Income Tax Appellate Tribunal - Delhi
Cosmos Industries Ltd., New Delhi vs Department Of Income Tax on 4 January, 2011
1IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : B : NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI A.D. JAIN, JUDICIAL MEMBER
ITA No.877/Del/2011
Assessment Year : 2004-05
Cosmos Industries Limited, Vs. ITO,
202, Thapar Arcade, Ward-3 (4),
47, Kalu Pura, Haus Khas, New Delhi.
New Delhi - 110 016.
PAN : AAACC6682R
ITA No.1819/Del/2011
Assessment Year : 2004-05
DCIT, Vs. Cosmos Industries Limited,
Circle 3 (1). Farm No.16,
New Delhi. Rajokri, NH-8,
New Delhi..
PAN : AAACC6682R
ITA Nos.1906 & 1965/Del/2011
Assessment Years : 2006-07 & 2007-08
ITO, Vs. Cosmos Industries Limited,
Ward-3 (4), 202, Thapar Arcade,
New Delhi. 47, Kalu Pura, Haus Khas,
New Delhi - 110 016.
PAN : AAACC6682R
(Appellant) (Respondent)
Assessee By : Shri Akhilesh Kumar, Advocate &
Shri Rakesh Garg, CA
Department By : Smt. Nidhi Srivastava, CIT, DR
ITA Nos.877, 1819, 1906 & 1965/Del/2011
ORDER
PER A.D. JAIN, JUDICIAL MEMBER:
ITA No.1819/Del/2011
This is Department's appeal for AY 2004-05 against the order dated 04.01.2011, passed by the CIT (A)-V, New Delhi, taking the following grounds:-
"1. The ld. CIT (A) has erred on facts and in law in deleting addition of Rs.29,34,000/- on account of disallowance of interest liability for year on "sugar development fund loan" u/s 43B of the IT Act ignoring the fact that the assessee cannot absolve his responsibility to pay interest on term loan merely by terming it as loan from Central Govt. and the case of the assessee squarely falls within the ambit of Section 43B (d) of the IT Act.
2. The ld. CIT (A) has erred on facts and in law in deleting addition of Rs.24,59,447/- on account of disallowance of cane cess and bonus payable by invoking section 43B of the IT Act ignoring that Circular No.581 of CBDT referred by Ld. CIT (A) for allowing relief to the assessee has no relevance. Further, keeping in view the judgement of Hon'ble Apex Court in the case of M/s Goetze (I) Limited vs. CIT (2006) 157 Taxman 1 (SC) wherein t was pronounced that the AO has no power to entertain a claim made by the assessee after filing of original return otherwise than by filing revised return.
3. In the facts and circumstances of the case, the Ld. CIT (A) has erred in law and on facts in allowing the assessee's claim that an income of Rs.1,90,70,843/- was taxed twice which was not accepted by the AO on the ground that the return was not revised. Here also reliance is placed on the judgment of Hon'ble Apex Court in the case of M/s Goetze (I) Ltd. vs. CIT (2006) 157 Taxman 1 (SC)."
2. Apropos Ground No.1, the AO made disallowance of an amount of Rs. 29,34,000/- u/s 43B of the IT Act on account of non-payment of interest on Sugar Development Fund. The AO held:
"a) The assessee has shown the term loan as "Sugar Development Fund Loan (thru IFCI)" in Schedule-2 of secured loan of the balance sheet.
b) The assessee has not paid interest during the year.
c) That IFCI has written letter dated 17.2.2000, wherein the co was
asked to remit the entire amount of loan. On the basis of this letter the AO 2 ITA Nos.877, 1819, 1906 & 1965/Del/2011 concluded that IFCI has not only given the loan but pursued for its repayment.
3. The CIT (A) deleted this disallowance/addition.
4. The ld. DR has contended that the ld. CIT (A) has erred in deleting the disallowance correctly made; that while doing so, the ld. CIT (A) has failed to appreciate the fact that since the assessee has termed the loan as a loan from the Central Government, this alone does not absolve the assessee from its responsibility to pay interest on the term loan and that the case of the assessee squarely falls within the ambit of Section 43B (d) of the Act. The ld. Counsel for the assessee, on the other hand, has placed strong reliance on the impugned order, contending that it remains undisputed that the loan in question was from the Government of India and not from IFCI, which is evident from the deed of hypothecation, sanction letter regarding the loan, the charge in favour of the Government of India and the letters of the IFCI, dated 17.02.00 and 14.11.03, all of which documents were before both the taxing authorities and which have also been placed before the Tribunal.
5. It is available from the record and not disputed before us, that a Sugar Development Fund Loan (SDF) was sanctioned to Cosmos Industries Ltd. (CIL) for modernization of the erstwhile Bhagwanpura Sugar Mills Ltd. (BSML) for Rs.489.00 lacs in two instalments - Rs.88.00 lacs as first instalment and Rs.401.00 lacs as second instalment; that the SDF was created from the sanctioned budget grant of the department of Food Ministry of Food and Civil Supplies, Govt. of India (GOI) for the rehabilitation/modernization of sugar mills (Non-plan) - Development fund for agriculture purposes; that in terms of sub-rule (7) of rule 16, the amount of the loan sanctioned as above was disbursed through a financial institution viz., Industrial Finance Corporation of India (IFCI), New Delhi. IFCI is the was nodal agency of the GOI for the purpose of administering SDF loans; that the deed of Hypothecation was executed in favour of the President of India and a charge was duly created in favour of the President of India through the Ministry of Food and Civil Supplies, Government of India (copy of charge certificate is on record); that the loan was sanctioned by the department of Food, Ministry of Food & Civil Supplies, GOI; that the charge was created 3 ITA Nos.877, 1819, 1906 & 1965/Del/2011 in favour of the President of India (Certificate of Registration of mortgage u/s 132 of the Companies Act); and that in the departmental communication addressed to the Controller of Accounts, Deptt. Of Food, Ministry of Food & Civil Supplies, regarding sanction of SDF loan to BSML, the Deputy Secretary to the Govt. of India mentioned in clause 3 of the sanction that : 'The expenditure involved is debitable to the to the sanctioned budget grant of this department for year 1989-90 under grant No.38, Major Head '6860'-CC-Loans for consumer Industries-CC.1 - sugar - CC-1 (I)(I)(I) - loans for modernization/rehabilitation of sugar mills (non-plan) and recoverable from the Major Head '8229' - Development and welfare funds - Sugar Development Fund.'
6. The AO, however, observed that the submission of the assessee gets diluted in the wake of the fact that IFCI has written a letter dated 17.02.2000 to the assessee company asking the company to remit to them the entire amount of loan immediately, and that the letter prima facie established that IFCI had not only given the loan, but was also pursuing the assessee for repayment. It was further observed that the correspondence for early repayment had been regularly made by IFCI with the assessee and under the given circumstances, the assessee could not absolve itself of its responsibility to pay interest on term loan, merely by terming it is a loan from the Central Government; and that IFCI always acts on behalf of the Central Government and the case of this assessee squarely falls within the ambit of section 43B (d) of IT Act, 1961.
7. It was in this manner that the AO made the disallowance in question.
8. We find that the deed of hypothecation is at APB 92-101, giving all the details regarding the creditor, the debtor and the agent. The SDF loan, definitely, was given by the Ministry of Food and Civil Supplies, New Delhi and not by any financial institution. Therefore, the provisions of Section 43B of the Act do not get attracted for this reason itself. The SDF was created from the sanctioned budget grant of the Department of Food and Civil Supplies, Government of India for the rehabilitation and modernization of sugar mills. This fund was created to undertake activities envisaged with the intention of developing a particular agricultural commodity in order to improve the marketability of the product.
4ITA Nos.877, 1819, 1906 & 1965/Del/2011
9. APB 89-91A is a copy of the sanction letter regarding the loan, as issued by the Government of India. This letter states that: "the expenditure involved, is debitable to the sanctioned budget grant of this department for consumer industries-loans for modernization, rehabilitations of sugar mill (non plan) and recoverable from the development and welfare funds - Sugar Development Fund." The sanction letter requires that the company shall create second charge on its fixed and movable assets in favour of Central Government. This signifies that it is a loan granted by and repayable to Government of India and not granted by or repayable to IFCI."
10. APB 102-103 is a copy of the certificate of registration of mortgage u/s 132 of the Companies Act, 1956, certifying that the charge dated 11.12.89 for Rs. 401.00 lacs and that dated 09.03.88 for Rs. 88.00 lacs stood registered in the office of the Registrar of Companies, Punjab, Himachal Pradesh and Chandigarh, in accordance with the provisions of Sections 125 to 130 of the Companies Act. As per the provisions of section 125 of the Companies Act, 1956, every charge created by a company shall be void against any creditors of the company, unless the prescribed particulars of the charge are filed with Registrar of Companies. Accordingly, a charge was created in favour of the creditors namely, the "President of India through respective Ministry."
11. The assessee is also correct in maintaining that if the creditor in the SDF loan was IFCI, the charge would have been created in favour of IFCI, and not in favour of the President of India, since under the Companies Act, a charge can only be created in favour of the creditor of the loan.
12. Further, it goes without saying that a loan taken is required to be repaid to its creditor. The sanction letter of the SDF loan requires that it should be repaid to the Controller of Accounts, Department of Food, Government of India. Hence, the creditor of loan is the Government of India. The correspondence made by IFCI clearly states that the assessee was required to credit the installment of principal and interest amount to the Controller of Accounts, Ministry of Consumer Affairs, Food & Public Distribution. Thus, a debtor-creditor relationship was established between the assessee company as a debtor and the Ministry of Food & Civil Supplies, Government of India, as a creditor.
5ITA Nos.877, 1819, 1906 & 1965/Del/2011
13. IFCI letter dated 23.08.07 (APB 87 and 106) states that: "You are requested to credit the installment of principal and interest amount directly to controller of Accounts, Ministry of Consumer Affairs, Food & Public Distribution."
14. IFCI letter dated 21.09.07 (APB 88 and 107) reads:-
"We have also to advice that any amount received by way of repayment of loan, payment of interest thereon or any other receipt, credit the said amount to Sugar Development Fund, Government of India. IFCI acting as a nodal agency, charge agency commission from Government of India."
15. IFC letter dated 17.02.00 (APB 104) specifically states that IFCI was acting as an agent of the Government of India and that the assessee company remitted the loan amount to it, i.e., the IFCI.
16. IFCI letter dated 14.11.03 (APB 105) is to the same effect.
17. The AO took the factum of the depiction of the SDF loan in Schedule II of the assessee's balance sheet as 'Sugar Development Fund Loan through IFCI', to be going against the assessee and revealing that the loan was in fact taken from IFCI. However, the AO omitted to notice that the operative word here is 'through' and not 'from'. This makes it abundantly clear that the creditor was not IFCI, but was the Government of India. IFCI acted as a nodal agent for the Government of India regarding the SDF loan, which fact is also evident from the copious documentation including the hypothecation deed, the sanction letter and the numerous letters of IFCI, as taken note of hereinabove. Therefore, indisputably, it is the Government of India which is the principal and that being so, its agent, IFCI, according to Section 182 of the Indian Contract Act, 1872, cannot be taken to be a person employed to do any act as such principal. Such agent is a person employed (APB 37A). Section 43B provides that any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State Financial Corporation or a State Industrial Investment Corporation in accordance with the terms and conditions of the agreement governing such loan or borrowing, shall be allowed only on actual payment. In the present case, the IFCI did not receive any interest. The interest was on the SDF loan taken from the Government of India. As per the terms and conditions of the SDF loan, the charge on the immovable 6 ITA Nos.877, 1819, 1906 & 1965/Del/2011 and movable properties of the company operates as security, inter alia, for due payment by the company to the President of India for term loan together with interest, additional interest, liquidated damages and all other monies payable by the company to the President of India. The mode of repayment of loan and payment of interest thereon should be by means of a demand draft drawn on the Reserve Bank of India or the State Bank of India, New Delhi, in favour of the Controller of Accounts, Department of Food, Government of India, New Delhi..
18. In its letter dated 21.09.07 (APB 88-106), IFCI has specifically stated that:
"i) IFCI has worked as a nodal agency of Sugar Development Fund, Government of India;
ii) Any amount received by way of repayment of loan, payment of interest thereon or any other receipt; credit the said amount to Sugar Development Fund, Government of India.
iii) IFCI acting as a nodal agency and charge agency commission.
iv) As per latest procedure of repayment of SDF loan principal and interest amount is directly, to be sent to controller of Accounts Ministry of Consumer Affairs, Food & Public Distribution, New Delhi."
19. Thus, the AO obviously went wrong in concluding that the SDF loan was from IFCI and not from the Government of India. The ld. CIT (A) has duly taken into consideration all these facts while rightly deleting the disallowance/addition and we do not find any error whatsoever with the well reasoned observations recorded by her in the impugned order.
20. For the above discussion, finding no merit therein, the Ground No.1 raised by the department is rejected.
21. Apropos Ground No.2, the AO disallowed the assessee's claim of payment of liability of Rs. 24,59,447 on account of cane cess and bonus payable. While doing so, the AO did not accept the assessee's contention that it was by mistake that this amount paid had not been claimed in the return of income filed and had been claimed during the assessment proceedings, though this amount was allowable u/s 43B of the IT Act.
7ITA Nos.877, 1819, 1906 & 1965/Del/2011 According to the AO, a revised return of income ought to have been filed by the assessee. The ld. CIT (A) directed the AO to allow this payment.
22. The ld. DR has contended that while illegally deleting the disallowance correctly made u/s 43B of the Act, the ld. CIT (A) has failed to consider that CBDT Circular No.581 dated 28.09.90 has no relevance; and that the ld. CIT (A) has failed to consider the decision of the Hon'ble Supreme Court in the case of 'M/s Goetze (I) Ltd. vs. CIT', 157 Taxman 1 (SC), holding that the AO has no power to entertain a claim made by the assessee after filing of the original return, otherwise than by filing a revised return of income.
23. The ld. Counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. It has been contended that the amount in question is allowable under the provisions of Section 43B of the Act; that the payment was made during the year under consideration; that in the Audit Report, this amount has been reported as an allowable expenditure; that evidence for such payment was duly furnished before the AO in the assessment proceedings; that it was due to a bona fide mistake which had occurred in the computation of taxable income, as filed along with the return of income, that this amount was not claimed, but was claimed in the assessment proceedings.
24. During the year, the assessee had paid Rs. 6 lacs towards cane cess payable and Rs.18,59,947/- towards bonus liabilities. Both these liabilities pre-existed on the first day of the previous year. Before the AO, the assessee filed vouchers as evidence for payment of bonus and challans showing payment of cess. Undisputedly, the entire amount is an allowable expenditure under the provisions of Section 43B of the Act, according to which, a deduction otherwise allowable under the Act shall, notwithstanding anything contained in any other provision of the Act, be allowed in computing the income referred to in Section 28 of the Act, of that previous year, in which such sum is actually paid by the assessee. In the Tax Audit Report of the assessee, both these amounts have duly been reported as allowable expenditure.
8ITA Nos.877, 1819, 1906 & 1965/Del/2011
25. In the above facts, the ld. CIT (A) is found to have correctly allowed the payment of Rs.24,59,957/- on account of cane cess and bonus paid during the year by the assessee out of pre-existing liabilities. Accordingly, Ground No.2 is rejected.
26. Addressing Ground No.3, the assessee claimed that an income of Rs.1,90,70,843/- had been taxed twice. This claim of the assessee was rejected by the AO for the reason that the assessee had not revised its return of income. The ld. CIT (A) allowed the assessee's claim.
27. The ld. DR contends that here also, as for Ground No.2, the ld. CIT (A) has failed to take into consideration the decision in 'M/s Goetze (I) Ltd.' (supra).
28. The ld. Counsel for the assessee, per contra, has again relied on the CIT (A)'s order.
29. The claim of the assessee has been that income of Rs.1,90,70,843/- was taken twice, once as business income and again as income from long-term capital gain. In Schedule-II to the assessee's Profit and Loss Account for the year under consideration, this amount appears as 'Profit on sale of fixed assets.' It includes Rs.1,89,71,606/-, being profit on sale of plots and Rs.99,237/-, representing profit on sale of vehicles. The profit on sale of plots was considered as income from long-term capital gain, whereas the profit on sale of vehicles was considered in the depreciation chart. These amounts were not deducted from 'business income' and, as such, they were taxed twice.
30. The Profit & Loss Account, the depreciation chart, the computation of income and all the other connected documents were duly taken into consideration by the ld. CIT (A) and it was on the basis of this documentary evidence, that the ld. CIT (A) arrived at and, in our considered opinion, rightly so, the conclusion that the amount had been taxed twice. Therefore, the AO was rightly directed to reduce this amount from the assessee's business income. Thus, finding no error therein, the order of the ld. CIT (A) in this regard is confirmed and Ground No.3 is rejected.
31. In the result, the appeal filed by the department is dismissed.
9ITA Nos.877, 1819, 1906 & 1965/Del/2011 ITA No.877/Del/2011
32. This is assessee's appeal for AY 2004-05, against the order dated 04.01.2011 passed by the CIT (A)-V, New Delhi, taking the following grounds:-
"1. That the Commissioner of Income Tax (Appeals) V, New Delhi erred in law by holding that appellant company has not been able to identify and link that the advances to the tune of Rs.42 lacs were paid out of internal generation of funds though the appellant has furnished sufficient and documentary evidence with regard to it.
2. That CIT (Appeals) ignored the decision pronounced by various High Courts & Supreme Court wherein it was held that in case profit earned by the assessee were sufficient to cover the impugned loans, addition cannot be sustained. Similarly on the principle of prudence such addition can also not be sustained."
33. The facts are that the AO noticed the assessee company to have shown an amount of ` 1,60,24,219/- as due to its Director. The assessee had given interest free loans to Directors and while at the same time it had paid a sum of ` 2,91,86,597/- to bank as interest. Relying on the decision in 'HR Sugar Factory Pvt. Ltd. vs. CIT', 187 ITR 363 (All), disallowed an amount of ` 9,61,952/-, on account of interest claimed as paid to bank on borrowed funds @ 6%.
34. While restricting the addition from ` 9,61,952/- to ` 2,52,000/-, the ld. CIT (A) observed as follows:-
"I have carefully considered the assessment order as well as the written submission of the appellant as well as the case laws relied on by the AO and the appellant. The facts of the case of H.R. Sugar Factor v/s CIT 187 ITR 363 relied on by the AO is similar only to the extent that the assessee in both the case is a Sugar Mill. In the case of H.R. Sugar Factory, over the last several years, it has been advancing loans to its directors and since there was practically no repayment, the loan amount went on mounting and rising steadily. The advances were made to directors at a very low rate of 2.5% and hence the AO concluded that the appellant is not in the business of mercy lending and had borrowed huge funds from the bank at higher rate of interest while at the same time giving huge advances to directors/shareholders and therefore the High Court held the AO was right in disallowing the balance. In the present case it is seen that the appellant company has enjoyed interest free loans from its directors since 1999 and interest free advances were made only for the years ending 31.3.2003 and 31.3.2004. It is also seen that Rs.120 lacs was in the form of 'calls in arrears' to be received from directors for which an entry debiting "amount due from directors" and crediting share capital a/c was journalized where no actual outflow of fund was involved. It is only in respect of the balance 10 ITA Nos.877, 1819, 1906 & 1965/Del/2011 amount of Rs.42 lacs, which the company claims that it was given out of internal generation of funds. However, the appellant company has not been able to identify and link that the advances were paid out of the internal generation of funds. Therefore, the addition of 6% to the extent of Rs.9,61,952/- which works out to Rs.2,52,000/- is upheld and the balance amount of Rs.7,09,952/- is deleted."
35. Challenging the aforesaid action of the ld. CIT (A) in sustaining the addition to the extent of ` 2,52,000/-, the ld. Counsel for the assessee has contended that the ld CIT (A) has failed to take into consideration the ample evidence brought by the assessee to prove that the advances of ` 42 lacs were paid by the assessee out of its own internal funds. It has been contended that there was a running account of the assessee with its directors since 1999 and the amount of ` 42 lacs stood paid in the earlier year; that otherwise, the assessee had taken huge interest free loans from its directors and had got the benefit of interest of ` 124 lacs even after setting off the impact interest, if any, as on 31.3.03 and 31.3.04; that the term loans taken from the bank were utilized in creating long term assets of the assessee company; that the long-term assets of the company during the year were worth ` 34.65 crores, as against outstanding term loan of ` 9.45 crore only; that likewise, the working capital credit was deployed in current assets, which was worth ` 16.66 crores, as against outstanding bank credits of ` 10.84 crores; that in fact, the loan in question was continuously reducing due to repayment from 31.3.01 to 31.3.04; and that this amply proves that the loan was not utilized for payment of the amount of ` 42 lacs as advanced to the directors of the assessee company.
36. It has further been contended that it was a continuous internal generation of funds and during the years ended on 31.3.2002 and 31.3.03, assessee's net profit before providing depreciation, amounted to ` 28 lacs and ` 170 lacs, respectively; that this apart, the assessee company was having a share capital of ` 7.6 crores, which was interest free; and that the ld. CIT (A) has failed to take into consideration these aspects of the matter while wrongly sustaining the addition to the extent of ` 2,50,000/-.
37. The ld. DR, on the other hand, has placed strong reliance on the impugned order.
11ITA Nos.877, 1819, 1906 & 1965/Del/2011
38. We have heard the parties and have perused the material on record. The factum of the assessee company having enjoyed interest free loans from its directors since 1999 and having made interest free advances only in the year ended on 31.3.2003, 31.3.04 and the factum of an amount of ` 120 lacs out of ` 160 lacs being 'calls in arrears' only by way of book entry and not involving any actual outflow of funds, have duly been taken into consideration by the ld. CIT (A). The sole objection raised by the ld. CIT (A) is that the assessee company has not been able to identify any link in respect of the balance amount of ` 42 lacs to show that the advances were paid out of internal generation of funds.
39. This, however, is found to be incorrect. The record, as produced before the taxing authorities, i.e., the AO as well as the ld. CIT (A), shows that as per the balance sheet of the assessee company, as at 31.3.04, the term loan taken from the bank was utilized in creating long-term assets of the assessee company. Further, the working capital created had also been deployed in inventories, debtors and liquid assets in an appropriate manner. Then, as per the fund flow of the assessee company, there was continuous internal generation of funds through sales activity. The current account transactions in the current account maintained with the assessee's directors, were maintained from the earlier year and not done during the year. Further, as per Annexure 'A' (APB 51) filed by the assessee along with its written submissions (APB 48-52), the cumulative impact of benefit of notional interest not paid on net credit balances of the directors, calculated @ 6% per annum of such interest free loans, for the years ended 31.3.99 to 31.3.02, was of ` 144.89 lacs. As per Annexure 'B' (APB 52) of the said written submissions filed by the assessee before the ld. CIT (A), the interest on the debit balance of the directors for the years ended 31.3.03 and 31.3.04, amounted to ` 19.34 lacs only. This, noticeably, was inclusive of the tentative impact of interest @ 6% per annum, of 9.6%, for the year ended 31.3.04. Thus, as rightly contended, even after setting off the debit impact of interest for the years ended 31.3.03 and 31.3.04, the assessee company had a benefit of more than ` 124 lacs.
40. In 'Munjal Sales Corporation vs. CIT', 298 ITR 298 (SC), it was held that where opening balance of profit and loss account and the profits are sufficient to cover the 12 ITA Nos.877, 1819, 1906 & 1965/Del/2011 loans given, such loan is to be treated as given out of the assessee's own funds and no disallowance of the interest paid on borrowed funds for business, is called for.
41. In 'CIT vs. Bharti Televenture Ltd.', 331 ITR 502 (Del), where the assessee had established that it had adequate non-interest bearing funds by way of share capital and reserves at the time of advance and the loan was also prompted by business consideration, it was held that the deduction allowed by the Tribunal was not to be interfered with.
42. In 'CIT vs. Dalmia Cement Pvt. Ltd.' 254 ITR 377 (Del), as confirmed by the Hon'ble Supreme Court in 'SA Builders Ltd. vs. CIT', 288 ITR 1 (SC), it was held that the revenue is not justified to put itself in the armchair of the businessmen or in the position of the Board of Directors to disallow a claim of interest on borrowing, holding that the assessee had ample resources at his disposal and need not have borrowed.
43. In 'CIT vs. Prem Heavy Engg. Works P. Ltd.', 285 ITR 554 (All), it was held that where, in a case of interest on borrowed capital concerning advances made by the assessee to its sister concerns, sufficient interest free funds were available with the assessee in the form of interest free advances from customers, share capital surplus and reserves to make advances, interest on borrowings was not to be disallowed.
44. In view of the above, the grievance of the assessee is justified and is accepted. The disallowance of interest paid of ` 2,52,000/- is deleted.
ITA No.1965/Del/201145. This is department's appeal for AY 2007-08 against the order dated 15.2.2011, passed by the CIT (A)-VI, New Delhi, taking the following grounds:-
""1. The ld. CIT (A) has erred on facts and in law in deleting addition of Rs.8450784/- on account of disallowance of interest liability for year on "sugar development fund loan" u/s 43B of the IT Act ignoring the fact that the assessee cannot absolve his responsibility to pay interest on term loan merely by terming it as loan from Central Govt. and the case of the assessee squarely falls within the ambit of Section 43B (d) of the IT Act.13
ITA Nos.877, 1819, 1906 & 1965/Del/2011
2. In the facts and circumstances of the case, the ld. CIT (A) has erred on facts and in law in deleting addition of Rs.80294/- on account of disallowance of extra depreciation on computer peripherals ignoring that as per the IT Rules 60% depreciation is allowable only on computer and computer software and not on computer peripherals and accessories."
46. The matter concerning Ground No.1 is, mutatis mutandis, exactly similar to that relating to Ground Nos.1 and 2 in ITA No.1819/Del/2011. For our preceding discussion while dealing with those grounds in ITA No.1819/Del/2011, this ground raised by the department is also rejected.
47. Apropos Ground No.2, the ld. CIT (A) has deleted the addition made by the AO, following the Hon'ble Delhi High Court order dated 31.08.2010, passed in the case of 'CIT vs. BSES Rajdhani Powers Ltd.' in ITA No.1266/2010.
48. No decision contrary to 'BSES Rajdhani Powers Ltd.' (supra) has been brought to our notice by the department. In 'BSES Rajdhani Powers Ltd.' (supra), it was held by the Hon'ble Delhi High Court that computer accessories and peripherals such as printers, scanners, servers, etc formed an integral part of the computer system, as they cannot be used without the computer; and that thus, they are entitled to depreciation at the higher rate of 60%.
49. In view of the above, the ld. CIT (A) has correctly deleted the disallowance made by the AO concerning extra depreciation on computer peripherals. Accordingly, Ground No.2 is also rejected.
ITA No.1906/Del/201150. This is department's appeal for AY 2006-07 against the order dated 15.2.2011, passed by the CIT (A)-VI, New Delhi. The issue involved in this appeal is, mutatis mutandis, exactly similar to the one concerning ITA No.1819/Del/2011. Therefore, for the reasons given by us while deciding ITA No.1819/Del/2011, this appeal of the department in ITA No.1906/Del/11 is also dismissed.
14ITA Nos.877, 1819, 1906 & 1965/Del/2011
51. In the result, the appeals of the department in ITA Nos.1819/Del/11, 1906/Del/11 and 1965/D/11are dismissed. The assessee's appeal in ITA No.877/Del/2011 is allowed.
The order pronounced in the open court on 23.05.2014.
Sd/- Sd/-
[G.D. AGRAWAL] [A.D. JAIN]
VICE PRESIDENT JUDICIAL MEMBER
Dated, May, 2014.
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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