ITO - 3(3)(1), MUMBAI V. M/s. RICOH INDIA LTD., MUMBAI

ITA 997/MUM/2006

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3816 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 13-03-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 10-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K SINHA N
• Assessee Lawyers: SUR ESH MALIK; SANTHANAM
• Keywords: Business income; Transfer pricing; Business expenditure; International transaction; Retrospective amendment; Bad and doubtful debts
• Section: 43B; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI ., !' #$ #$ #$ #$ .#. %&', ( )*+ )' BEFORE SHRI D. MANMOHAN, V.P. AND SHRI P.M. JAGTAP, AM )./ I.T.A. NO.997 /MUM/2006 ( - . $/. - . $/. - . $/. - . $/. / / / / ASSESSMENT YEAR : 2002-03) INCOME TAX OFFICER- 3(3)(1), ROOM NO. 602, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. M/S RICOH INDIA LTD., (FORMERLY, RPG RICOH LTD.), 1104, ARCADIA, 195 NCPA ROAD, NARIMAN POINT, MUMBAI 400 021. +0 ( )./ PAN : AAACR4151J ( 01 / // / APPELLANT ) .. ( 2301 / RESPONDENT ) 23' )/C.O. NO. 97/MUM/2008 ARISING OUT OF ITA NO. 997/MUM/2006 M/S RICOH INDIA LTD., (FORMERLY, RPG RICOH LTD.), 1104, ARCADIA, 195 NCPA ROAD, NARIMAN POINT, MUMBAI 400 021. / VS. INCOME TAX OFFICER- 3(3)(1), ROOM NO. 602, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. +0 ( )./ PAN : AAACR4151J CROSS OBJECTOR .. ( 2301 / RESPONDENT ) )./ I.T.A. NO.6274 /MUM/2006 ( - . $/. - . $/. - . $/. - . $/. / / / / ASSESSMENT YEAR : 2003-04) INCOME TAX OFFICER- 3(3)(1), ROOM NO. 602, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. M/S RICOH INDIA LTD., (FORMERLY, RPG RICOH LTD.), 1104, ARCADIA, 195 NCPA ROAD, NARIMAN POINT, MUMBAI 400 021. +0 ( )./ PAN : AAACR4151J ( 01 / // / APPELLANT ) .. ( 2301 / RESPONDENT ) ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 2 )./ I.T.A. NO.5738 /MUM/2008 ( - -- - . $/. . $/. . $/. . $/. / / / / ASSESSMENT YEAR : 2004-05) DY. COMMISSIONER OF INCOME-TAX- CIR. 3(3), ROOM NO. 602, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. M/S RICOH INDIA LTD., (FORMERLY, RPG RICOH LTD.), 1104, ARCADIA, 195 NCPA ROAD, NARIMAN POINT, MUMBAI 400 021. +0 ( )./ PAN : AAACR4151J ( 01 / // / APPELLANT ) .. ( 2301 / RESPONDENT ) 23' )/C.O. NO.179/MUM/2009 ARISING OUT OF ITA NO. 5738/MUM/2008 M/S RICOH INDIA LTD., (FORMERLY, RPG RICOH LTD.), 1104, ARCADIA, 195 NCPA ROAD, NARIMAN POINT, MUMBAI 400 021. / VS. DY. COMMISSIONER OF INCOME-TAX- 3(3), ROOM NO. 602, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. +0 ( )./ PAN : AAACR4151J CROSS OBJECTOR .. ( 2301 / RESPONDENT ) ASSESSEE BY : SHRI SANTHANAM & SHRI SURESH MALIK DEPARTMENT BY : SHRI D.K. SINHA )$ N '( / // / DATE OF HEARING : 13-3-2013 O/ N '( / DATE OF PRONOUNCEMENT : 10-04-2013 *P / O R D E R PER P.M. JAGTAP, A.M . : THESE THREE APPEALS PREFERRED BY THE REVENUE AGAINS T THREE SEPARATE ORDERS PASSED BY THE LD. CIT(A) FOR ASSESSMENT YEAR S 2002-03, 2003-04 & 2004-05 INVOLVE COMMON ISSUES AND THE SAME THEREFOR E HAVE BEEN HEARD ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 3 TOGETHER AND ARE BEING DISPOSED OF ALONG WITH CROSS OBJECTIONS FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 2002-03 & 2004-05 BY THIS SINGLE COMPOSITE ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE SHALL TAKE UP THE APPEAL OF THE REVENU E FOR A.Y. 2002-03 BEING ITA NO. 997/MUM/2006 WHICH IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) - XXXII, MUMBAI DTD. 29-11-2005. 3. IN GROUND NO. 1, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUN T OF USANCE INTEREST AMOUNTING TO RS. 47,59,895/- AND INTEREST PAID TO B ANK ON BLC AMOUNTING TO RS. 25,83,474/-. 4. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS MAINLY ENGAGED IN THE BUSINESS OF MARKETING, SELLING AND SERVICING OFFICE AUTOMATION PRODUCTS LIKE PHOTOCOPY MACHINES, FAX MACHINES ETC. IT IMPO RTS THE SAID MACHINES AS WELL AS ACCESSORIES AND SPARE PARTS THEREOF FROM IT S PARENT COMPANY NAMELY RICOH, JAPAN. THE RETURN OF INCOME FOR THE YEAR UND ER CONSIDERATION WAS FILED BY THE ASSESSEE ON 30-10-2002 DECLARING TOTAL INCOM E AT NIL AFTER SETTING OFF THE BROUGHT FORWARD LOSSES OF THE EARLIER YEARS. I N THE P&L ACCOUNT FILED ALONG WITH THE SAID RETURN, USANCE INTEREST OF RS. 47,59, 895/- AND INTEREST PAID TO BANK ON BLC OF RS. 25,83,474/- WAS DEBITED BY THE A SSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE BEFORE THE A.O. THAT ITS HOLDING COMPANY NAMELY RIC OH, JAPAN ALLOWS A CREDIT PERIOD OF 180 DAYS FOR THE MACHINES, SPARES AND ACC ESSORIES FROM THE DATE OF BILL OF LADING FOR WHICH INTEREST IS CHARGED ON THE BASIS OF INTERNATIONAL LIBOR. IT WAS SUBMITTED THAT THE SAID CREDIT IS ALLOWED FO R A PERIOD OF 180 DAYS AFTER WHICH PAYMENT IS MADE BY THE CITI BANK TO RICOH, JA PAN ON BEHALF OF THE ASSESSEE. IT WAS SUBMITTED THAT AS PER THE ARRANGEM ENT BETWEEN THE ASSESSEE COMPANY AND CITI BANK, THE AMOUNT PAID BY THE LATER TO RICOH, JAPAN IS CONVERTED INTO BUYERS LINE OF CREDIT (BLC) AND THE SAME IS SUBSEQUENTLY ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 4 REPAID BY THE ASSESSEE COMPANY IN US DOLLARS ALONG WITH INTEREST. IT WAS CONTENDED THAT THE INTEREST PAID TO RICO, JAPAN FOR A CREDIT PERIOD OF 180 DAYS ALLOWED BY THEM IS TERMED AS USANCE INTEREST WHEREA S INTEREST PAID TO CITI BANK ON BLC IS TERMED AS BLC INTEREST AND THE SAME BEING INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS WAS CLA IMED AS DEDUCTIBLE BUSINESS EXPENDITURE. THIS EXPLANATION OFFERED BY THE ASSESSEE WAS NOT FOUND SATISFACTORY BY THE A.O. ACCORDING TO HIM, R ICO, JAPAN WAS NOT OFFERING ANY CREDIT PERIOD FOR THE EXPORT OF MACHINES AND SP ARES MADE TO THE ASSESSEE COMPANY WHICH WAS NOT AS PER THE GENERAL BUSINESS P RACTICE TO SUPPORT ITS SUBSIDIARY COMPANY BY A HOLDING COMPANY. HE ALSO NO TED THAT THE ASSESSEE WAS HOLDING STOCK OF MACHINES AND SPARES FOR A LONG TIME OF UP TO 6 MONTHS. ACCORDING TO THE A.O., WHEN THE ASSESSEE WAS PAYING USANCE INTEREST FOR A CREDIT PERIOD OF 180 DAYS TO ITS HOLDING COMPANY, T HERE WAS NO BUSINESS PRUDENCE TO HOLD THE STOCK FOR SUCH A LONG TIME. H E HELD THAT THIS WAS DONE DELIBERATELY BY THE ASSESSEE WITH AN INTENTION TO T RANSFER PART OF ITS PROFITS TO THE HOLDING COMPANY IN THE FORM OF USANCE INTEREST TO MITIGATE THE TAX LIABILITY. HE OBSERVED THAT THE ASSESSEE WAS NOT E VEN BOUND TO PAY USANCE INTEREST UNDER ANY CONTRACTUAL OBLIGATION. HE ALSO HELD THAT AFTER PAYING USANCE INTEREST FOR THE CREDIT PERIOD OF 180 DAYS, THE ASSESSEE WAS FURTHER ROUTING THE INTEREST PAYMENT TO ITS HOLDING COMPANY THROUGH CITI BANK AS A DUBIOUS METHOD OF TAX EVASION TO MITIGATE THE TAX L IABILITY. HE HELD THAT THE PAYMENT OF USANCE INTEREST AND BLC INTEREST BY THE ASSESSEE THUS WAS NOTHING BUT A MODE OF TRANSFER OF ITS PROFIT TO PAR ENT COMPANY IN JAPAN IN ORDER TO MITIGATE THE TAX LIABILITY IN INDIA. ACCO RDINGLY, RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MCDOWELL AN D CO. LTD. V. CTO (1985) 154 ITR 148 (SC), THE A.O. DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF USANCE INTEREST AND BLC INTEREST. 5. THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF USANCE INTEREST AND BLC INTEREST WAS DISPUTED BY THE ASSESSEE IN AN APP EAL FILED BEFORE THE LD. ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 5 CIT(A). IT WAS SUBMITTED BEFORE THE LD. CIT(A) ON B EHALF OF THE ASSESSEE COMPANY THAT AS PER THE BUSINESS TERMS AGREED WITH RICO, JAPAN, NO CREDIT PERIOD WAS ALLOWED AND THE INTEREST WAS PAYABLE FRO M THE DATE OF BILL OF LADING FOR THE PERIOD OF 180 DAYS BY WHICH THE ASSESSEE WA S REQUIRED TO MAKE THE PAYMENT. IT WAS SUBMITTED THAT AS PER THE ARRANGEME NT MADE BY THE ASSESSEE WITH CITI BANK, THE LATER HAD AGREED TO MAKE THE PA YMENT TO RICO, JAPAN AFTER A PERIOD OF 180 DAYS WHICH WAS TREATED AS BUYERS LI NE OF CREDIT (BLC) AND INTEREST WAS PAYABLE BY THE ASSESSEE ON THE SAID CR EDIT GIVEN IN US DOLLAR TERMS. AS REGARDS THE OBJECTION OF THE A.O. ABOUT THE PILING OF STOCK, IT WAS SUBMITTED BY THE ASSESSEE THAT THE SAME WAS REQUIRE D BECAUSE OF THE LEAD- TIME IN PROCURING THE IMPORTS. IT WAS ALSO SUBMITTE D THAT THE ASSESSEE BEING IN THE BUSINESS OF SERVICING AND MAINTENANCE OF ALL THE MODELS, WAS REQUIRED TO MAINTAIN STOCK OF CONSUMABLES, SPARES AND ACCESS ORIES OF ALL THE MACHINES. IT WAS ALSO SUBMITTED THAT HIGHER STOCK OF THE MACH INES NEWLY INTRODUCED IN THE MARKET WAS REQUIRED TO BE MAINTAINED BY THE ASS ESSEE TO MEET THE REQUIREMENTS OF CUSTOMERS NEEDS. IT WAS CONTENDED THAT THE HIGHER LEVEL OF STOCK THUS WAS MAINTAINED BY THE ASSESSEE DUE TO PE CULIAR NATURE OF THE PRODUCTS DEALT IN AND SUCH HIGHER LEVEL WAS MAINTAI NED CONSISTENTLY. IT WAS ALSO POINTED OUT THAT THE ASSESSEE WAS PAYING USANC E INTEREST AND BLC INTEREST AT INTERNATIONAL LIBOR RATE WHICH WAS LESS THAN 7% IN THE YEAR UNDER CONSIDERATION WHICH IS MUCH LOWER THAN THE INTEREST PAID BY THE ASSESSEE ON LOANS BORROWED IN INDIA. IT WAS CONTENDED THAT THE ASSESSEE THUS WAS SAVING ON ITS INTEREST COSTS AND SHOWING MORE PROFITS WHIC H CERTAINLY CANNOT SAID TO BE A TAX EVASION METHOD. IT WAS CONTENDED THAT THE ASSESSEE COMPANY THUS WAS NOT TRANSFERRING PART OF ITS PROFIT IN THE GUIS E OF INTEREST PAYMENT TO RICOH, JAPAN AS ALLEGED BY THE A.O. WITH AN INTENTI ON TO AVOID TAX. IT WAS POINTED OUT THAT THE GENUINENESS OF ALL THE INTERNA TIONAL TRANSACTIONS OF THE ASSESSEE WITH RICOH, JAPAN DURING THE YEAR UNDER CO NSIDERATION WERE DULY VALIDATED BY THE TRANSFER PRICING OFFICER VIDE ITS ORDER PASSED U/S 92CA(3) OF THE INCOME TAX ACT, 1961 HOLDING THE SAME TO BE AT ALP (ARMS LENGTH PRICE). ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 6 6. THE LD. CIT(A) FOUND MERIT IN THE SUBMISSIONS MA DE ON BEHALF OF THE ASSESSEE ON THIS ISSUE AND DELETED THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF USANCE INTEREST AND BLC INTEREST FOR THE FOLLOWING REASONS GIVEN IN PARA 4.17 OF HIS IMPUGNED ORDER:- I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPEL LANT HAS MENTIONED THAT INTEREST HAS BEEN PAID TO M/S RICO JAPAN AS PE R AGREEMENT AND THIS FACT HAS ALSO BEEN MENTIONED IN THE INVOICE RA ISED. BY PAYING INTEREST IT CANNOT BE SAID THAT APPELLANT IS INDULG ING IN ANY TAX PLANNING WHICH IS OTHERWISE NOT PERMISSIBLE. IT IS NOT THE CASE OF A.O. THAT INTEREST HAS NOT BEEN PAID. IT IS NOT THE CAS E OF ASSESSING OFFICER THAT FUNDS ARE AVAILABLE WITH THE APPELLANT AND ARE LYING IDLE, WHICH THE APPELLANT COULD HAVE UTILIZED TO MAKE PAYMENT TO M/ S RICOH, JAPAN. THE OBSERVATION OF THE A.O. THAT IN THIS LINE OF BU SINESS GENERALLY CREDIT OF 30 TO 45 DAYS IS AVAILABLE IS WITHOUT ANY SUBSTA NCE AND NOT SUPPORTED BY ANY EVIDENCE. THE ASSESSING OFFICER H AS ALSO NOT POINTED OUT THAT ONLY PURPOSE OF NON PAYMENT BY THE APPELLA NT WAS TO PLAN THE TAX LIABILITY. EVEN IF IT IS PRESUMED THAT PAYMENT TO M/S RICOH LTD. IS ON ACCOUNT OF ANY PLANNING, THE ASSESSING OFFICER S HOULD NOT HAVE DISALLOWED THE AMOUNT OF INTEREST PAYABLE TO CITI B ANK. IT MIGHT BE IN THE INTEREST OF THE APPELLANT TO UTILISE THE FUNDS HERE IN INDIA RATHER THAN TO MAKE THE PAYMENT TO M/S. RICOH JAPAN OR TO CITI BANK AS THESE FUNDS WERE AVAILABLE ON COMPARATIVELY CHEAPER RATES AT RATE OF 6.79% TO 6.9% THAN THE INTEREST PAYABLE ON CC LIMIT WHICH WA S 13.50%. IN VIEW OF THIS IT IS HELD THAT AO IS NOT LEGALLY JUSTIFIED IN MAKING DISALLOWANCE OUT OF BLC INTEREST. DISALLOWANCE MADE IS HEREBY DE LETED. 7. THE LD. D.R., AFTER NARRATING THE FACTS RELEVANT TO THIS ISSUE, RELIED ON THE ORDER OF THE A.O. IN SUPPORT OF THE REVENUES C ASE. 8. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, STRONGLY RELIED ON THE IMPUGNED ORDER OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE STATING THAT THE SAME IS A WELL DISCUSSED AND WELL REASONED ORDER. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT T HE MACHINES, ACCESSORIES AND PARTS THEREOF WERE IMPORTED BY THE ASSESSEE COM PANY FROM ITS HOLDING ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 7 COMPANY RICOH, JAPAN DURING THE COURSE OF ITS NORMA L BUSINESS AND THERE IS NO DISPUTE ABOUT THE SAME. AS PER THE RELEVANT BILL S OF LADING, THE ASSESSEE WAS LIABLE TO PAY INTEREST TO RICOH, JAPAN FOR THE DELAY IN PAYMENT UP TO A PERIOD OF 180 DAYS. THERE IS NOTHING BROUGHT ON RE CORD BY THE A.O. TO SHOW THAT ANY CREDIT PERIOD WAS ACTUALLY ALLOWED BY RICO , JAPAN TO THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAD AVAILED BLC FROM CITI BANK AND AS PER THE TERMS OF THE SAID CREDIT, THE CITI BANK WAS MAK ING THE PAYMENT TO RICOH, JAPAN ON BEHALF OF THE ASSESSEE COMPANY AFTER A PER IOD OF 180 DAYS IN DOLLAR TERMS AND THE SAID CREDIT WAS SUBSEQUENTLY REPAID B Y THE ASSESSEE AGAIN IN DOLLARS ALONG WITH INTEREST. THE USANCE INTEREST T O RICOH, JAPAN AND INTEREST FROM BLC TO CITI BANK WAS AGREED TO BE PAID AT INTE RNATIONAL LIBOR WHICH, AS NOTED BY THE A.O. HIMSELF IN THE ASSESSMENT ORDER, WAS 6.79% AND 6.9% RESPECTIVELY WHICH WAS MUCH LOWER THAN THE RATE OF INTEREST OF 13.50% CHARGED TO THE ASSESSEE FOR THE CC LIMIT AVAILED FR OM BANK IN INDIAN RUPEE. IT IS ALSO OBSERVED THAT THE OBJECTION OF THE A.O. REG ARDING HIGHER LEVEL OF STOCK OF IMPORTED ITEMS MAINTAINED BY THE ASSESSEE WAS SA TISFACTORILY MET BY THE ASSESSEE BY EXPLAINING BEFORE THE LD. CIT(A) THE VA RIOUS REASONS FOR MAINTAINING SUCH HIGHER LEVEL OF STOCK SUCH AS LEAD TIME IN PROCURING THE ITEMS, MAINTENANCE OF SPARES OF ALL THE MODELS FOR THE PURPOSE OF SERVICING, MAINTENANCE OF HIGHER QUANTITY OF THE PRODUCTS NEWL Y INTRODUCED IN THE MARKET ETC. BEFORE THE LD. CIT(A), RELEVANT DETAIL S WERE ALSO FURNISHED BY THE ASSESSEE TO SHOW THAT SUCH HIGHER STOCK WAS CONSIST ENTLY MAINTAINED BY THE ASSESSEE WHICH FURTHER SUPPORTS AND SUBSTANTIATE TH E CASE OF THE ASSESSEE THAT HIGHER LEVEL OF STOCK WAS REQUIRED DUE TO PECU LIAR NATURE OF THE BUSINESS OF THE ASSESSEE. HAVING REGARD TO ALL THESE FACTS OF THE CASE CLEARLY BORNE OUT FROM THE RECORD, WE ARE OF THE VIEW THAT THE EXPEND ITURE ON ACCOUNT OF USANCE INTEREST AND BLC INTEREST WAS INCURRED BY THE ASSES SEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND IT CANNOT BE SAID B Y ANY STRETCH OF IMAGINATION THAT IT WAS A CASE OF TRANSFER OF ITS P ROFITS BY THE ASSESSEE COMPANY TO THE PARENT COMPANY RICOH, JAPAN IN THE G UISE OF THE SAID INTEREST ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 8 IN ORDER TO AVOID THE TAX LIABILITY AS ALLEGED BY T HE A.O. ESPECIALLY WHEN THE RELEVANT INTERNATIONAL TRANSACTIONS OF THE ASSESSEE COMPANY WITH RICOH, JAPAN WERE ACCEPTED BY THE TRANSFER PRICING OFFICE IN ITS ORDER PASSED U/S 92(3) AS MADE AT ALP. IN THAT VIEW OF THE MATTER, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) GIVING RELIEF TO T HE ASSESSEE ON ACCOUNT OF USANCE INTEREST AND BLC INTEREST AND UPHOLDING THE SAME ON THIS ISSUE, WE DISMISS GROUND NO. 1OF REVENUES APPEAL. 10. IN GROUND NO. 2, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DIRECTING THE A.O. TO TREAT THE BANK INTEREST AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES AS CONSIDERED BY THE A.O. 11. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE COMPANY HAD EARNED INTEREST INCOME ON VARIOUS FIXED DEPOSITS KEPT WITH THE BANK AGAINST PERFORMANCE BANK GUARANTEE ISSUED BY THE BANK. SIN CE THE SAID INVESTMENT IN FIXED DEPOSITS WITH BANK WAS MADE FOR THE PURPOS E OF ITS BUSINESS, THE INTEREST EARNED THEREON WAS DECLARED BY THE ASSESSE E COMPANY AS BUSINESS INCOME. ACCORDING TO THE A.O., NONE OF THE MAIN OBJ ECTS OF THE ASSESSEE COMPANY AS PER ITS MEMORANDUM OF ARTICLE OF ASSOCIA TION WAS THAT OF MAKING INVESTMENT IN BANK DEPOSITS FOR THE PURPOSE OF EARN ING INTEREST INCOME. HE THEREFORE HELD THAT INTEREST INCOME EARNED BY THE A SSESSEE ON BANK DEPOSITS WAS NOT ITS BUSINESS INCOME BUT THE SAME WAS CHARGE ABLE TO TAX IN THE HANDS OF THE ASSESSEE COMPANY UNDER THE HEAD INCOME FROM OTHER SOURCES. 12. ON APPEAL, THE LD. CIT(A) ACCEPTED THE STAND OF THE ASSESSEE THAT INTEREST INCOME EARNED ON BANK DEPOSITS CONSTITUTED ITS BUSINESS INCOME AS FIXED DEPOSITS WERE KEPT WITH THE BANK DURING THE C OURSE OF CARRYING ON ITS BUSINESS. HE NOTED THAT THE ASSESSEE COMPANY WAS RE QUIRED TO PROVIDE PERFORMANCE GUARANTEE TO ITS CLIENTS FOR WHICH THE BANK ISSUEING THE PERFORMANCE GUARANTEE INSISTED FOR 100% MARGIN MONE Y TO BE KEPT IN THE ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 9 FORM OF FIXED DEPOSITS. HE HELD THAT THE MAIN PURP OSE OF KEEPING THE SAID DEPOSITS WITH BANK THUS WAS NOT FOR EARNING INTERES T INCOME BUT THE SAME WAS NECESSITATED BY THE BUSINESS OF THE ASSESSEE CO MPANY. HE THEREFORE HELD THAT INTEREST EARNED BY THE ASSESSEE ON THE BANK DE POSITS WAS REQUIRED TO BE TREATED AS ITS BUSINESS INCOME. 13. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE LD. CIT(A) ON THE BASIS OF SUBMISSIONS MADE BY THE ASSESSEE BEFORE HI M, HAS RECORDED A FINDING THAT THE DEPOSITS WITH BANK WERE KEPT BY THE ASSESS EE AS ITS BUSINESS NECESSITY TO OBTAIN THE PERFORMANCE GUARANTEE IN FA VOUR OF THE CLIENTS AND THE LD. D.R HAS NOT BEEN ABLE TO CONTROVERT/REBUT THIS FINDING RECORDED BY THE LD. CIT(A). IN OUR OPINION, ONCE IT IS FOUND THAT THE FIXED DEPOSITS WITH BANK WERE KEPT BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINES S, THE INTEREST EARNED ON THE SAID DEPOSITS HAS TO BE TREATED AS BUSINESS INC OME OF THE ASSESSEE AS RIGHTLY HELD BY THE LD. CIT(A). WE THEREFORE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESS EE ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS GROUND NO. 2 OF REVENUES APPE AL. 14. IN GROUND NO. 3, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN GIVING RELIEF TO THE ASSESSEE BY DELETING THE AD DITION MADE BY THE A.O. BY DISALLOWING THE ASSESSEES CLAIM ON ACCOUNT OF FORE IGN EXCHANGE FLUCTUATION LOSS. 15. IN ITS RETURN OF INCOME, THE ASSESSEE COMPANY H AD CLAIMED DEDUCTION ON ACCOUNT OF LOSS DUE TO FLUCTUATION IN FOREIGN EX CHANGE INTER ALIA IN RESPECT OF USANCE INTEREST PAID TO RICOH, JAPAN AND BLC INT EREST PAID TO CITI BANK. SINCE THE SAID INTEREST WAS DISALLOWED BY HIM IN TH E ASSESSMENT, THE A.O. ALSO DISALLOWED THE FOREIGN EXCHANGE FLUCTUATION LO SS CLAIMED BY THE ASSESSEE RELATING TO THE SAID INTEREST. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE FOR FOREIGN EXCHANGE FLUCTUATION LOSS AS T HE CLAIM OF THE ASSESSEE FOR ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 10 DEDUCTION ON ACCOUNT OF USANCE INTEREST PAID TO RIC OH, JAPAN AND BLC INTEREST PAID TO CITI BANK WAS ALLOWED BY HIM. 16. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THE ISSUE INVOLVED IN THIS GROUND R ELATING TO ASSESSEES CLAIM FOR FOREIGN EXCHANGE FLUCTUATION LOSS RELATING TO U SANCE INTEREST AND BLC INTEREST IS CONSEQUENTIAL TO THE ISSUE RELATING TO ALLOWABILITY OF THE SAID INTEREST AS INVOLVED IN GROUND NO. 1 OF REVENUES A PPEAL. SINCE THE SAID ISSUE INVOLVED IN GROUND NO. 1 OF REVENUES APPEAL HAS AL READY BEEN DECIDED BY US IN FAVOUR OF THE ASSESSEE UPHOLDING THE IMPUGNED OR DER OF THE LD. CIT(A) DELETING THE DISALLOWANCE MADE BY THE A.O. ON ACCOU NT OF USANCE INTEREST AND BLC INTEREST, WE ALLOW THE CONSEQUENTIAL RELIEF DUE TO THE ASSESSEE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS RELATING TO TH E SAID INTEREST AND DISMISS GROUND NO. 3 OF THE REVENUES APPEAL. 17. IN GROUND NO. 4, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 5,78,215/- MADE BY THE A.O. ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO GRATUITY FUND BY INVOKING THE PROVISIONS OF SECTION 43-B OF THE ACT. 18. THE EMPLOYEES CONTRIBUTION TOWARDS GRATUITY FUN D AMOUNTING TO RS. 5,78,215/- FOR THE MONTH OF MARCH, 2002 WAS PAID BY THE ASSESSEE COMPANY ON 19-6-2002. AS THE DUE DATE FOR THE SAID PAYMENT UNDER THE RESPECTIVE ACT WAS 21-4-2002, THE PAYMENT MADE BY THE ASSESSEE ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO GRATUITY FUND AFTER THE SAID DUE DA TE WAS DISALLOWED BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 43-B OF THE ACT. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE A.O. ON THIS ISSUE RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF HAFFKINE AJ ANTHA PHARMACEUTICALS LTD. (ITA NO. 3140/MUM/99) WHEREIN IT WAS HELD THAT AMEN DMENT MADE IN THE PROVISO TO SECTION 43-B BEING CLARIFICATORY IN NATU RE WOULD HAVE RETROSPECTIVE ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 11 EFFECT. SINCE THE PAYMENT ON ACCOUNT OF EMPLOYEES C ONTRIBUTION TO GRATUITY FUND WAS MADE BY THE ASSESSEE BEFORE THE DUE DATE O F FILING OF RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION, THE LD. CI T(A) DELETED THE DISALLOWANCE MADE BY THE A.O. BY INVOKING THE PROVI SIONS OF SECTION 43-B OF THE ACT, KEEPING IN VIEW THE SAID AMENDMENT WHICH W AS HELD TO BE RETROSPECTIVE IN OPERATION. 19. AT THE TIME OF HEARING BEFORE US, THE LD. REPRE SENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE NOW STANDS COVERE D BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ALLIED MOTORS (P.) LTD. V. COMMISSIONER OF INCOME-TAX (1997) 244 ITR 677 (SC) WHEREIN IT HA S BEEN HELD THAT THE AMENDMENT MADE IN THE PROVISO TO SECTION 43-B BEING CLARIFICATORY IN NATURE IS APPLICABLE WITH RETROSPECTIVE EFFECT. RESPECTFUL LY FOLLOWING THE SAID DECISION OF THE HONBLE SUPREME COURT, WE UPHOLD THE IMPUGNE D ORDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE MADE BY THE A.O. U/S 43B OF THE ACT ON ACCOUNT OF PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS GRATUITY FUND MADE BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME FOR THE YEA R UNDER CONSIDERATION. GROUND NO. 4 OF REVENUES APPEAL IS ACCORDINGLY DIS MISSED. 20. IN GROUND NO. 5, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN TREATING THE MISCELLANEOUS INCOME OF RS. 10.35 L ACS AS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES AS TREATED BY THE A.O. 21. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE HAD RECEIVED MISCELLANEOUS INCOME OF RS. 10.35 LACS ON ACCOUNT O F SUNDRY CHARGES RECEIVED FROM CLIENTS TOWARDS VISIT OF SERVICE ENGINEERS ETC . WHICH WAS SHOWN AS BUSINESS INCOME. ACCORDING TO THE A.O., THE ASSESSE E, HOWEVER, COULD NOT PRODUCE ANY FURTHER DETAILS TO SHOW THAT THE SAID M ISCELLANEOUS INCOME CONSTITUTED ITS BUSINESS INCOME. THE A.O. THEREFORE DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT THE MISCELLANEOUS INCOME CONST ITUTED ITS BUSINESS ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 12 INCOME AND BROUGHT THE SAME TO TAX IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. 22. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFO RE THE LD. CIT(A), THE ASSESSEE FURNISHED ALL THE RELEVANT DETAILS IN RESP ECT OF MISCELLANEOUS INCOME AS UNDER:- BRANCHES AMOUNT(RS) TRADE-IN RECOVERIES DEALERS RECOVERY CHARGES SCRAP SALES MISCELLANEOU S INCOME. MUMBAI 1,813.00 - - 1,813.00 - BHOPAL 16,991.00 - 16.991.00 - - AHMEDABAD 83,086.96 29,316.96 - 31,270.00 22,500 COCHIN 13,756.00 13,756.00 - - - CALCUTTA 29,584.00 - 29,584.00 - - CHANDIGARH 74,247,07 - 74,247,07 - - JAIPUR 41,841.00 - 41,841.00 - - LUCKNOW 73,850.00 - 73,850.00 - - HYDRABAD 99,029.00 - 99,029.00 - - DELHI 17,245.00 - 17,245.00 - - GANDHINAGA R 43,502.09 - - 43,502.09 - NOIDA 10,506.50 - - 10,506.50 - BANGALORE 1,85,395.00 - 1,85,395.00 - - CHENNAI 1,19,650.00 - 1,19,650.00 - - PUNE 1,00,529.00 - 1,00,529.00 - 1,01,110.00 TOTAL 10,35,832.75 43,072.9 6 7,82,058.2 0 87,091.59 1,23,610.00 THE DESCRIPTION OF THE NATURE OF ALL THE RECEIPTS I S AS FOLLOWS:- 1. TRADE IN-MACHINES SALES/RECOVERY : RS. 43,072.96 THE COMPANY GIVES AN INCENTIVE TO ITS PROSPECTIVE C USTOMERS TO BUY BACK AN OLD PHOTOCOPIER MACHINE AGAINST A SALE OF A NEW PHOTOCOPIER TO THEM. THE COST OF THIS BUY BACK OF OLD MACHINE IS CALLED AS A TRADE IN COST AND WHEN THE SAME MACHINE IS FURTHER SOLD AS O LD SECOND HAND MACHINE THAT IS CALLED AS A TRADE IN RECOVERY/TRADE IN MACHINE SALES. THESE OLD MACHINES CAN BE USED AS SECOND HAND MACHI NES ONLY. IN VIEW OF THE ABOVE, THE RECEIPT AGAINST THE SALE OF OLD MACHINES IS VERY MUCH FROM BUSINESS ACTIVITIES CARRIED ON BY THE APP ELLANT AND THEREFORE THIS INCOME SHOULD BE ASSESSED UNDER THE HEAD INCO ME FROM BUSINESS ONLY. 2. DEALER RECOVERY CHARGES: RS. 7.82.058.20 ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 13 WHEN ANY DEALER REQUIRES SOME TECHNICAL HELP ABOUT THE APPELLANTS PRODUCT THE COMPANYS SERVICE ENGINEER VISITS SUCH DEALER/CUSTOMER AND PROVIDES HIM THE NECESSARY TECHNICAL HELP. SINC E THIS IS NOT A CONTRACT BOUND TRANSACTION, ACTUAL EXPENSES INCURRE D ON SUCH VISIT BY THE ENGINEER PLUS NOMINAL TECHNICAL SUPPORT CHARGES ARE RECOVERED FROM THE DEALER FOR SUCH HELP. THESE ARE NOT NETTED OFF AGAINST THE ACTUAL EXPENSES CLAIMED BY THE EMPLOYEE AGAINST HIS TRAVEL EXPENSES, WHICH ARE SHOWN SEPARATELY UNDER THE RESPECTIVE EXPENSE H EAD. THE GROSS RECOVERY FROM THE DEALER IS SHOWN SEPARATELY UNDER MISCELLANEOUS INCOME. THEREFORE THE DEALER RECOVERY CHARGES ARE IN THE NA TURE OF TECHNICAL SUPPORT BEING PROVIDED TO THE CUSTOMER OF THE APPEL LANT AND THEREFORE RELATED TO THE BUSINESS CARRIED ON BY THE APPELLANT AND SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUS 3. SCRAP SALES: RS. 87,091.59 WHEN ANY MACHINE OR SCRAP PART IS NOT UNDER ACTIVE USE OR IS IN A DAMAGED CONDITION, WHICH PREVENTS IT TO BE USED AS A PHOTOCOPIER MACHINE SUCH OLD JUNK IS SOLD AS SCRAP TO SCRAP DEA LERS AND THE RECEIPTS OUT OF THAT SCRAP SALE IS SHOWN AS MISCELL ANEOUS INCOME. THE SCRAP SALE IS INCIDENTAL TO THE BUSINESS ACTIVI TIES CARRIED ON BY THE APPELLANT AND, THEREFORE, ANY INCOME OUT OF THE SCR AP SALE SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS ONLY . 4. MISCELLANEOUS INCOME - RS. 1.23.610.00 CORRESPONDING TO THIS INCOME APPEARING IN THE BOOKS OF THE APPELLANTS BRANCH, AN EQUIVALENT AMOUNT HAS BEEN CLAIMED AS WR ITE OFF IN THE BOOKS OF HEAD OFFICE, WHICH HAS NOT BEEN ALLOWED BY THE AO AND IS BEING CONTESTED SEPARATELY AS A PART OF GROUND NO. 8. BOTH THESE CANCEL EACH OTHER AND HAVE NO REVENUE / TAX IMPLICATIONS. KEEPING IN VIEW THE ABOVE DETAILS FURNISHED BY THE ASSESSEE, THE LD. CIT(A) HELD THAT THE ENTIRE MISCELLANEOUS INCOME RECEIVED BY THE ASSESSEE WAS HAVING INTRICATE CONNECTION WITH ITS BUSINESS AND T HE SAME THEREFORE CONSTITUTED ITS BUSINESS INCOME AND NOT INCOME F ROM OTHER SOURCES. 23. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE RELEVANT DETAILS FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(A) WER E SUFFICIENT TO SHOW THAT THE ENTIRE MISCELLANEOUS INCOME EARNED DURING THE Y EAR UNDER CONSIDERATION ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 14 WAS HAVING DIRECT NEXUS WITH ITS BUSINESS ACTIVITY AND THE SAME WAS VERY MUCH FORMING PART OF ITS BUSINESS INCOME AS RIGHTLY FOUND BY THE LD. CIT(A). EVEN THE LD. D.R., AT THE TIME OF HEARING BEFORE US , HAS NOT BEEN ABLE TO RAISE ANY ARGUMENT TO DISPUTE THIS POSITION CLEARLY ARISI NG FROM THE DETAILS FURNISHED BY THE ASSESSEE AND HAS SIMPLY RELIED ON THE ORDER OF THE A.O. IN SUPPORT OF THE REVENUES CASE. WE THEREFORE FIND N O INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) ACCEPTING THE CLAIM OF THE ASSESSEE THAT THE MISCELLANEOUS INCOME OF RS. 10.35 LACS CONSTITUTED ITS BUSINESS INCOME WHICH COULD NOT BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AND UPHOLDING THE SAME, WE DISMISS GROUND NO. 5 OF REVE NUES APPEAL. 24. GROUND NO. 6 OF REVENUES APPEAL AND GROUND NO. 3 OF ASSESSEES C.O. INVOLVE A COMMON ISSUE RELATING TO ADDITION OF RS.1 9,43,928/- MADE BY THE A.O. ON ACCOUNT OF ADVANCES WRITTEN OFF AS BAD DEBT S WHICH HAS BEEN DELETED BY THE LD. CIT(A) TO THE EXTENT OF RS. 1,45,610/-. 25. IN THE P&L ACCOUNT FILED ALONG WITH THE RETURN OF INCOME, THE ASSESSEE HAD CLAIMED ADVANCES WRITTEN OFF TO THE TUNE OF RS. 19.43 LACS UNDER THE HEAD OTHER EXPENSES. THE ASSESSEE, HOWEVER, DID NOT FU RNISH THE RELEVANT DETAILS TO SHOW THAT THE AMOUNT OF ADVANCES SO WRITTEN OFF HAD BEEN BROUGHT TO TAX IN THE EARLIER YEARS. IT ALSO COULD NOT PRODUCE ANY EV IDENCE TO ESTABLISH THAT THE SAID ADVANCES HAD ACTUALLY BECOME BAD OR IRRECOVERA BLE DURING THE YEAR UNDER CONSIDERATION. THE A.O. THEREFORE DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF ADVANCES WRITTEN OFF HO LDING THAT THE CONDITIONS STIPULATED IN SECTION 36(1)(VII) R.W.S. 37(2) OF TH E ACT WERE NOT SATISFIED. 26. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFO RE THE LD. CIT(A), THE ASSESSEE FURNISHED THE DETAILS OF ADVANCES WRITTEN OFF AS BAD DEBTS AS UNDER:- (A) EARNEST MONEY DEPOSITS RS. 7,95,706/- EARNEST MONEY DEPOSITS ARE GIVEN BY THE APPELLANT T O VARIOUS GOVERNMENT DEPARTMENTS/PUBLIC SECTOR UNDERTAKINGS T O PROCURE SALES ORDERS FROM THOSE AGENCIES AGAINST A TENDER. THE AO IN HIS ORDER AT ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 15 PAGE NO. 11 HAS ALREADY MENTIONED BREAKUP OF RS. 7, 95,706/-. EMD IS PAID TO ALL THE GOVERNMENT DEPARTMENTS TO BID FOR T HE TENDER. THE MATTER IS SOLELY RELATED TO THE BUSINESS CARRIED ON BY THE APPELLANT. THE AMOUNT OF RS. 7,95,706/- IS OUTSTANDING FOR MORE TH AN 3 YEARS AND THE SAME IS IRRECOVERABLE AND, THEREFORE, HAS BEEN WRIT TEN-OFF. (B) DEALERS DEPOSIT RS. 97,524/-. THE AMOUNT WAS P AID TO DEALERS OF THE APPELLANT AND IT IS OUTSTANDING FOR MORE THA N 5 YEARS SINCE SEP 1996 AND IS IRRECOVERABLE. (C) REPROGRAPHIC DIVISION (CEAT LTD.) RS. 9,00,000/ - THE AMOUNT IS PERTAINING PRIOR TO APRIL 1996 AND IS OUTSTANDING F OR MORE THAN 5 YEARS AND THE SAME IS IRRECOVERABLE. (D) IMPREST A/C (DR. BL.) RS. 1,23,610/- THE AMOUN T PERTAINS TO EX- EMPLOYEES OF THE APPELLANT WHO HAVE ALREADY LEFT TH E COMPANY AND THE OUTSTANDING AMOUNT IS IRRECOVERABLE NOW. DETAILS AR E: KAMLESH PRASAD RS. 101,110/- SANJEEV SRIVASTAVA RS. 22,500/- (E) SUPPLIERS DEBIT BALANCE RS. 25,000/-. THE AMOU NT IS OUTSTANDING SINCE LONG TIME AND IS IRRECOVERABLE. ON THE BASIS OF THE ABOVE DETAILS, IT WAS CLAIMED B Y THE ASSESSEE THAT THE ADVANCES GIVEN IN THE NORMAL COURSE OF BUSINESS HAD BECOME BAD OR IRRECOVERABLE DURING THE YEAR UNDER CONSIDERATION A ND THE SAME THEREFORE SHOULD BE ALLOWED U/S 37(1) IF NOT U/S 36(1)(VII) O F THE ACT. 27. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE A SSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) DECIDE D THIS ISSUE VIDE PARA NO. 10.4 OF HIS IMPUGNED ORDER AS UNDER:- 10.4 I HAVE CONSIDERED THE SUBMISSION OF THE APPEL LANT AND FOUND THE SAME TO BE NOT ACCEPTABLE. THE APPELLANT HAS SOUGHT TO WRITE OFF EARNEST MONEY DEPOSITS OF RS.7.95 LACS. THESE DEPOS ITS ARE MAINLY WITH GOVERNMENT AGENCIES. THE APPELLANT IS DUTY BOUND TO EXPLAIN AS TO WHY THE DEPOSITS COULD NOT BE RECOVERED. THE AMOUNTS CA NNOT BE WRITTEN OFF MERELY ON THE GROUNDS THAT THESE ARE THREE YEARS OL D. THE SAME FACTS APPLIES TO IN THE CASE WITH DEALERS DEPOSITS, REPR OGRAPHIC DIVISION OF CEAT LTD. THE APPELLANT HAS FILED NO EVIDENCE AS TO WHY THESE AMOUNTS HAVE BECOME BAD. EVEN IF THE AMOUNT IS TO BE ALLOWE D U/S. 37(1) OF THE INCOME TAX ACT, THE APPELLANT HAS TO FURNISH EVIDEN CE THAT AMOUNT IS NO MORE RECOVERABLE. HOWEVER, AS REGARDS THE CLAIM MADE FOR INTEREST ACCOUNT AND SUPPLIERS DEBIT ACCOUNT, THE EXPLANATIO N OF THE APPELLANT IS ACCEPTABLE. THE IMPREST ACCOUNT IS OUTSTANDING AMOU NT RECOVERABLE AGAINST TWO EMPLOYERS WHO HAVE ALREADY LEFT THE SER VICE AND THE ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 16 SUPPLIERS DEBIT BALANCE IS MEAGER AND NO PURPOSE WI LL BE SERVED BY TAKING CUMBERSOME RECOVERY MEASURES. THEREFORE, CLA IM OF RS. 1,45,610/- IS ALLOWED AND THE ACTION OF ASSESSING O FFICER IN MAKING DISALLOWANCE OF THE BALANCE AMOUNT IS CONFIRMED. TH IS GROUND IS PARTLY ALLOWED. THE LD. CIT(A) THUS ALLOWED THE CLAIM OF THE ASSESS EE ON ACCOUNT OF ADVANCES WRITTEN OFF TO THE EXTENT OF RS. 1,45,610/- AND SUS TAINED THE DISALLOWANCE MADE BY THE A.O. ON THIS ISSUE TO THE EXTENT OF RS. 17,94,318/-. 28. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE LD. COUNSEL FOR THE ASSESSEE HAS AGREED THAT THE AMOUNT OF ADVANCES WRI TTEN OFF HAVING NOT BEEN TREATED AS THE INCOME OF THE ASSESSEE IN THE EARLIE R YEARS, THE SAME CANNOT BE ALLOWED AS BAD DEBTS KEEPING IN VIEW THE PROVISIONS OF SECTION 37(2) OF THE ACT, HE HAS SUBMITTED THAT THE LOSS SUFFERED BY THE ASSESSEE AS A RESULT OF THE ADVANCES BECOMING IRRECOVERABLE BEING INCIDENTAL TO THE BUSINESS, THE SAME SHOULD BE ALLOWED. IN THIS REGARD, IT IS OBSERVED T HAT A SIMILAR ALTERNATIVE CLAIM WAS MADE BY THE ASSESSEE BEFORE THE LD. CIT(A ) AND AFTER EXAMINING THE SAME, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSES SEE PARTLY TO THE EXTENT OF RS. 1,45,610/-. HE HOWEVER SUSTAINED THE BALANCE D ISALLOWANCE OF RS. 17,94,318/- MADE BY THE A.O. ON THE GROUND THAT THE RE WAS A FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE ANY EVIDENCE TO SHO W THAT THE ADVANCES TO THAT EXTENT HAD ACTUALLY BECOME BAD DURING THE YEAR UNDER CONSIDERATION. IN OUR OPINION, THE ONUS IN THIS REGARD IS CLEARLY ON THE ASSESSEE TO ESTABLISH THAT THE LOSS AS A RESULT OF THE ADVANCES BECOMING IRRECOVERABLE WAS INCURRED IN THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HA S FAILED TO DISCHARGE THE SAME BEFORE THE LD. CIT(A). EVEN BEFORE US, NO EVI DENCE WHATSOEVER HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE IN SUPPORT OF ITS CASE ON THIS ISSUE AND THIS BEING SO, WE FIND IT DIFFICULT TO ACCEPT EVEN THE A LTERNATIVE STAND OF THE ASSESSEE THAT SUNDRY ADVANCES WRITTEN OFF TO THE EX TENT OF RS. 17,94,318/- SHOULD BE CONSIDERED AS LOSS INCIDENTAL TO THE BUSI NESS WHICH IS DEDUCTIBLE WHILE COMPUTING THE BUSINESS INCOME. WE THEREFORE UPHOLD THE IMPUGNED ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 17 ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS G ROUND NO. 6 OF REVENUES APPEAL AS WELL AS GROUND NO. 3 OF ASSESSEES C.O. 29. IN GROUND NO. 7, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 38,26,000/- MADE BY THE A.O. ON ACCOUNT OF INTEREST RECEIVABLE ON ADVANCE PAID BY THE ASSESSEE TO M/S CEAT TYRES LTD. 30. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE COMPANY ON THE ONE HAND HAD INCURRED HUGE INTEREST EXPENDITURE ON THE BORROWED FUNDS AND ON THE OTHER HAND NO INTEREST WAS CHARGED ON THE SUBSTANTIAL ADVANCE GIVEN TO M/S CEA T TYRES LTD. HE ALSO NOTED IN THIS CONTEXT THAT THE ASSESSEE WAS ENTITLE D TO CHARGE INTEREST @ 2% AS PER THE AGREEMENT WITH M/S CEAT TYRES LTD. HE, THEREFORE, WORKED OUT THE INTEREST ATTRIBUTABLE TO THE ADVANCE GIVEN BY T HE ASSESSEE TO M/S CEAT TYRES LTD. AT RS. 38.26 LACS AND THE INTEREST EXPEN DITURE CLAIMED BY THE ASSESSEE TO THAT EXTENT WAS REDUCED BY HIM. BEFORE THE LD. CIT(A), IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT ADVANCE OF RS. 159.43 LACS WAS RECEIVABLE FROM M/S CEAT TYRES LTD. WHICH REPRESENT ED RENT RECEIVABLE, MAINTENANCE CHARGES RECEIVABLE, BILLS FOR SUPPLY OF SPARES RECEIVABLE AND SERVICE CHARGES RECEIVABLE. IT WAS SUBMITTED THAT THE SAID AMOUNT WAS OUTSTANDING FOR MORE THAN THREE YEARS AND A CIVIL S UIT WAS ALREADY FILED FOR THE RECOVERY OF THE SAME ALONG WITH INTEREST WHICH WAS PENDING BEFORE THE HONBLE BOMBAY HIGH COURT. IT WAS CONTENDED THAT T HE RECOVERY OF THE PRINCIPAL AMOUNT ITSELF THUS WAS DOUBTFUL AND INTER EST THEREON COULD NOT BE TREATED AS INCOME ACCRUED TO THE ASSESSEE IN THE YE AR UNDER CONSIDERATION. THE LD. CIT(A) FOUND MERIT IN THIS CONTENTION RAISE D ON BEHALF OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE A.O. ON ACCOUN T OF INTEREST ATTRIBUTABLE TO THE ADVANCE GIVEN BY THE ASSESSEE TO M/S CEAT TY RES LTD. HOLDING THAT WHEN THE MATTER FOR THE RECOVERY OF PRINCIPAL AMOUN T ALONG WITH INTEREST WAS PENDING BEFORE THE COURT, IT COULD NOT BE SAID THAT INTEREST INCOME HAD REALLY ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER CONSI DERATION. HE HELD THAT ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 18 THE INTEREST INCOME WOULD ACCRUE TO THE ASSESSEE ON LY WHEN THE CASE OF THE ASSESSEE FOR RECOVERY OF INTEREST IS FINALLY DECIDE D IN ITS FAVOUR BY THE HONBLE BOMBAY HIGH COURT. ACCORDINGLY, THE ADDITION MADE BY THE A.O. ON ACCOUNT OF INTEREST ATTRIBUTABLE TO THE ADVANCE GIVEN BY TH E ASSESSEE TO M/S CEAT TYRES LTD. WAS DELETED BY THE LD. CIT(A). 31. THE LD. D.R. SUBMITTED BEFORE US THAT THE INTER EST WAS CHARGEABLE BY THE ASSESSEE ON THE ADVANCE APPEARING IN THE NAME O F CEAT TYRES LTD. AS PER THE AGREEMENT AND IN THE ABSENCE OF ANYTHING BROUGH T ON RECORD BY THE ASSESSEE TO SHOW THAT SUCH INTEREST CHARGEABLE UNDE R THE AGREEMENT WAS ACTUALLY WAIVED BY IT, INTEREST INCOME HAD ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 32. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, STRONGLY RELIED ON THE IMPUGNED ORDER OF THE LD. CIT(A) IN SUPPORT OF THE ASSESSEES CASE ON THIS ISSUE AND SUBMITTED THAT THE RECOVERY OF ADVANCE AP PEARING IN THE NAME OF M/S CEAT TYRES LTD. ITSELF BEING DOUBTFUL, INTEREST ON SUCH ADVANCE COULD NOT BE SAID TO HAVE ACCRUED TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. 33. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS WELL SETTLED T HAT INCOME TAX IS A LEVY ON INCOME AND INCOME TAX ACT TAKES INTO ACCOUNT POINTS OF TIME AT WHICH THE LIABILITY TO TAX IS ATTRACTED VIZ. THE ACCRUAL OF I NCOME OR ITS RECEIPT. IF THE RIGHT TO RECEIVE A PARTICULAR INCOME IS VESTED IN THE ASS ESSEE AS PER THE AGREEMENT OR UNDERSTANDING, THE SAME CAN BE SAID TO HAVE ACCR UED TO THE ASSESSEE IN THE RELEVANT YEAR UNLESS SUCH RIGHT IS WAIVED BY HI M AS A RESULT OF REVISED AGREEMENT OR UNDERSTANDING. IF THERE IS SUCH WAIVER IN THE RELEVANT YEAR, THE INCOME SO WAIVED COULD NOT BE ACCRUED TO THE ASSESS EE IN THAT YEAR AND ACCORDINGLY THE SAME COULD NOT BE ASSESSED TO TAX I N HIS HANDS IN THAT YEAR. AS RIGHTLY SUBMITTED BY THE LD. D.R., NOTHING HAS BEEN BROUGHT ON RECORD IN ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 19 THE PRESENT CASE EITHER BEFORE THE AUTHORITIES BELO W OR EVEN BEFORE US TO SHOW THAT INTEREST CHARGEABLE BY IT ON THE ADVANCE TO M/ S CEAT TYRES LTD. AS PER THE AGREEMENT WAS ACTUALLY WAIVED IN THE YEAR UNDER CONSIDERATION. ON THE OTHER HAND, A CIVIL SUIT WAS FILED BY THE ASSESSEE AGAINST M/S CEAT TYRES LTD. TO RECOVER THE ADVANCE ALONG WITH INTEREST WHICH WA S PENDING BEFORE THE HONBLE BOMBAY HIGH COURT. HAVING REGARD TO ALL THE SE FACTS OF THE CASE, WE ARE OF THE VIEW THAT INCOME ON ACCOUNT OF INTEREST RECEIVABLE ON ADVANCE PAID BY THE ASSESSEE TO M/S CEAT TYRES LTD. HAD ACCRUED TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AND THE SAME WAS TAXABLE I N THE HANDS OF THE ASSESSEE AS RIGHTLY HELD BY THE A.O. IN THAT VIEW O F THE MATTER, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE A.O. GROUND NO. 7 OF REVENUES APPEAL IS ACCORDINGLY ALL OWED. 34. IN THE C.O. FILED FOR A.Y. 2002-03 BEING C.O. N O. 97/MUM/2008, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN NOT ALLOWING DED UCTION OF RS. L.47 LAKHS IN RESPECT OF REVENUE LOSS INCIDENTAL TO BUSI NESS WHICH WAS WRONGLY DISALLOWED BY THE ITO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE AUTHORITIES BELOW HAD TAKEN THE FIGURE OF RS.22.99 LAKHS AS THE AMOUNT OF DISALLOWANCE WHEREAS THE CORRECT FIGURE IS ONLY RS. L4.46 LAKHS WHICH ALONE REQUIRES TO BE ALLOWED AND AS THE WRONG ADDIT ION HAS BEEN DELETED IN FIRST APPEAL, THE REVENUE CAN HAVE NO GR IEVANCE AGAINST THE DELETION OF ILLEGAL ADDITION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE AUTHORITIES BELOW HAVE ERRED, BOTH ON FACTS AND IN LAW, IN NOT ALLOWING RS.L7,94,318/- BEING THE REVENUE LOSS INCIDENTAL TO BUSINESS ESPECIALLY WHEN THE AMOUNT OF THE LOSS HAD BEEN DULY WRITTEN O FF BY THE ASSESSEE AND NOTHING FURTHER WAS REQUIRED TO BE DONE. 35. AT THE TIME OF HEARING BEFORE US, THE LD. COUNS EL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 1 & 2 OF THE C.O. FILED BY T HE ASSESSEE. THE SAME ARE THEREFORE DISMISSED AS NOT PRESSED. ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 20 36. AS REGARDS GROUND NO. 3 OF THE C.O. OF THE ASSE SSEE, THE SAME HAS ALREADY BEEN DISMISSED BY US WHILE DECIDING GROUND NO. 6 OF THE REVENUES APPEAL INVOLVING A COMMON ISSUE. 37. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE FOR A.Y. 2003-04 BEING ITA NO. 6274/MUM/2006 WHICH IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)- XXXII, MUMBAI DTD. 3-10-2006. 38. AS REGARDS GROUND NO. 1 RAISED BY THE REVENUE I N THIS APPEAL, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING T O DISALLOWANCE OF USANCE INTEREST AND BLC INTEREST IS SIMILAR TO THE ONE INV OLVED IN GROUND NO. 1 OF THE REVENUES APPEAL FOR A.Y. 2002-03 WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN IN A.Y. 2002-03, WE DELETE THE DISALLOWANCE MADE BY THE A.O . ON ACCOUNT OF USANCE INTEREST AND BLC INTEREST AND DISMISS THE GROUND RA ISED BY THE REVENUE. ` 39. AS REGARDS GROUND NO. 2 OF THE REVENUES APPEAL , IT IS OBSERVED THAT THE ISSUE RAISED THEREIN RELATING TO THE HEAD OF INCOME UNDER WHICH BANK INTEREST IS CHARGEABLE TO TAX IS ALSO SIMILAR TO THE ONE INV OLVED IN GROUND NO. 2 OF REVENUES APPEAL FOR A.Y. 2002-03 WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN IN A.Y. 2002-03 ON SIMILAR ISSUE, WE UPHOLD THE IMPUGNED OR DER OF THE LD. CIT(A) TREATING THE BANK INTEREST AS ASSESSEES BUSINESS I NCOME AND DISMISS GROUND NO. 2 OF REVENUES APPEAL. 40. AS REGARDS GROUND NO. 3, IT IS OBSERVED THAT TH E ISSUE INVOLVED THEREIN RELATING TO THE TAXABILITY OF INTEREST RECEIVABLE B Y THE ASSESSEE ON ADVANCE APPEARING IN THE NAME OF M/S CEAT TYRES LTD. IS AL SO SIMILAR TO THE ONE INVOLVED IN GROUND NO. 7 OF REVENUES APPEAL FOR A. Y. 2002-03 WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN IN A.Y. 2002-03 ON SIMILAR ISS UE, WE SET ASIDE THE ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 21 IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE A.O. GROUND NO. 3 OF REVENUES APPEAL IS ACCORDINGLY DIS MISSED. 41. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE FOR A.Y. 2004-05 BEING ITA NO. 5738/MUM/2008 WHICH IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)- XXXII, MUMBAI DTD.30-4-2008. 42. AS REGARDS GROUND NO. 1 RAISED BY THE REVENUE I N THIS APPEAL, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING T O DISALLOWANCE OF USANCE INTEREST AND BLC INTEREST IS SIMILAR TO THE ONE INV OLVED IN GROUND NO. 1 OF THE REVENUES APPEAL FOR A.Y. 2002-03 WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN IN A.Y. 2002-03, WE DELETE THE DISALLOWANCE MADE BY THE A.O . ON ACCOUNT OF USANCE INTEREST AND BLC INTEREST AND DISMISS GROUND NO.1 R AISED BY THE REVENUE. 43. AS REGARDS GROUND NO. 2 OF THE REVENUES APPEAL , IT IS OBSERVED THAT THE ISSUE RAISED THEREIN RELATING TO THE HEAD OF INCOME UNDER WHICH BANK INTEREST IS CHARGEABLE TO IS ALSO SIMILAR TO THE ONE INVOLVE D IN GROUND NO. 2 OF REVENUES APPEAL FOR A.Y. 2002-03 WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN IN A.Y. 2002-03 ON SIMILAR ISSUE, WE UPHOLD THE IMPUGNED OR DER OF THE LD. CIT(A) TREATING THE BANK INTEREST AS ASSESSEES BUSINESS I NCOME AND DISMISS GROUND NO. 2 OF REVENUES APPEAL. 44. IN ITS C.O. NO. 179/MUM/2009 ARISING OUT OF ITA NO. 5738/MUM/2008 FOR A.Y. 2004-05, THE ASSESSEE HAS RAISED FOUR GROU NDS. 45. AT THE TIME OF HEARING BEFORE US, THE LD. COUNS EL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 2,3 & 4. THE SAME ARE ACCOR DINGLY DISMISSED BEING NOT PRESSED. ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 22 46. THE ISSUE RAISED IN GROUND NO. 1 OF ASSESSEES CROSS OBJECTION RELATES TO THE ADDITION OF RS. 1,51,000/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ADVANCES/DEPOSITS WRITTEN OFF. 47. IN THE RETURN OF INCOME, THE ASSESSEE HAD CLAIM ED DEDUCTION OF RS. 1,51,000/- ON ACCOUNT OF ADVANCES WRITTEN OFF AS BA D DEBTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE ADVANCES WRITTEN OFF AS BAD ACTUALLY REPRESENTED EA RNEST MONEY DEPOSITS (EMD) PAID WHILE BIDING FOR THE TENDERS. SINCE THE AMOUNT OF THE SAID EMD WAS NOT ASSESSED AS INCOME OF THE ASSESSEE IN THE E ARLIER YEARS, THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS WAS DISALLOWED BY THE A.O. HOLDING THAT THE CONDITIONS STIPULATED IN SECTION 3 6(1)(VII) R.W.S. 37(2) OF THE ACT WERE NOT SATISFIED. 48. BEFORE THE LD. CIT(A), AN ALTERNATIVE CLAIM WAS MADE BY THE ASSESSEE BY STATING THAT THE LOSS AS A RESULT OF EMD BECOMING I RRECOVERABLE BEING A BUSINESS LOSS SHOULD BE ALLOWED U/S 37(1) OF THE AC T. THE LD. CIT(A), HOWEVER, DID NOT ALLOW THIS ALTERNATIVE CLAIM OF THE ASSESSE E HOLDING THAT THERE WAS NO EVIDENCE BROUGHT ON RECORD TO SHOW THAT THE LOSS AS A RESULT OF EMD BECOMING IRRECOVERABLE WAS ACTUALLY INCURRED DURING THE YEAR UNDER CONSIDERATION. EVEN BEFORE US, NO SUCH EVIDENCE HAS BEEN PRODUCED BY THE ASSESSEE TO SHOW THAT THE SAID LOSS WAS ACTUALLY INCURRED DURING THE YEAR UNDER CONSIDERATION AND IN THE ABSENCE OF THE SAME, WE FIND NO JUSTIFIA BLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE. GROUND NO. 1 OF ASSESSEES C.O. IS ACCORDINGLY DISMISSED. 49. IN THE RESULT, APPEALS OF THE REVENUE FOR AS SESSMENT YEARS 2002-03 AND 2003-04 ARE PARTLY ALLOWED WHILE APPEAL OF THE REVE NUE FOR A.Y. 2004-05 AND THE ASSESSEES CROSS OBJECTIONS FOR ASSESSMENT YEAR S 2002-03 & 2004-05 ARE DISMISSED. ITA NO. 997/M/2006, C.O. 97/MUM/2008, ITA NO.6274/M/2006, ITA N O.5738/M/08 & C.O. 179/M/2009 23 ORDER PRONOUNCED IN THE OPEN COURT ON 10-04 -2013. . *P N O/ ( Q*R 10-04-2013 N & SD/- SD/- (D. MANMOHAN) (P.M. JAGTAP ) !' VICE PRESIDNET ( )*+ / ACCOUNTANT MEMBER MUMBAI ; Q* DATED 10-04-2013. $.-.)./ RK , SR. PS *P N 2-'[\ ]\/' *P N 2-'[\ ]\/' *P N 2-'[\ ]\/' *P N 2-'[\ ]\/'/ COPY OF THE ORDER FORWARDED TO : 1. 01 / THE APPELLANT 2. 2301 / THE RESPONDENT. 3. () / THE CIT(A)CONCERNED, MUMBAI. 4. / CIT CONCERNED, MUMBAI 5. \$A& 2-'- , , / DR, ITAT, MUMBAI K BENCH 6. &. B / GUARD FILE. *P) *P) *P) *P) / BY ORDER, )3\' 2-' //TRUE COPY// / // /) % ) % ) % ) % ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI