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1 - 10 of 10 (0.33 seconds)E. D. Sassoon And Company Ltd vs The Commissioner Of Income-Tax,Bombay ... on 14 May, 1954
Ltd. v. CIT[1986] 162 ITR 587 (Ker.)
Shree Sajjan Mills Ltd vs Commissioner Of Income Tax, M.P. Bhopal ... on 8 October, 1985
In the case of Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585 also, the Supreme Court has held, that contingent liability is not one which could be allowed as a deduction.
Rayalaseema Mills Limited vs Commissioner Of Income-Tax, Andhra ... on 19 June, 1984
and Rayalaseema Mills Ltd. v. CIT [1985] 155 ITR 19 (AP). In the light of these decisions, for the assessee to contend that what is debited to the profit & loss account was an accrued, actual and ascertained liability would be a travesty. The CIT's assuming jurisdiction under Section 263 has not in any way infringed any provisions of the Act. The CIT also on perusal of the records, found that there was substantial debit balances in the names of the sister concerns. Assessee had been charging interest on these debit balances in the past. For some obscure reasons, no such interest was charged during the year. It is for this reason that the CIT thought it necessary to initiate action under Section 263. His formation of prima facie opinion that the order passed by the AO was erroneous being prejudicial to the interest of the revenue, cannot be faulted on the facts and circumstances of the case.
Commissioner Of Income-Tax Bombay ... vs Bombay Samachar Ltd., Bombay on 30 June, 1969
9. As regards the interest, the position is the same. The debits in the various accounts are mostly on account of group companies receiving revenues belonging to the assessee on advertisements, circulations and the like. Assessee has centralised system of collection and in such circumstances at any given time the companies receiving amounts on behalf of the assessee would have debit balances in assessee's books of account. It would be wrong to determine the interest on notional basis on such debit balances and treat them as the income of the assessee. We shall reject the findings of the CIT in this connection that the failure of sister concerns to transfer funds to the assessee company and non-action of assessee-company to ask them to transfer such funds would amount to conversion of collections made by the sister concern from deposits to loans. The reliance placed by the assessee in this connection on the decision of the Bombay High Court in CIT v. Bombay Samachar Ltd. [1969] 74 ITR 723 is quite appropriate. Disallowance of interest, only on the ground that the assessee had huge borrowals on which it had been paying interest and such interest payment could have been reduced if assessee had expedited the collection of funds due to it from sister concern, would be totally unjustified.
Venkatakrishna Rice Company vs Commissioner Of Income-Tax on 5 March, 1981
We shall further refer to the decision of the Madras High Court reported in Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 where the court has held that scope of interference under Section 263 was not to set aside merely unfavourable orders and bring to tax some more money to treasury. The prejudice contemplated under Section 263 is a prejudice to the tax. administration. Then again, the grounds on which the CIT took the view that interest on the debit balances should have been brought to tax is not at, all tenable. Probably, if the CIT had proceeded on the basis that there were few instances where assessee had advanced interest free loans to the sister concern out of its borrowed funds and, therefore, a part of the interest paid by the assessee had to be disallowed, a favourable view could have been taken. Here, as observed earlier, the CIT had proceeded on an entirely different footing and as the premises on which order under Section 263 has been passed do not exist, there could be no case for upholding such order. In this connection, it would be worthwhile to refer to the decision reported in 140 ITR 490. In that case the court has held that jurisdiction vested in the CIT under Section 263(1) of the Act is of a special nature and the CIT alone has exclusive jurisdiction under the Act to revise orders of the ITO which are erroneous insofar as they were prejudicial to the interest of the revenue. The court has added that if the assessee could satisfy the Tribunal that the ground for decision given in the order of the Commissioner was wrong on facts or was not tenable in law, the Tribunal would have no option but to accept an appeal and set aside the order passed by the Commissioner. The courts cautioned that the Tribunal could not uphold the order of the Commissioner on any other ground which in its opinion was available to CIT. In the light of the above discussion, we are of the view, that there would be no basis for upholding the order of the CIT and we, therefore, shall cancel the same.
Messrs. Calcutta Company Ltd vs The Commissioner Of Income-Tax,West ... on 12 May, 1959
It is contended by the learned D. R that the order passed by the CIT is not open to challenge. Assessee in this connection contends that the claim this year, which is in the nature of notional debit, represents merely a contingent liability. It is only when the news print taken on loan is returned, a debit could be made in the Profit & Loss account. This is a sound accounting principle and was in fact followed consistently by the assessee in the past. A departure, according to the Departmental Representative, would not lead to the determination of the true profits and gains of business. The learned Departmental Representative thereafter contends, that the decision of the Supreme Court in Calcutta Co. Ltd.'s case (supra) on which reliance has been placed by the assessee, has no relevance in deciding the issue before the Tribunal. Our attention is invited to the decision in Indian Molasses Co. (P.)
Section 10 in Income Tax Rules, 1962 [Entire Act]
Calcutta Discount Company Limited vs Income-Tax Officer, Companies ... on 1 November, 1960
7. Our attention also is further invited to the decision in East Coast Conductors (P.) Ltd. v. ITO [1988] 25 ITD 25 (Mad.). According to the assessee, that decision was rendered on identical facts. That was a case where assessee company was manufacturing aluminium conductors which were sold to the Electricity Board. For this purpose, the Government allotted aluminium to various users including the assessee. Whenever the assessee did not have adequate stock of aluminium to carry out the orders, it borrowed the requisite quantity on loan basis and which was to be returned in kind. Assessee was following the mercantile system of accounting. When the loan was taken the value of the material so taken was deposited with the dealer but the goods were not treated as having been purchased. At the end of the accounting year the prevailing rate of aluminium ingots or the value was ascertained and the difference in price between the date of borrowing and the last date of the accounting year was debited to the profit and loss account by way of provision in respect of an obligation which arose on account of borrowal of the raw material which was returnable and which remained to be returned at the end of the accounting year. The ITO disallowed the claim but it was allowed in appeal by the CIT(A) and the Tribunal. The Tribunal observed that the provision made for definite obligation was in accordance with the method of accounting consistently followed by the assessee and would be permissible deduction in computing taxable profits. As regards noncharging of interest, assessee contends, that except on 2 or 3 occasions, assessee has not made any advances to the members of the group. The debit balances occurred on account of inter corporate transactions. In the case of the business of the assessee, collections on account of advertisement and circulations are made by the various centres all over India. The revenue so collected, might pertain partly to the receiving company and partly to the associate company. Such revenues are also allocable on the basis of circulation. Each of the group companies pass appropriate entries in its books of account for share of revenue belonging to the other companies and on the basis of information received from the particular group companies, entries are made by the company receiving such information. Assessee contends that this would be evident from the copy of the accounts of the group companies in the books of account of the assessee. It is only on three occasions advances have been made by the assessee but that were in the nature of accommodation loan. Thus, on 22-5-1981 a sum of Rs. 20 lakhs was remitted to IEM. On 22-4-1982 a sum of Rs. 60,99,287 was also remitted. On 30-4-1982 a sum of Rs. 7 lakhs was remitted from Express Towers Unit current account. The amounts remained outstanding in the accounts for less than a month on each occasion. The interest that assessee had to pay on this account was very marginal. In the past, assessee has also received similar accommodations from the group companies and it was for this reason it was thought not to charge any interest on the debit balances appearing in the name of the group companies. Our attention in this connection is invited to the decision of the Bombay High Court in the case of Bombay Samachar wherein the court has clearly held that the only conditions required to be satisfied in order to enable the assessee to claim a deduction in respect of interest on borrowed capital under Section 10(2)(iii) of the I.T. Act, 1922, were that firstly, money must have been borrowed by the assessee; secondly, it must have been borrowed for the purpose of business, and thirdly, assessee must have paid interest on the said amount and claimed it as a deduction. All the three conditions have been satisfied in this case and, therefore, there would be no case for disallowing any part of the interest. In any case, it is pointed out that the reasons given by the CIT in his order apart from being not very clear are also not tenable. The CIT in his order has observed as under:
Addl. Commissioner Of Income-Tax vs Instrumentation Limited on 20 April, 1984
The Departmental Representative also took us through the decisions reported in 70 ITR 65 (sic) and CIT v. Instrumentation Ltd. [1987] 167 ITR 354 (Raj.). These decisions, according to him, support the view that he has been canvassing before the Tribunal. It is further submitted by the Departmental Representative that the liability in regard to news print taken on loan from group company, can be compared with the set on liability under Section 15(1) of the Bonus Act. Such liability has been held to be contingent by the courts and in this connection our attention has been invited to the decisions reported in P.K. Mohammed (P.)
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