OM SIDDIVINAYAK CREATIONS P. LTD, MUMBAI V. ITO 8(2)-4, MUMBAI

ITA 8819/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8812 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 29-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIPUAL J SHAH
• Assessee Lawyers: PREMANAND J
• Keywords: Bad and doubtful debts; Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI , JUDICIAL MEMBER ITA NO. 8819/MUM/2011 (ASSESSMENT YEAR: 2008-09) M/S. OM SIDDIVINAYAK VS. INCOME TAX OFFICER - 8(2) - 4 CREATIONS PVT. LTD. 6 TH FLOOR, GAZEBO HOUSE PLOT NO. 52, GULMOHAR ROAD VILE PARLE (W), MUMBAI 400049 ROOM NO. 213/A, 2 ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AAACO7488F APPELLANT RESPONDENT ITA NO. 55/MUM/2012 (ASSESSMENT YEAR: 2008-09) INCOME TAX OFFICER - 8(2) - 4 VS. M/S. OM SIDDIVINAYAK ROOM NO. 213/A, 2 ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 CREATIONS PVT. LTD. 6 TH FLOOR, GAZEBO HOUSE PLOT NO. 52, GULMOHAR ROAD VILE PARLE (W), MUMBAI 400049 PAN AAACO7488F APPELLANT RESPONDENT APPELLANT BY: SHRI VIPUAL J. SHAH RESPONDENT BY: SHRI PREMANAND J. DATE OF HEARING: 18.01.2017 DATE OF PRONOUNCEMENT: 20.01.2017 O R D E R PER BENCH THESE ARE CROSS APPEALS, BY THE ASSESSEE AND REVENU E DIRECTED AGAINST THE ORDER OF THE CIT(A)-17, MUMBAI DATED 31 .10.2011 FOR A.Y. 2008-09. 2. THE FACTS OF THE CASE, BRIEFLY STATED, ARE AS UNDER : - 2.1 THE ASSESSEE, A COMPANY ENGAGED IN BUSINESS OF FILM MAKING AND FILM FINANCING IN THE FORM OF LOANS, FILED ITS RETU RN OF INCOME FOR A.Y. 2008- 09 ON 03.10.2008 DECLARING TOTAL INCOME OF ` 1,21,421/-; COMPRISING LOSS OF ITA 8819/MUM/2011 & 55/MUM/2012 M/S. OM SIDDIVINAYAK CREATIONS P. LTD. 2 ` 27,06,657/- UNDER THE HEAD PROFIT AND GAINS FROM B USINESS AND PROFESSION WHICH WAS SET OFF AGAINST SHORT TERM CA PITAL GAINS (STCG) OF ` 28,28,078/- ON SALE OF PROPERTY. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) O F THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') VIDE ORDER DATED 10.12.20 11, WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT ` 61,29,100/- IN VIEW OF THE FOLLOWING ADDITIONS/DISALLOWANCES: - (I) DISALLOWANCE OF INTEREST CHARGES ` 5,67,403/- (II) DISALLOWANCE OF LOSS ON FILM FINANCE ` 6,38,615/- (III) DISALLOWANCE OF CLAIM OF BAD DEBTS WRITTEN OF F ` 12,56,664/- (IV) ADDITION ON ACCOUNT OF DEEMED DIVIDEND ` 29,78,075/- UNDER SECTION 2(22)(E) APART FROM THIS SHORT TERM CAPITAL GAINS ON SALE O F PROPERTY WAS ASSESSED AT NIL. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 10.1 2.2010 FOR A.Y. 2008- 09, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A)-17, MUMBAI, WHO DISPOSED OFF THE APPEAL VIDE THE IMPUGNED ORDER DA TED 31.10.2011 ALLOWING THE ASSESSEE PARTIAL RELIEF. 3. REVENUE AND THE ASSESSEE, BEING AGGRIEVED BY THE OR DER OF THE CIT(A)-17, MUMBAI DATED 31.10.2011, HAVE PREFERRED CROSS APPEALS WHICH WILL BE DISPOSED OFF IN SERIATUM HEREUNDER: - 4. ASSESSEES APPEAL IN ITA NO. 8819/MUM/2011 FOR A.Y. 2008-09 4.1 IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS: - 1. THE LEARNED CIT HAS ERRED IN CONFIRMING THE DIS ALLOWANCE OF RS.638615/- AS A BUSINESS LOSS. 2. THE APPELLANT CRAVES PERMISSION TO ADD OR AMEND OR WITHDRAW ANY OF THE GROUND OR GROUNDS OF APPEAL AT THE TIME OF HEARING. 4.2 THE LEARNED A.R. OF THE ASSESSEE WAS HEARD IN S UPPORT OF THE GROUNDS RAISED AND REITERATED THE SUBMISSIONS PUT F ORTH BEFORE THE LEARNED CIT(A) AS RECORDED IN PARAS 5.1 AND 5.2 OF THE IMPU GNED ORDER. IT IS PRAYED THAT THE DISALLOWANCE OF BUSINESS LOSS OF ` 6,28,615/- BE DELETED. 4.3 PER CONTRA, THE LEARNED D.R. FOR REVENUE PLACED STRONG RELIANCE ON THE FINDINGS RENDERED IN THE ORDER OF THE AO/LEARNE D CIT(A). IT IS CONTENDED ITA 8819/MUM/2011 & 55/MUM/2012 M/S. OM SIDDIVINAYAK CREATIONS P. LTD. 3 THAT BOTH BEFORE THE AUTHORITIES BELOW AND ALSO BEF ORE THE TRIBUNAL, THE ASSESSEE HAS FAILED TO BRING ON RECORD ANY MATERIAL /DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE BUSINESS LOSS CLAIMED AND THERE FORE THE ASSESSEES APPEAL ON THIS ISSUE IS LIABLE TO BE DISMISSED. 4.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. FROM AN APPRECIA TION OF THE FACTS ON RECORD, IT IS SEEN THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED BUSINESS LOS S OF ` 6,65,305/- FROM FINANCING FOUR OR FIVE FILMS. ON EXAMINATION OF THE DETAILS FILED BY THE ASSESSEE IN THIS REGARD, THE ASSESSING OFFICER (AO) OBSERVED THAT THE DETAILS FILED CONSTITUTED OF ONLY A FILM-WISE STATE MENT IN WHICH ALL PAYMENTS WERE MADE IN CASH AND RECEIPTS FROM DISTRI BUTION WERE ALSO RECEIVED IN CASH. THE AO ALSO NOTICED THAT EXCEPT F OR ONE FILM NAMED BADLA, WHICH WAS THE ASSESSEES HOME PRODUCTION S UFFERING A LOSS OF ` 26,690/-, ALL OTHER FILMS WERE FOUND TO BE PRODUCED BY MAYURA FILMS AS PER CENSOR BOARD CERTIFICATIONS FILED. IN THIS FACT UAL MATRIX, THE AO WAS OF THE VIEW THAT EXCEPT FOR THE LOSS INCURRED IN THE H OME PRODUCTION BADALA, THE LOSSES ON FILM FINANCE CLAIMED IN RES PECT OF OTHER FILMS, APART FROM EXPENSES, ETC. NOT BEING ESTABLISHED WITH ANY MATERIAL EVIDENCE THE LOSSES THEREOF AMOUNTING TO ` 6,38,615/- ARE NOT ALLOWABLE AS BUSINESS LOSS. ON APPEAL, THE LEARNED CIT(A) HELD THAT IN TH E ABSENCE OF DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE ASSESSEE S CLAIM IN RESPECT OF THE ABOVE LOSS ON FINANCING OF FILMS, THE LOSS CLAI MED CANNOT BE ALLOWED. IN THE FACTUAL MATRIX OF THE CASE, AS DISCUSSED ABO VE, WE ARE INCLINED TO AGREE WITH THE CONCLUSIONS OF THE AUTHORITIES BELOW SINCE EVEN BEFORE US THE ASSESSEE EXCEPT FOR RAISING THIS GROUNDS HAS FA ILED TO FILE ANY DOCUMENTARY EVIDENCE TO ESTABLISH THE CLAIM OF LOSS ES INCURRED IN FINANCING OF THE FILMS JUNGLE LOVE, DUDHWALI AN D AUTOWALI AMOUNTING TO ` 6,38,615/-. FINDING NO REASON TO INTERFERE WITH THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE, WE UPHOLD THE SAME AN D CONSEQUENTLY DISMISS GROUNDS 1 AND 2 RAISED BY THE ASSESSEE. 5. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ITA 8819/MUM/2011 & 55/MUM/2012 M/S. OM SIDDIVINAYAK CREATIONS P. LTD. 4 6. REVENUES APPEAL IN ITA NO. 55/MUM/2012 FOR A.Y. V2 008-09 6.1 IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWIN G GROUNDS: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS.33,95,0 00/- MADE BY THE A.O. U/S 2(22)(E) OF THE IT ACT 1961, WITHOUT C ONSIDERING THE FACT THAT THE PROVISIONS OF SEC 2(22)(E) ARE CLEARL Y APPLICABLE IN THIS CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS FAILED TO APPRECIATE THE CBDT'S CIRCULAR NO 495 DATED 22.09.1987, WHEREIN THE PROVISIONS OF SECTION 2(22) (E) HAVE BEEN EXPLAINED AS UNDER: 'THE NEW PROVISION WOULD, THEREFORE, BE APPLICABLE IN A CASE WHERE A SHAREHOLDER HAS 10 PERCENT OR MORE OF THE E QUITY CAPITAL. FURTHER DEEMED DIVIDEND WOULD BE TAXED IN THE HANDS OF A CONCERN WHERE ALL THE FOLLOWING CONDITIONS ARE SATISFIED. (I) WHERE THE COMPANY MAKES THE PAYMENT BY WAY OF L OANS OR ADVANCES TO A CONCERN (II) WHERE A MEMBER OR A PARTNER OF THE CONCERN HOL DS 10 PER CENT OF THE VOTING POWER IN THE COMPANY; AND (III) WHERE THE MEMBER OR PARTNER OF THE CONCERN IS ALSO BENEFICIALLY ENTITLED TO 20 PER CENT OF THE INCOME OF SUCH CONCERN. WITH A VIEW TO AVOID THE HARDSHIP IN CASES WHERE AD VANCES OR LOANS HAVE ALREADY BEEN GIVEN, THE NEW PROVISIONS H AVE BEEN MADE APPLICABLE ONLY IN CASES WHERE LOANS OR ADVANC ES ARE GIVEN AFTER 31ST MAY 1987. THESE AMENDMENTS WILL APPLY IN RELATION TO ASSESSMENT YEAR 1988-89 AND SUBSEQUENT YEARS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF BAD DE BTS OF RS. 12,56,664/- WITHOUT APPRECIATING THE FACTS OF THE C ASE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTERE ST OF RS. 10,4,873/- WITHOUT APPRECIATING THE FACTS OF THE CA SE. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE RESTORE D. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 7. GROUND NOS. 1 AND 2 DEEMED DIVIDEND UNDER SECTION 2(22)(E) 7.1 IN THESE GROUNDS (SUPRA), THE REVENUE HAS CHALL ENGED THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITIO N MADE ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT B Y THE AO, AS THE SAID ITA 8819/MUM/2011 & 55/MUM/2012 M/S. OM SIDDIVINAYAK CREATIONS P. LTD. 5 PROVISIONS ARE ATTRACTED IN THE CASE ON HAND. THE L EARNED D.R. PLACED RELIANCE ON THE GROUNDS RAISED AND THE ORDER OF THE AO ON THIS ISSUE. 7.2 PER CONTRA, THE LEARNED A.R. OF THE ASSESSEE CO NTENDED THAT THERE WAS NO REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE OF DEEMED DIVIDEND UNDER SECTION 2(22 )(E) OF THE ACT, AS THE SAME IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DE CISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R A.Y. 2006-07 IN ITA NO. 3852/MUM/2010 DATED 20.05.2011. IT IS PRAYED TH AT, SINCE THE LEARNED CIT(A) HAS RIGHTLY FOLLOWED THE AFORESAID O RDER IN THE ASSESSEES OWN CASE FOR A.Y. 2006-07 (SUPRA), REVENUES APPEAL ON THIS ISSUE BE DISMISSED. 7.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. ON A CAREFUL PERUSAL OF THE ORDER OF THE COO RDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2006-0 7 IN ITA NO. 3852/MUM/2010 DATED 20.05.2011, WE FIND THAT ON SIM ILAR FACTS THE COORDINATE BENCH IN THE AFORESAID ORDER FOR A.Y. 20 06-07 (CITED SUPRA) HAS DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF D EEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT HOLDING UNDER AT PARAS 7 TO 9 THEREOF: - 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DI SPUTE THAT THE ASSESSEE-COMPANY IS NEITHER SHARE HOLDER NOR THE BE NEFICIAL SHARE HOLDER IN THE COMPANY NAMELY M/S GAZEBO DEVELOPERS PVT.LTD. IN ACIT VS. BHAUMIK COLOUR P. LTD. [2009] 118 ITD 1 (M UM.)(SB), IT HAS BEEN HELD BY THE SPECIAL BENCH VIDE PARA -41, A PPEARING AT PAGE 27, OF THE REPORT AS UNDER: ON THE FIRST QUESTION: DEEMED DIVIDEND CAN BE ASSE SSED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF TH E LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN A SHAREHOLDER. ON THE SECOND QUESTION: THE EXPRESSION SHAREHOLDER REFERRED TO IN SECTION 2(22)(E) REFERS TO BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER. IF A PERSON IS REGISTER ED SHAREHOLDER BUT NOT THE BENEFICIAL SHAREHOLDER THEN THE PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY. SIMI LARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGIST ERED ITA 8819/MUM/2011 & 55/MUM/2012 M/S. OM SIDDIVINAYAK CREATIONS P. LTD. 6 SHAREHOLDER THEN ALSO THE PROVISIONS OF SECTION 2(2 2)(E) WILL NOT APPLY. 8. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT, VS UNIVERSAL MEDICARE PVT LTD (2010) 324 ITR 263 (BOM) HAS HELD THAT EVEN ASSUMING THAT IT WAS A DIVIDEND, IT WOULD HAVE TO B E TAXED NOT IN THE HANDS OF THE ASSESSEE BUT IN THE HANDS OF THE SHARE HOLDER. 9. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BRO UGHT ON RECORD BY THE LEARNED D.R., WE RESPECTFULLY FOLLOWING THE DEC ISION OF THE SPECIAL BENCH OF THE TRIBUNAL (SUPRA) AND THE DECISION OF T HE HONBLE BOMBAY HIGH COURT (SUPRA) HOLD THAT THE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE IN THE CASE OF THE ASSE SSEE AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING O F THE LEARNED COMMISSIONER OF INCOME TAX (A) IN DELETING THE ADDI TION MADE BY THE AO. THE GROUNDS TAKEN BY THE REVENUE ARE, THERE FORE, REJECTED. 7.3.2 RESPECTFULLY FOLLOWING THE RATIO OF THE DECIS IONS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PVT. LTD. (2010) 324 ITR 263 (BOM); OF THE SPECIAL BENCH OF THE ITAT MUM BAI IN THE CASE OF BHAUMIK COLOUR P. LTD. (2009) 118 ITD 1 (MUM) (SB) AND THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSE ES OWN CASE FOR A.Y. 2006-07, WE HOLD THAT THE PROVISIONS OF SECTION 2(2 2)(E) OF THE ACT ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND ACCORDIN GLY UPHOLD THE FINDING OF THE LEARNED CIT(A) IN DELETING THE ADDITION MADE BY THE AO UNDER SECTION 2(22)(E) OF THE ACT. CONSEQUENTLY GROUNDS 1 AND 2 R AISED BY REVENUE ARE REJECTED. 8. GROUND NO. 3 DISALLOWANCE OF BAD DEBTS ` `` ` 12,56,664/- 8.1 IN THIS GROUND, REVENUE ASSAILS THE ORDER OF LE ARNED CIT(A) DELETING THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO ` 12,56,664/-. THE LEARNED D.R. FOR REVENUE WAS HEARD AND PLACED STRONG RELIAN CE ON THE FINDING RENDERED BY THE AO ON THIS ISSUE. 8.2 PER CONTRA, THE LEARNED A.R. OF THE ASSESSEE SU BMITTED THAT THERE WAS NO ERROR IN THE ORDER OF THE LEARNED CIT(A) IN ALLO WING THE ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF WRITE OFF OF BAD DEBTS STANDING IN THE NAME OF THE FILM GANGA JAMUNA. THE LEARNED A.R. REITERATE D THE SUBMISSIONS PUT FORTH BEFORE THE LEARNED CIT(A) WHICH ARE EXTRACTED AT PARA 4.2 OF THE IMPUGNED ORDER. ACCORDING TO THE LEARNED A.R. OF TH E ASSESSEE, THE LEARNED CIT(A) HAS RIGHTLY OBSERVED THAT THE ASSESSEE APART FROM BEING ENGAGED IN ITA 8819/MUM/2011 & 55/MUM/2012 M/S. OM SIDDIVINAYAK CREATIONS P. LTD. 7 THE BUSINESS OF FILM MAKING, WAS ALSO AS PER THE AR TICLE 22 OF THE MEMORANDUM OF ASSOCIATION (MOA) INVOLVED IN LENDING AND ADVANCING MONEY IN THE BUSINESS OF FILM FINANCING WHICH BRING S IT WITHIN THE PURVIEW OF EXCEPTION UNDER SECTION 36(2)(I) OF THE ACT AND IT IS IN THIS CONTEXT THAT MONEYS WERE ADVANCED TO M/S. MAYURA ENTERPRISES FOR MAKING THE BHOJPURI FILM GANGA JAMUNA. IT IS SUBMITTED THAT EVEN ALTERNATIVELY, SINCE THESE AMOUNTS HAVE BEEN ADVANCED IN THE NORMA L COURSE OF THE ASSESSEES BUSINESS OF FILM MAKING THE SAID LOSS IS TO BE ALLOWED UNDER SECTION 28/37 OF THE ACT. 8.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. FROM AN APPRECIA TION OF THE MATERIAL ON RECORD, IT IS NOT DISPUTED THAT THE ASSESSEE COMPAN Y IS ADMITTEDLY ENGAGED IN THE BUSINESS OF FILM MAKING AND FINANCING OF FIL MS. IN THE YEAR UNDER CONSIDERATION, THE AO NOTICED THAT THE ASSESSEE HAD WRITTEN OFF BAD DEBTS AMOUNTING TO ` 12,56,666/- IN RESPECT OF AMOUNTS ADVANCED TO MAYUR A FILMS FOR MAKING THE FILM GANGA JAMUNA. IT IS SEE N THAT THE AO INSPITE OF OBSERVING THAT THE ASSESSEE WAS, INTER ALIA, IN THE BUSINESS OF FILM FINANCING HELD THAT THE ABOVE CLAIM FOR WRITE OFF O F BAD DEBTS WAS NOT ALLOWABLE UNDER SECTION 36(I)(VII) R.W.S. 36(2)(I) OF THE ACT FOR THE REASON THAT THE SAME WAS NOT OFFERED FOR TAXATION IN THE EARLIE R YEARS. WE CONCUR WITH THE OBSERVATION OF THE LEARNED CIT(A) THAT THE AO W HILE RELYING ON THE PROVISIONS OF SECTION 36(2)(I) OF THE ACT TO DENY T HE ASSESSEES CLAIM FOR WRITE OFF OF BAD DEBTS HAS FAILED TO OBSERVE THAT S UB CLAUSE (I) OF SECTION 36(2) OF THE ACT PROVIDES AN EXCEPTION IN THE CASE OF MONEY LENDING BUSINESS; WHICH IN OUR VIEW, THE ASSESSEE IS ENGAGE D IN AS PER ARTICLE 22 OF ITS MOA AND THAT IS EVIDENTLY SO AS PER THE FACTS O N RECORD. IN THIS FACTUAL AND LEGAL MATRIX OF THE CASE AS DISCUSSED ABOVE, WE AGREE WITH THE FINDING OF THE LEARNED CIT(A) THAT THE SUM WRITTEN OFF REP RESENTS MONEY LENT TO MAYURA FILMS FOR FINANCING THE FILM GANGA JAMUNA AND THEREFORE THE CLAIM OF WRITE OFF OF THE BAD DEBTS THEREOF IS TO B E ALLOWED UNDER SECTION 36(I)(VII) R.W.S. 36(2) OF THE ACT. WE HOLD AND DIR ECT ACCORDINGLY. CONSEQUENTLY, GROUND NO. 3 RAISED BY REVENUE IS DIS MISSED. ITA 8819/MUM/2011 & 55/MUM/2012 M/S. OM SIDDIVINAYAK CREATIONS P. LTD. 8 9. GROUND NO. 4 DISALLOWANCE OF INTEREST ( ` `` ` 10,74,873/-) 9.1 IN THIS GROUND, REVENUE CONTENDS THAT THE LEARN ED CIT(A) ERRED IN DISALLOWING THE INTEREST OF ` 10,74,873/-. THE LEARNED D.R. FOR REVENUE PLACED STRONG RELIANCE ON THE FINDING OF THE AO IN THE ORDER OF ASSESSMENT. 9.2 PER CONTRA, THE LEARNED A.R. OF THE ASSESSEE CO NTENDS THAT THE LEARNED CIT(A)S ORDER DELETING THE SAID DISALLOWAN CE OF INTEREST WAS IN ORDER, AS THE AO HAS ADMITTEDLY NOT BROUGHT ON RECO RD ANY MATERIAL EVIDENCE TO PROVE THAT EITHER THE INTEREST PAID OR THAT THE ADVANCES MADE WERE NOT FOR BUSINESS PURPOSE. IT IS SUBMITTED THAT ALL THE DETAILS IN THIS REGARD OF ADVANCES MADE WERE PLACED ON RECORD BY TH E ASSESSEE WITH REASONS FOR NOT CHARGING OF INTEREST IN CERTAIN CAS ES. IT IS PRAYED THAT IN VIEW OF THE ABOVE, REVENUES GROUND MAY BE DISMISSE D. 9.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM A PERUSAL OF THE ORDER OF ASSESSMENT THAT THE AO IN THE COURSE OF ASSESSME NT PROCEEDINGS HAD OBSERVED THAT THE ASSESSEES INCOME FROM FINANCING BUSINESS HAD REDUCED TO ` 4,72,475/-. THE ASSESSEES EXPLANATION FOR THE DECL INE OF ITS INCOME FROM FINANCING BUSINESS WAS FOUND TO BE UNAC CEPTABLE BY THE AO AND THEREFORE PROCEEDED TO DISALLOW THE ASSESSEES CLAIM FOR INTEREST ON BANK LOAN ` 5,31,791/-, BANK CHARGES ` 35,612/- AND INTEREST TO OTHERS ` 5,07,470/-. WE FIND FROM A PERUSAL OF THE MATERIAL ON RECORD THAT, AS OBSERVED BY THE LEARNED CIT(A), THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE INTEREST PAID BY THE ASSESSEE OR ADVANCES MADE BY ASSESSEE WAS NOT FOR BUSINESS PURP OSES. NEITHER BEFORE THE AUTHORITIES BELOW OR BEFORE US, HAS THE REVENUE BEEN ABLE TO CONTRAVENE THE FINDING OF THE LEARNED CIT(A) THAT T HE ASSESSEE HAS FILED THE COMPLETE DETAILS OF ADVANCES MADE AND BASIS OF NOT CHARGING INTEREST. IN THIS FACTUAL MATRIX OF THE CASE, AS DI SCUSSED ABOVE, WE UPHOLD THE FINDING OF THE LEARNED CIT(A) IN DELETIN G THE DISALLOWANCE OF INTEREST AMOUNTING TO ` 10,74,873/-. CONSEQUENTLY, GROUND NO. 4 RAISED BY THE REVENUE IS DISMISSED. ITA 8819/MUM/2011 & 55/MUM/2012 M/S. OM SIDDIVINAYAK CREATIONS P. LTD. 9 10. GROUND NOS. 5 & 6B 10.1 THESE GROUNDS BEING GENERAL IN NATURE AND NOT BEING URGED BEFORE US, NO ADJUDICATION IS CALLED FOR THEREON AND THESE GROUNDS ARE DISMISSED AS INFRUCTUOUS. 11. IN THE RESULT, REVENUES APPEAL FOR A.Y. 2008-09 IS DISMISSED. 12. TO SUM UP, BOTH THE CROSS APPEALS BY THE ASSESSEE A ND REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2017. SD/ - SD/ - (RAM LAL NEGI) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 20 TH JANUARY, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -17, MUMBAI 4. THE CIT - 8, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.