR AY 1995-96 WAS SETTLED UNDER KAR VIVAD SAMADHAN SCHME (KVSS) AND I T DID NOT TAKE AWAY THE RIGHT OF ASSESSEE FOR ADJUDICATION OF ISSU E ON MERIT IN OTHER YEARS. THE LD. AR SUBMITS THAT CBDT ISSUED A CLARIF ICATION THAT KVSS DOES NOT DECIDE JUDICIAL ISSUE AND DOES NOT FOREGO RIGHT TO APPEAL ON SAME ISSUE IN OTHER AY. THE LD. AR SUBMITS THAT COP Y OF LEASE AGREEMENT DATED 15.03.1995 IS PLACED ON RECORD. THE CONFIRMATION OF GENERAL MANGER OF LESSEE, INSURANCE POLICY, INSTALL ATION CERTIFICATE, LEASE RENTAL, DETAILS INVOICE, EXCISE CHALLAN OF SU PPLIER, CONSIGNMENT NOTE OF TRANSPORTER, TRUCK NO., OCTROI RECEIPT IS P LACED ON RECORD. THE LD. AR SUBMITS THAT ASSESSING OFFICER MADE DIRECT E NQUIRES BY ISSUING SUMMON UNDER SECTION 131 AND SUMMONED GENERAL MANAG ER OF KORES INDIA. ALL DOCUMENTS AND STATEMENTS AND ENQUIRY CON FIRMED THE INSTALLATION AND DATE OF DELIVERY. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 17 19. THE LD.AR OF THE ASSESSEE SUBMITS THAT THE HONBLE SUPREME COURT IN CASE OF ICDS LTD. VS. CIT [350 ITR 527(SC)] HELD TH AT WHEN THE ASSESSEE PURCHASED VEHICLES FROM MANUFACTURERS, LEA SED OUT THOSE VEHICLES TO CUSTOMERS, IT WAS ENTITLED TO CLAIM DEP RECIATION IN RESPECT OF VEHICLES SO LEASED OUT. THUS, ON THE BASIS OF DECIS ION OF HONBLE SUPREME COURT THE ASSESSEE IS ENTITLED FOR CLAIM OF DEPRECIATION ON LEASED ASSET. 20. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMI TS THAT THE ASSESSEE HAS MADE THE FINANCIAL ARRANGEMENT WAY BACK IN F.Y. 1994-95. IN AY 1995-96, THE SIMILAR CLAIM OF ASSESSEE WAS DISALLOW ED AND THE SAME HAS ATTAINS FINALITY. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT TH E LOWER AUTHORITY HAS NOT DISPUTED THE OWNERSHIP OF LEASED ASSET. IN AY 1 995-96, THERE WAS A LIMITED DISPUTE ABOUT THE DATE OF PUT TO USE. EVEN OTHERWISE, THE DISPUTE FOR AY 1994-96 WAS SETTLED UNDER KVSS, AND IT WOULD NOT TAKE ANY RIGHT OF THE ASSESSEE FOR TAKING UP THE ISSUE IN SU BSEQUENT YEARS. WE HAVE FURTHER NOTED THAT THE ASSESSEE HAS PLACED ON RECORD SUFFICIENT MATERIAL SHOWING OWNERSHIP OF LEASED ASSET. THE HON BLE SUPREME COURT IN ICDS LTD. VS. CIT (SUPRA) HELD THAT WHEN A SSESSEE PURCHASED VEHICLES FROM MANUFACTURERS (ASSET) AND LEASED OUT THOSE ASSET TO CUSTOMERS, IT WAS ENTITLED TO CLAIM DEPRECIATION IN RESPECT OF VEHICLES SO IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 18 LEASED OUT. CONSIDERING THE DECISION OF HONBLE SUP REME COURT, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE DEPRECIAT ION ON LEASED ASSET I.E. INDUCTION MELTING FURNACE LEASED TO KORES INDIA LTD . IN THE RESULT, GROUND NO. 5A TO 5C ARE ALLOWED. 22. GROUND NO.5D RELATES TO DEPRECIATION-EARLIER YEAR A SSETS. THE LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSING OFFICER DISALLO WED DEPRECIATION ON ASSETS WHICH IS DISALLOWED IN EARLIER YEARS. THE AS SESSING OFFICER DISALLOWED BY TAKING VIEW THAT SIMILAR DISALLOWANCE S WAS CONFIRMED BY LD. CIT(A), THEREFORE, BASED ON THE ASSESSMENT ORDE R FOR AY 1995-96 DISALLOWED DEPRECATION OF RS. 17,15,727/-. THE LD. CIT(A) ALLOWED THE DEPRECIATION FOR EARLIER YEARS AND DIRECTED THE SAM E SHOULD BE ALLOWED AFTER VERIFICATION THAT ASSETS WERE IN EXISTENCE AN D PUT TO USE IN THE ASSESSMENT YEAR. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER WHILE PASSING THE ORDER GIVING EFFECT ALLOW ED DEPRECIATION IN CASE OF LEASES WITH LML LTD., APLAB LTD. AND PRECIS ION CAPSULE LTD. THE LD. AR FURTHER SUBMITS THAT IN APPEAL FOR AY 19 94-95, THE TRIBUNAL RESTORED THE MATTER BACK TO THE ASSESSING OFFICER T O DECIDE THE ISSUE AFRESH IN THE LIGHT OF DECISION FOR AY 1989-90 RELY ING ON THE ORDER OF AYS 1991-92 AND 1993-94. FOR AY 1989-90 THE TRIBUNA L SET-ASIDE THE ISSUE TO THE FILE OF LD. CIT(A). 23. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE THOUG H SUPPORTED THE ORDER OF LOWER AUTHORITIES. HOWEVER, ON OUR QUERY A BOUT THE FURTHER IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 19 AGAINST THE ORDER OF TRIBUNAL, THE LD. DR SUBMITS T HAT MATTER MAY BE RESTORED BACK TO THE LOWER AUTHORITIES TO PASS CONS EQUENTIAL ORDER. 24. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND FIND THAT ON SIMILAR GROUNDS ON VARIOUS LEASE ASSETS FOR VARIOUS YEARS, THE TRIBUNAL IN AY 1994-95 BY FOLLOWING THE OTHER YEARS ORDER RESTO RED BACK THE ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE FOLLOWING DIRECTION: 6.3 GROUND 6 IS AGAINST THE DISALLOWANCE OF DEPRECI ATION OF ASSETS WHOSE LEASE PERIOD HAS EXPIRED. WE NOTE THAT FOR THE ASSE SSMENT YEAR 1991-92 THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF THE ASSE SSING OFFICER, WHICH WAS FOLLOWED FOR ASSESSMENT YEARS 1992-93 AND 1993-94 B Y THE TRIBUNAL. THE TRIBUNAL VIDE PARAGRAPHS 9 & 10, WHILE FOLLOWING TH E ORDER FOR ASSESSMENT YEAR 1991-92 HELD AS FOLLOWS: 9. GROUND NO.25 RELATE TO DISALLOWANCE OF DEPRECIA TION OF ASSETS WHOSE LEASE PERIOD ARE EXPIRED IN THIS REGARD, THE LEARNE D COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THIS GROUND IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 1991- 92 IN WHICH THE MATTER WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR ITS RE-ADJUDICATION. 10.THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND HAS SUBMITTED THAT THE IDENTICAL ISSUE WAS RAISED BEFOR E THE CIT(A) IN THE ASSESSMENT YEAR 1993-94 AND CIT(A) HAS RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS. SINC E THE MATTER HAS TO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER, THE CIT(A) DIRECTIONS GIVEN IN ASSESSMENT YEAR 1993-94 DO ALSO TAKEN INTO ACCOUNT WHILE DISPOSING OF THE APPEAL.' 25. CONSIDERING THE AFORESAID DECISION OF TRIBUNAL, THI S GROUND OF APPEAL IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO D ECIDE THE ISSUE AFRESH IN THE LIGHT OF AFORESAID ORDER OF THE TRIBUNAL. IN THE RESULT, GROUND NO. 5D IS ALLOWED FOR STATISTICAL PURPOSE. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 20 26. GROUND NO.6 RELATES TO DEPRECIATION ON LEASED ASSET TO PRAKASH INDUSTRIES LTD. (WIND ELECTRIC GENERATOR (WEG). T HE LD. AR SUBMITS THAT WEG WAS PURCHASED FROM PRAKASH INDUSTRIES LTD. FOR RS. 83.75 LAKHS AND LEASED BACK TO PRAKASH INDUSTRIES FOR PUT TING WIND FARM AT TAMILNADU. THE SALE AND LEASED BACK TRANSACTION WAS EXAMINED IN DETAILED IN AY 1995-96 WHEREIN THE DISALLOWANCE OF DEPRECIATION WAS MADE THAT ASSET WAS NOT INSTALLED AND PUT TO USE BE FORE 31.03.1995 AND/OR THERE WAS MISMATCH IN YEAR OF MAKE, MACHINE NUMBER, LOCATION AND PLACE OF INSTALLATION. THE ASSESSEE WAS ONLY FI NANCER, EVEN IF PURCHASE TO BE ACCEPTED AS GENUINE. THE LD. CIT(A) REJECTED THE CONTENTION RAISED BY ASSESSEE, HOWEVER, DIRECTED TH E AO TO BIFURCATE LEASE INCOME OF RS. 20,10,000/- INTO PRINCIPLE AND FINANCIAL CHARGES AND TAX ONLY FINANCIAL CHARGES. 27. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESS EE HAS FURNISHED THE COMPLETE DETAILS OF LEASE AGREEMENT, TRANSPORTATION , INSTALLATION, CONFIRMATION, PHOTOGRAPHS OF LEASE EQUIPMENTS AND S UBMITS THAT SIMILAR LEASE WAS MADE TO KORES INDIA LTD. AND THAT HE ADOP TS THE SAME ARGUMENT AS MADE FOR ALLOWANCE OF DEPRECIATION ON L EASE ASSET TO KORES INDIA LTD. 28. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 21 29. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE RECORD INCLUDING VARIOUS DOCUMENTARY EVIDENCE FURNI SHED IN RESPECT OF LEASE ASSET INCLUDING LEASE AGREEMENT, TRANSPORTATI ON, INSTALLATION, INSURANCE POLICY AND PHOTOGRAPHS OF LEASED EQUIPMEN TS. WE HAVE FURTHER NOTED THAT THIS ISSUE IS SIMILAR TO THE GRO UND TAKEN IN GROUND NO. 5A TO 5C, WHICH WE HAVE ALLOWED BY FOLLOWING THE DE CISION OF HONBLE SUPREME COURT IN ICDS LTD. (SUPRA). THEREFORE, THIS GROUND OF APPEAL IS ALSO ALLOWED WITH SIMILAR OBSERVATION. 30. GROUND NO.7 RELATES TO TAXING PROFIT OF RS. 22.50 L AKHS ON SALE OF SHARES OF PANCHMAHAL CEMENT LTD. THE LD. AR OF THE ASSESSE E SUBMITS THAT DURING THE RELEVANT PERIOD, THE ASSESSEE SOLD AND P URCHASES SHARE OF PANCHMAHAL CEMENT LTD. FROM OCEANIC CEMENT LTD. THE ASSESSEE HAD A PROFIT OF RS. 22.50 LAKHS AND OFFERED THE SAME FOR TAXATION. THE LD. CIT(A) NOT ALLOWED THE GROUND OF APPEAL BY TAKING V IEW THAT THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER THAT ASSESSEE IT SELF INCLUDED THE AMOUNT IN ITS PROFIT & LOSS A/C AND OFFERED TO TAX. THE ASSESSEE BEFORE THE LD. CIT(A) CONTENDED THAT THE ASSESSING OFFICER IN CASE OF OCEANIC INVESTMENT LTD., THE ENTIRE TRANSACTION RELATING TO THE SHARES OF PANCHMAHAL CEMENT LTD. WERE BOGUS AND IF IN APPEAL IN THAT CASE THE FINDING OF ASSESSING OFFICER WERE UPHELD, THE AMOUN T OF RS. 22.25 LAKHS OFFERED BY ASSESSEE FOR TAXATION SHOULD TAKEN AWAY FROM THE INCOME OF ASSESSEE. THE LD. CIT(A) ON THIS CONTENTION CONCLUD ED THAT APPEAL CAN IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 22 ONLY BE MAINTAINED BY AGGRIEVED PERSON AND CANNOT B E TAKEN IN ANOTHER CASE AND THE GROUND WAS REJECTED BEING INCOMPETENT. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSMENT ORDER OF OCEAN IC INVESTMENT LTD. WAS PASSED BY SAME ASSESSING OFFICER ON THE SAME DA Y. IT WAS FURTHER ARGUED THAT THE TRANSACTION OF OCEANIC INVESTMENT L TD. AS BOGUS WAS AFFIRMED BY LD. CIT(A) AND WAS UPHELD BY TRIBUNAL V IDE ORDER DATED 26.02.2007 IN ITA NO. 3993/M/2001. 31. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 32. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE RECORD. WE HAVE NOTED THAT THE ASSESSEE ITSELF OFFE RED THE PROFIT ON SALE OF SHARES OF PANCHMAHAL CEMENT LTD., FOR TAXATION. BEFORE THE LD. CIT(A), THE ASSESSEE RAISED THE GROUND THAT IN CASE OF OCEANIC INVESTMENT LTD. THE TRANSACTION OF SHARES OF PANCHM AHAL CEMENT, WHICH WAS TREATED AS BOGUS TRANSACTION, IS UPHELD IN APPE AL, THE AMOUNT OFFERED BY ASSESSEE SHOULD BE TAKEN AWAY FROM THE INCOME OF ASSESSEE. THE LD. CIT(A) REJECTED THE GROUND THAT THE ASSESSE E NEVER CLAIMED THIS PROFIT OF THIS AMOUNT AS OFFERED BY MISTAKE AND THA T THE ASSESSEE CANNOT BE SAID TO HAVE BEEN AGGRIEVED BY THE ACTION OF ASS ESSING OFFICER. IN OUR CONSIDERED VIEW, THE ACTION OF LD. CIT(A) IS REASON ED ONE. THERE IS NO ADVERSE TREATMENT OF THE PROFIT SHOWN ON SALE OF SH ARES EITHER BY ASSESSING OFFICER OR BY FIRST APPELLATE AUTHORITY. THEREFORE, WE DO NOT IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 23 FIND ANY JUSTIFICATION FOR INTERFERING WITH THE FIN DING OF LD. CIT(A). IN THE RESULT, THIS GROUND OF APPEAL IS DISMISSED. 33. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 4080/MUM/2001 (AY 1996-97) BY REVENUE 34. THE REVENUE IN ITS CROSS APPEAL HAS RAISED THE FOLL OWING GROUNDS: 1 A) DIRECTING TO DELETE THE DISALLOWANCE OF RS.17, 10,771/- MADE ON ACCOUNT OF WRITE OFF OF ACCOUNTS IN RESPECT OF DEBIT BALANC ES IN THE CASES OF ANDHRA SINTEX LTD., SWASTIK SURFACTANTS LTD., INDAGE INDIA LTD; B) NOT CONSIDERING THE FACT THAT THE CLAIM OF DEDUC TION MADE BY THE ASSESSEE WAS NOT ON ACCOUNT OF 'BAD DEBTS' WRITTEN OFF BUT W AS IN RESPECT OF 'ACCOUNTS' WRITTEN OFF; C) IGNORING THE FACT THAT THE ASSESSEE COMPANY HAD NOT CLAIMED DEDUCTION OF WRITE OFFS UNDER THE HEAD BAD DEBTS; D) APPLYING THE PROVISIONS OF SEC.36(L X VII) READ WITH SEC.36(2) OF THE ACT TO THE CLAIM OF WRITE OFF OF ACCOUNTS EVEN THOUGH THE AFORESAID PROVISIONS ARE APPLICABLE ONLY IN RESPECT OF CLAIM OFF OF WRITE OF F OF BAD DEBTS; E) OVERLOOKING THE FACT THAT THE WRITE OFF OF ACCOU NTS WAS AUTHORISED BY THE BOARD OF DIRECTORS ON THE ASSESSEE COMPANY AFTER TH E END OF RELEVANT PREVIOUS YEAR. IN THEIR MEETING HELD ON 2/11/1996 W HICH FACT IS NOTED IN THE APPELLATE ORDER; F) IGNORING THE FACT THAT TILL THE LAST DATE OF THE RELEVANT PREVIOUS YEAR THE ACCOUNTS WERE NOT AUTHORISED TO BE WRITTEN OFF AND SUCH AUTHORISATION FOR WRITE OFF GIVEN BY THE BOARD OF DIRECTORS IN THE FO LLOWING PREVIOUS YEAR SUBSEQUENT TO THE END OF THE RELEVANT PREVIOUS YEAR FOR ASSESSMENT YEAR 1996- 97. G) NOT TAKING INTO ACCOUNT THE FACT THAT THERE WAS NO JUSTIFICATION . FOR WRITE OFF OF ACCOUNTS AS ON 31/3/1996; 2 . A) DIRECTING TO GRANT RELIEF TO THE ASSESSEE TO T HE EXTENT OF DISALLOWANCE OF INTEREST RELATED TO DEBIT BALANCES CARRIED OVER FRO M THE PRECEDING YEAR, IN RESPECT OF INTEREST FREE LOANS ADVANCED TO M/S. OCE ANIC INVESTMENTS LTD; IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 24 B) RELYING UPON THE DECISION OF THE HON 'BLE KARNAT AKA HIGH COURT IN THE CASE OF ERR VS. SRIDEV ENTERPRISES 192 ITR 165 EVEN THOU GH THE FACTS IN THAT CASE WERE TOTALLY DIFFERENT AND WERE NOT APPLICABLE TO T HE CASE OF THE ASSESSEE ; C) NOT APPRECIATING THE FACT THAT INTEREST FREE ADV ANCES OF RS.1,77,00,000/- MADE TO M/S. OCEANIC INVESTMENT LTD., IN THE IMMEDI ATE PRECEDING PREVIOUS YEAR WAS IN THE NATURE OF ADVANCE AGAINST PURCHASE OF PROPERTY, AND AFTER THE SCRAPING OF TRANSACTION WITH THAT COMPANY DURING TH E RELEVANT PREVIOUS YEAR THE NATURE OF OUTSTANDING AMOUNT OF RS.1,09,50,000/ - WITH M/S. OCEANIC INVESTMENT LTD., CHANGED TO INTEREST FREE LOAN; D) OVERLOOKING THE CHANGE IN THE NATURE OF ADVANCES MADE TO M/S. OCEANIC INVESTMENT LTD., DUE TO CANCELLATION OF TRANSACTION FOR PURCHASE OF PROPERTY; E) IGNORING THE FACT THAT DURING THE RELEVANT PREVI OUS YEAR THE AMOUNT OUTSTANDING IN THE NAME OF M/S. OCEANIC INVESTMENT LTD. WAS IN THE FORM OF INTEREST FREE LOAN WHICH WAS DIVERTED OUT OF INTERE ST BEARING LOANS TAKEN BY THE ASSESSEE AND HENCE THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN 192-ITR 165 WAS NOT APPLICABLE; 3 . A) DIRECTING TO BIFURCATE THE LEASE RENTAL INCOME BETWEEN THE RECOVERY OF PRINCIPAL AND THE RECEIPT OF FINANCIAL CHARGES IN R ESPECT OF LEASE RENTAL RECEIVED FROM M/S. PRAKASB INDUSTRIES LTD., AND FRO M M/S .KORES INDIA LTD ; B) DIRECTING TO CONSIDER THE LEASE RENTAL INCOME RE CEIVABLE FOR THE ENTIRE LEASE PERIOD FOR THIS PURPOSE AND EXCLUDE THERE FROM THE PRINCIPAL AMOUNT OF LEASE FINANCE IN ARRIVING AT THE INCOME FROM FINANCIAL CH ARGES FOR THE ENTIRE LEASE PERIOD C) IGNORING THE FACT THAT CLAIM OF DEPRECIATION AT 100% ON THE LEASED ASSETS WAS MADE BY RESORTING TO MANIPULATE METHODS AND THE REFORE INCOME AS FINANCIAL CHARGES ON THE AMOUNT FINANCED WAS ALSO S TRUCTURED TAKING INTO ACCOUNT THE BENEFITS OF 100% DEPRECIATION AVAILED O FF BY RESORTING TO SUCH FRAUDULENT METHODS; D) NOT TAKING INTO ACCOUNT THAT SUCH A DIRECTION MA Y LEAD TO ABSURD RESULTS IN AS MUCH AS THE RETURN TO THE ASSESSEE ON THE AMOUNT S FINANCED AMOUNTED TO ONLY 4% (APPROX.) EVEN THOUGH ADMITTEDLY LOANS AT B EARING INTEREST @ 15% TO 21 % WERE TAKEN BY THE ASSESSEE; IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 25 E) NOT APPRECIATING THE TACT THAT IN SUCH STRUCTURE D AND COLLUSIVE TRANSACTIONS, THE RETURN COULD HAVE BEEN NEGATIVE ALSO DEPENDING ON THE BENEFITS AVAILED OFF BY THE ASSESSEE ON ACCOUNT OF VARIOUS DEDUCTION S; F) NOT TAKING INTO ACCOUNT THE FACT THAT THE DIREC TION GIVEN WOULD REDUCE THE INCOME DECLARED AS LEASE RENT AS PER THE RETURN OF INCOME FILED AND THEREFORE WOULD RESULT IN THE ASSESSEE BEING ASSESSED ON AN I NCOME LESSER THAN THE INCOME DECLARED IN THE RETURN : G) NOT CONFIRMING THE ORDER OF ASSESSING OFFICER TO ARRIVE AT INCOME ON FINANCIAL CHARGES @ 24% ON THE OUTSTANDING AMOUNT D UE FROM THE LESSEES ON REDUCING BALANCE METHOD.' 35. GROUND NO.1 RELATES TO DELETING THE DISALLOWANCE OF AMOUNTS WRITTEN OFF OF RS. 17,10,771/-. THE LD. DR FOR THE REVENUE SUPP ORTED THE ORDER OF ASSESSING OFFICER. THE LD. DR FOR REVENUE SUBMITS T HAT ASSESSING OFFICER DISALLOWED WRITE OFF OF RS. 11.05 LAKHS OF ANDHRA SYNTEX LTD., RS. 204 LAKHS AND RS. 3.62 LAKHS OF SWASTIK SURFANC UTENTS LTD. AND RS. 38,776/- OF INDAGE (I) LTD. HOLDING THAT ASSESSEE H AS NOT FURNISHED EVIDENCE THAT ANY ACTION WAS TAKEN FOR RECOVERY OF THESE AMOUNT. THE LD. CIT(A) ALLOWED RELIEF TO THE ASSESSEE HOLDING THAT DISALLOWANCE OF THESE WRITE OFF WERE NOT PROPER. 36. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPP ORTED THE ORDER OF LD. CIT(A). THE LD. AR SUBMITS THAT THE ASSESSEE MADE A DVANCE TO ANDHRA SYNTEX DURING AY 1985-86. THE ASSESSEE HAS OFFERED INTEREST ACCRUED FOR EARLIER YEARS BUT NOT RECEIVED. FOR SWASTIK, TH E ADVANCE WAS GIVEN IN AY 1986-87, INTEREST WAS ACCRUED FOR EARLIER YEARS WAS OFFERED TO TAX BUT NOT RECEIVED. SIMILARLY FOR INDAGE INDIA, THE A SSESSEE MADE ADVANCE IN THE AY 1989-90 AND OFFERED THE INTEREST IN EARLI ER YEARS TO TAX, THOUGH IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 26 IT WAS NOT RECEIVED. THE ASSESSEE FURNISHED THE DET AILS OF WRITE OFF DURING THE ASSESSMENT AS WELL AS IN FIRST APPEAL. I N THE STATEMENT OF FACT, THE ASSESSEE MADE DETAILED SUBMISSION. IN ADDITION TO THAT THE ASSESSEE FILED AFFIDAVIT OF CHAIRMAN AND MANAGING DIRECTOR, SHRI KAMLESH SURESH GANDHI ALONG WITH THE ACCOUNTS WRITTEN OFF O F ALL THREE ENTITIES. IN THE AFFIDAVIT IT WAS CONTENTED THAT ASSESSING OF FICER HAS NOT GIVEN SUFFICIENT OPPORTUNITY. THE LD. AR FURTHER SUBMITS THAT IN THE BUSINESS OF FINANCE AND ADVANCES WAS GIVEN IN REGULAR COURSE OF BUSINESS AND INTEREST INCOME WAS TAX ON ACCRUAL BASIS IN PAST. T HE ADVANCES HAD BECOME TIME BARRED. PARTIES WERE NOT MAKING PAYMENT INSPITE OF EFFORTS TAKEN BY ASSESSEE. ANDHRA SYNTEX LTD. WAS DECLARED AS A SICK COMPANY BY BOARD OF INDUSTRIAL FINANCE & RECONSTRUCTION (BI FR) AND NO AMOUNT WAS RECOVERABLE. THE LD. AR SUBMITS THAT THE ASSESS EE WAS LIABLE TO PROVE THAT THE DEBT HAD BECOME BAD. IT WAS SUFFICIE NT IF THE SAME WAS WRITE OFF IN THE BOOKS OF ACCOUTS. THE LD. AR ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN TRS LTD. VS CI T (SUPRA) AND CIRCULAR OF CBDT NO. 12 OF 2016 DATED 03.05.2016. T HE LD. AR IN ALTERNATIVE CLAIMED THE WRITE OFF MAY BE ALLOWED AS BUSINESS LOSS. 37. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. WE HAVE NOTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF WRITE OFF BY TAKING VIEW THAT NO EVIDENCE TO SHOW THE EFFORT TO RECOVER THE AMOUNT O F WRITE OFF. BEFORE IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 27 THE LD. CIT(A), THE ASSESSEE CATEGORICALLY STATED T HAT THE ASSESSEE HAS OFFERED THE INTEREST ON ADVANCES TO TAX IN EARLIER YEARS AND THAT THE ADVANCES GIVEN TO THE PARTIES HAVE BECOME TIME BARR ED. THE ASSESSEE ALSO PLACED ON RECORD THE AFFIDAVIT OF MANAGING DIR ECTOR OF ASSESSEE, WHEREIN THE ASSESSEE STATED THAT NO SUFFICIENT TIME WAS GRANTED TO ASSESSEE TO PROVE ITS CONTENTION BY THE ASSESSING O FFICER. ON THE CONTENTION OF ASSESSEE, A REMAND REPORT WAS SOUGHT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER FURNISHED HIS REMAND REPORT VIDE LETTER DATED 05.12.2000. IN THE REMAND REPORT, THE ASSESSI NG OFFICER HAS STATED THAT NO EVIDENCE WAS PRODUCED DURING THE ASSESSMENT PROCEEDING, THE ASSESSEE WAS GIVEN FULL OPPORTUNITY TO FURNISH THE DETAIL OF AMOUNT OF WRITTEN OFF AND TO JUSTIFY THE REASONS THEREOF. 38. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE AND AMENDED PROVISION OF LAW WITH REGARD TO WRITE OFF, ALLOWED THE RELIEF OF RS. 17,10,771/-. THE RELIEF ALLOWED BY THE LD. CIT( A) CONSIST OF CLAIM OF WRITE OFF OF SWASTIK SURFANCUTENTS LTD., ANDHRA SYN TEX LTD. AND INDAGE INDIA LTD. WE HAVE NOTED THAT THE HONBLE SUPREME C OURT IN TRF LTD. VS. CIT (SUPRA) HELD THAT AFTER 01.04.1989 IT IS NO T NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT DEBT, INFACT HAS BECOME IRRECOVERABLE. IT IS ENOUGH, IF THE BAD IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF ASSESSEE. WE HAVE NOTED THAT THE ASSESSEE HAS SPECI FICALLY PLEADED THAT INTEREST INCOME FROM THE ADVANCE WAS OFFERED IN EAR LIER YEARS, WHICH HAS IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 28 NOT BEEN DISPUTED BY ASSESSING OFFICER. THEREFORE, WE DO NOT FIND ANY MERIT IN THE GROUND OF APPEAL RAISED BY REVENUE. IN THE RESULT, THE GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED. 39. GROUND NO.2 RELATES TO DELETING THE DISALLOWANCE OF INTEREST ADVANCED TO OCEANIC INVESTMENT LTD. THE LD. DR FOR THE REVENUE SUBMITS THAT ASSESSEE NOT FURNISHED ANY AGREEMENT FOR WAIVER OF INTEREST ON THE ADVANCE TO OCEANIC INVESTMENT LTD. THE DEBTORS COMP ANY HAS PROPERTIES IN DELHI AND MADE HUGE INVESTMENT. IT WA S NOT A CASE WHERE DEBTOR WAS UNABLE TO PAY THE INTEREST. THE LD. CIT( A) DELETED THE DISALLOWANCES TO THE EXTENT OF REOPENING BALANCE. T HE LD. DR PRAYED FOR RESTORING THE ORDER OF ASSESSING OFFICER AND TO REV ERSE THE ORDER OF LD. CIT(A). 40. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD. CIT(A). THE LD. AR FURTHER SUBMITS THAT NO SUCH DIS ALLOWANCE WAS MADE IN PAST. THE ASSESSEE MADE AN ADVANCE OF RS. 177 LA KHS BY WAY OF SECURITY DEPOSIT BY WAY OF SPECIFIC AGREEMENT. OCEA NIC INVESTMENT LTD. REPAID RS. 67.50 LAKHS DURING THE YEAR ITSELF BUT C OULD NOT PAY BACK BALANCE OF RS. 109.5 LAKHS DUE TO LIQUIDITY CRUNCH. THE ADVANCE WAS GIVEN FOR PURCHASE OF PROPERTY; THERE WAS NO AGREEM ENT FOR PAYMENT OF INTEREST. ACCORDINGLY, THERE WAS NO QUESTION OF WAI VER OF INTEREST DURING THE YEAR. THE LD. CIT(A) GRANTED RELIEF AFTER APPRE CIATION OF FACT. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 29 41. WE HAVE CONSIDERED THE SUBMISSION OF PARTIES AND PE RUSED THE ORDER OF LOWER AUTHORITIES. WE HAVE NOTED THAT DURING THE AS SESSMENT PROCEEDING, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD SHOWN INTEREST FREE ADVANCES OF RS. 177 LAKHS TO OCEANIC INVESTMENT LTD . ON SEEKING EXPLANATION THE ASSESSEE EXPLAINED THAT ADVANCE WAS MADE FOR PURCHASE A PROPERTY IN DELHI AND PUNE AND LATERON PLANS WERE ABANDONED. OCEANIC INVESTMENT LTD. COULD NOT REPAY THE BALANCE AFTER PAYING RS. 66.50 AND NO INTEREST WAS CHARGED. THE ASSESSING OF FICER NOT ACCEPTED THE CONTENTION OF ASSESSEE. THE ASSESSING OFFICER C ONCLUDED THAT INTEREST WAIVER WAS TOTALLY ONE SIDED AND THE COMPANY HAVE H UGE INVESTMENT IN SHARE AND OWNED PROPERTY IN NEW DELHI. THE ASSESSIN G OFFICER DISALLOWED THE INTEREST @ 21%. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE MADE DETAILED SUBMISSION AS EXPLAINED BEFO RE US AND ALSO EXPLAINED THAT NO DISALLOWANCE WAS MADE IN EARLIER YEAR. THE LD. CIT(A) ACCEPTED THAT NO DISALLOWANCE OF INTEREST WAS MADE IN EARLIER YEAR AND IN VIEW OF THE DECISION OF HONBLE KARNATAKA HIGH COUR T IN CIT VS. SRIDEV ENTERPRISES [192 ITR 165 (KAR.)]. THE LD. CIT(A) DI RECTED THE ASSESSING OFFICER TO GRANT THE RELIEF TO THE ASSESSEE TO THE EXTENT OF DISALLOWANCE OF INTEREST RELATED TO THE DEBIT BALANCE CARRIED OVER FROM THE PRECEDING YEAR. NO CONTRARY FACT OR LAW IS BROUGHT TO OUR NOTICE TO TAKE THE DIFFERENT VIEW. THEREFORE, WE DO NOT FIND ANY REASON TO INTER FERE WITH THE FINDING IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 30 OF LD. CIT(A), WHICH WE AFFIRMED. IN THE RESULT, GR OUND NO.2 IS DISMISSED. 42. GROUND NO.3 RELATES TO DIRECTION OF BIFURCATE LEASE RENT INTO REPAYMENT OF PRINCIPAL AMOUNT AND INTEREST COMPONENT AS WELL AS TO DELETE ESTIMATION OF HIGHER LEASE RENTAL RECEIVED IN CASE OF KORES INDIA AND PRAKASH INDUSTRIES LTD. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. 43. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMI TS THAT THIS GROUND OF APPEAL IS INTERCONNECTED WITH GROUND NO. 5 & 6 IN A SSESSEES APPEAL. 44. CONSIDERING THE FACT THAT WE HAVE GRANTED FULL RELI EF TO THE ASSESSEE ON GROUND NO. 5 & 6 IN ASSESSEES APPEAL BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN ICDS LTD. VS. CIT (SUPRA). THEREFORE, THIS GROUND OF APPEAL RAISED BY REVENUE HAS BECOME INFRU CTUOUS. IN THIS RESULT, THIS GROUND OF APPEAL IS DISMISSED BEING IN FRUCTUOUS. 45. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 4045/MUM/2005 (AY 1997-98) BY ASSESSEE 46. GROUND NO.1 RELATES TO DISALLOWANCE OF INTEREST GIV EN TO CIFCO TRAVEL PVT. LTD. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO.4 IN APPEAL FOR AY 1996-97, WHICH WE HAVE ALLOWED, THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY W HEN NO VARIANCE IN FACT IS BROUGHT TO OUR NOTICE, THIS GROUND OF APPEA L IS ALLOWED WITH SIMILAR DIRECTION. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 31 47. GROUND NO.2 RELATES TO DISALLOWANCE OF DEPRECIATION ON THE BASIS OF EARLIER YEARS. THE LD. AR OF THE ASSESSEE SUBMITS T HAT ASSESSING OFFICER MADE DISALLOWANCE BY FOLLOWING THE ORDER OF EARLIER YEARS. THE LD. CIT(A) CONFIRMED BY RELYING THE ORDER OF AY 1996-97 . WE HAVE NOTED THAT DEPRECIATION WAS DISALLOWED ON VARIOUS ASSETS BY ASSESSING OFFICER IN AY 1996-97, THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER. HOWEVER, WE HAVE GRANTED FULL RELIEF TO TH E ASSESSEE BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN ICDS LTD. VS. CIT (SUPRA). THEREFORE, FOLLOWING THE SAME PRINCIPLE, T HE ASSESSEE IS ALLOWED FULL RELIEF ON THIS GROUND OF APPEAL. 48. IN THE RESULT, GROUND NO.2 OF THE APPEAL IS ALLOWED . 49. GROUND NO.3 RELATES TO DISALLOWANCE OF ESTIMATED EX PENSES FOR ENTERTAINMENT. THE LD. AR OF THE ASSESSEE SUBMITS T HAT HE IS NOT PRESSING THIS GROUND OF APPEAL. CONSIDERING THE SUBMISSION O F LD. AR OF THE ASSESSEE, THIS GROUND OF APPEAL IS DISMISSED AS NOT PRESSED. 50. GROUND NO.4 RELATES TO ADDITION ON ACCOUNT OF FINAN CE CHARGES OF RS. 18,541/- FOR LEASE TO KORES INDIA LTD. WE HAVE NOTE D THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO.5 & 6 IN ASSES SEES AND GROUND NO. 3 IN REVENUES APPEAL FOR AY 1996-97. WE HAVE ALREA DY ALLOWED GROUND NO. 5 & 6 IN ASSESSEES APPEAL AND DISMISSED THE RE VENUES GROUND NO.3, THEREFORE, FOLLOWING THE CONSISTENCY, THE GROUND OF APPEAL RAISED BY ASSESSEE IS ALLOWED WITH SIMILAR DIRECTIONS. IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 32 51. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 4532/MUM/2005 BY REVENUE (AY 1997-98) 52. AT THE OUTSET OF HEARING, THE LD. AR OF THE ASSESSE E SUBMITS THAT THE TAX EFFECT INVOLVED IN THE PRESENT APPEAL IS LESS THAN THE MONETARY LIMIT OF RS. 50,00,000/- AS PRESCRIBED BY CBDT IN ITS CIRCUL AR NO. 17/2019 DATED 08.08.2019 AND ACCORDINGLY, THE APPEAL IS LIA BLE TO BE DISMISSED. 53. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THE REVE NUE MAY BE GIVEN LIBERTY TO GET THE APPEAL REVIVED, IF AT LATER STAG E IT DISCOVERED BY TAX EFFECT IS MORE THAN THE MONETARY LIMIT. 54. CONSIDERING THE SUBMISSION OF LD. AR OF THE ASSESSE E, THE APPEAL OF THE REVENUE IS DISMISSED WITH THE LIBERTY TO THE REVENU E TO GET THE APPEAL REVIVED, IF AT LATER STAGE IT IS DISCOVERED THAT TH E TAX EFFECT IS MORE THAN RS. 50,00,000/-. 55. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/11/2019. SD/- SD/- RAJESH KUMAR PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 01.11.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR C BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, IT A NO. 3992 & 4080 /M/ 01 & 4045 & 4532/ MUM/ 05 M/S CIFCO FINANCE LTD. 33 DY./ASST. REGISTRAR ITAT, MUMBAI