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II. Case laws - Direct Tax:
1. CIT Vs. M/s Southern Bottlers Pvt. Ltd., ITA No. 225 of 2004, Date of Decision: 07.05.2013, Punjab & Haryana High Court
Decision: Partial In favour of assessee & partial disposed,
Section: 36(1)(iii) of Income Tax Act, 1961
Assessment Year: 1989-90
Issue 1: Whether the excess of ‘security deposits’ over refunds received by the assessee on the sale of bottles is not a trading receipt?
Issue 2: Whether
it was right in law in deleting the addition made on account of
interest on interest free loans advanced by the assessee-company to its
directors and sisters concerns?
Held:-
1. For the reasons recorded in Munjal Gases Case (Supra), question No. 1 is decided in favour of the assessee.
2.
It was held that CIT disallows the interest expenditure on account of
Providing interest free loan to the directors on which he himself pay
the amount of interest to the bank as per section 36(1)(iii) &
relying on CIT Vs. Abhishek Industries Ltd. But on appeal to the CIT
(Appeals) it was held that assessee providing interest free loan is
commercial expediency by relying on the judgement as given in S.A.
Builders ltd. accordingly upheld by the ITAT (Appeals) but Apex court
held that commercial expediency cannot be mere availing of interest free
loan from one assessee and giving interest free loan to another. The
assessee in order to prove commercial expediency has to prove that it
was a prudent act of reasonal person in the trade to avail interest free
loan & to advance interest free loan to some other person.
Thus, appeal is dismisssed as the question is not determined in regard to commercial expediency.
(Please click here for judgment)
2. Commissioner
of Income Tax-I Vs. M/s Vardhman Polytex Ltd, Chandigarh, ITA No. 55 of
2013, Date of Decision: 23.05.2013, Punjab & Haryana High Court
Decision: In favour of assessee, Section 36(1)(iii) of I.T.Act, 1961
Whether
the interest on borrowed funds used for setting up a new unii before
the asset was put to use should be capitalized u/s 36(1)(iii) or allowed
as revenue expenditure ????
The
assessee has treated the interest paid on borrowed capital for the
establishment of new unit at baddi as revenue expenditure. Where as
department has the view that capital borrowed for the purpose of
establishing new plant should be capitalised instead of revenue. As per
section 36(1)(iii) and relying upon the judgement of the DCIT vs. Core
health Pvt. Ltd. Tribunal decided the appeal in favour of the assessee. The
hon’ble Punjab & Haryana High Court relying upon the judgment of
Hon’ble Supreme Court of India, in Civil Appeal No.6438 of 2012 titled
'M/s Vardhman Polytex Limited, Ludhiana Vs. Commissioner of Income Tax'
held the same to be treared as Revenue expenditure.
(Please click here for judgement)
3. M/s Bhoday Steel Rolling Mills Vs. CIT (Appeals), Patiala
& Another., CWP No. 12215 of 2013, Date of Decision 30.05.2013,
Punjab & Haryana High Court
The
Application for stay of demand should be forwarded with appropriate
substantive reasons, where the assessee does so, It shall be the duty of
the AO to consider it in accordance with the law.
(Please click here for judgment)
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