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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
O R D E R PER RAJESH KUMAR, A. M: By way of this appeal, the assessee is challenging the order of the ld. CIT(A)-8, Mumbai, dated 29.12.2014 for the assessment year 2011-12 wherein the assessee has raised following grounds of appeal: “I- Addition of Rs.1,01,67,542/- on account of non-recognition of interest
1. The learned CIT(A) failed to appreciate that the interest of Rs.1,01,67,542/- did not accrue to the appellant, and hence, the same cannot be treated as income. Hence, the appellant was justified in not passing the notional entry recognizing it as income; 2
2. The learned CIT(A) failed to take into consideration all the facts and surrounding circumstances such as financial condition of M/s Ordyn Technology Pvt Ltd to pay even the principal amount, its subsequent winding up proceedings, its agreement with the appellant wherein the appellant had to forego the interest prior to is accrual.
3. Without prejudice to the above, even if the appellant would have recognized Rs.1,01,67,542/- as its income, he same would have been eligible for deduction u/s 36(1)(vii0 as bad debt, and hence, no tax should have been payable; II-Disallowance of Rs.55,91,250/- u/s 36(1)(iii)
4. The learned CIT(A) failed to appreciate that merely because the borrowed capital of Rs.3,55,00,000/- did not yield any income from M/s Ordyn Technology Pvt Ltd, the same does not cease to be expended wholly and exclusively for appellant’s business, and hence, interest of Rs.55,91,250/- is rightly claimed by the appellant as deduction.
At the outset, the ld.AR submitted that the issue raised in grounds of appeal no.I (1,2 and 3) stands covered by the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case :2009-10) order dated 21 .10.2015 and submitted that the same benefit be extended to the assessee in this appeal also.
3. On the other hand, the ld. DR strongly objected to the plea put forth by the ld. AR on this issue and pointed out that the AO in the assessment order pointed out certain additional issues which were not before the Bench at the time of adjudication of the appeal/issues decided by the Co-ordinate 3 Bench. The ld. DR took us through the assessment order and finally prayed that the appeal should be dismissed.
We have heard both the parties and perused material placed before us including the impugned orders of authorities below and the case law relied upon by the assessee. We find that an identical issue has been decided by the coordinate bench of the Tribunal in assessee’s own case (supra) and the operative part of the said order is extracted below for the sake of convenience: “8. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the OCD of M/s. Ordyn Technologies Pvt. ltd., worth Rs. 20 crores were purchased by the assessee for a total consideration of Rs. 22,40,21,918/-. It is also an undisputed fact that the consideration was financed by IIISL. Obviously, the face value of the debentures was Rs. 20 crores and bypaying Rs. 22,40,21,918/-, the assessee has purchased the debenture cum interest. Thus one thing is clear that on maturity of OCD, the assessee is entitled to receive the interest. However, facts on record show that M/s. Ordyn Technologies Pvt. ltd., went into heavy financial crisis by which it was not in a position to pay the principle amount of debentures least to talk about interest on the said debentures. The assessee purchased the OCDs heavily banking upon the future prospects of M/s. Ordyn Technologies Pvt. ltd. However, it turn out to be that all the Government orders successfully bided by M/s. Ordyn Technologies Pvt. ltd. have been cancelled and the said company ran into deep financial crisis . There is no evidence on record brought by the AO to suggest that the assessee has actually received any interest from M/s. Ordyn Technologies Pvt. ltd. There is also no evidence on record which could suggest that there is any possibility of getting interest on debentures from the said company. 8.1. Assuming for a moment that the assessee has purchased debentures cum interest and therefore the assessee must account for the interest, but at the same time there being no possibility of 4 receiving interest, the same is allowable as a write off in the books. Therefore, we do not find any logic in making the addition of interest accrued and then allowing the same as a deduction as a bad debt. Considering the facts of the case from all possible angle, we do not find any reason to interfere with the findings of the Ld. CIT(A). To this extent, findings of the Ld. CIT(A) are confirmed”