The Commissioner Of Income Tax-V v. Kirloskar Oil Engines Ltd

ASN IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 784 OF 2011 The Commissioner of Income Tax-V. ..Appellant. v. Kirloskar Oil Engines Ltd...Respondent. Mr. Vimal Gupta, Senior Advocate with M/s. Padma Divakar for the Appellant. Mr. S.N. Inamdar, Senior Advocate with Mr. Mihir Naniwadekar for the Respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATE : 05TH FEBRUARY, 2013 PC: In this appeal by the revenue for the assessment year 1985-86 the following question of law has been proposed for our consideration. Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the dis-allowance of Rs.1,54,00,000/- being remission of the amount receivable from Kirloskar Tractors Ltd. (KTS) holding the same to be revenue expenditure? 2) For the assessment year under consideration the respondent assessee had debited an amount of Rs.1.54 crores to its profit and loss account on the ground of remission of the amount receivable from one Kirloskar Tractors Limited (hereinafter referred to as “KTL”). The respondent assessee along with another group company namely Kirloskar Brothers Limited had promoted M/s. KTL. The respondent assessee was a manufacturer of diesel engine and the same would be used in manufacture of tractors by M/s. KTL. The respondent assessee wrote off this amount of Rs.1.54 crores being the amounts due on the diesel engines supplied by it to M/s. KTL as financial condition of M/s. KTL was precarious . Further, the financial institutions had approached the promoters i.e. the assessee and Kirloskar Brothers Ltd. to write off the amount due to it from M/s. KTL so as to enable the financial institution to help in the revival of M/s. KTL. However, the Assessing officer did not accept the claim of the respondent assessee and disallowed the expenditure of Rs.1.54 crores. 3) In appeal, the CIT(Appeals) by order dated 30/1/1990 allowed the appeal of the respondent. This was on the ground that the amount of Rs.1.54 crores being debited to profit and loss account was on account of writing off the dues from M/s. KTL on account of commercial expediency Further, the CIT (Appeals) also records a fact that M/s. KTL had offered the remitted amount of Rs.1.54 crores as its income for tax under Section 41(1) of the Income Tax Act. 4) The revenue carried the matter in appeal before the Tribunal. The Tribunal by the impugned order dated 31/8/2009 dismissed the appeal. The Tribunal on examination of the facts concluded that the amount of Rs.1.54 crores represents dues ASN from M/s. KTL on account of its purchase of diesel engine from the respondent assessee. Further the respondent assessee had business interest in the well being of M/s. KTL as M/s. KTL would purchase diesel engines from the respondent-assessee to be used in manufacture of tractors. Besides the respondent assessee also had sizable equity stake in M/s. KTL. The Tribunal also records the fact that the financial institution had granted a remission of Rs. 3.42 crores as against Rs.1.54 crores granted by the respondent assessee to M/s. KTL. The Tribunal concluded that write off was made under compelling business circumstances only with a view to protect investment of the assessee and to maintain and develop profitable business relationships by selling more of its diesel engines to M/s. KTL. . 5)We note that the impugned order upheld the order of the CIT(Appeals) and allowed the remission of Rs.1.54 crores as the CIT(Appeals) and allowed the remission of Rs.1.54 crores as the expenditure in respondent-assessee's profit and loss account. The Tribunal has come to a conclusion on the basis of the facts examined by it that the respondent assessee had business interest in M/s. KTL and continued existence of M/s. KTL was in the business interest of the respondent assessee as manufacturer 5)We note that the impugned order upheld the order of the CIT(Appeals) and allowed the remission of Rs.1.54 crores as the CIT(Appeals) and allowed the remission of Rs.1.54 crores as the expenditure in respondent-assessee's profit and loss account. The Tribunal has come to a conclusion on the basis of the facts examined by it that the respondent assessee had business interest in M/s. KTL and continued existence of M/s. KTL was in the business interest of the respondent assessee as manufacturer of diesel engines which would be purchased by M/s. KTL to be used in manufacture of tractors. Therefore, the respondent assessee had a business interest and equity share in the well being of M/s. KTL. Therefore, we find that waiver of the amounts due from M/s. KTL was not malafide but was done so as to put M/s. KTL in a sound condition so as to enable the respondent assessee to have higher sale of diesel engine in future. This remission of Rs.1.54 crores was done not with any oblique motive but for the reasons of commercial expediencies and in the long term interest of the respondent-assessee. Thus, the remission of Rs.1.54 crores debited in profit and loss account is ASN an allowable business expenditure under Section 37 of the Act. We find that the decision of the Tribunal is based on a finding of fact. It is not the contention of the revenue that the finding of fact arrived at by the Tribunal is perverse and/or without any evidence. In the above circumstances, we do not entertain the proposed question of law. 6)to costs. Accordingly, the appeal is dismissed with no order as (M.S.SANKLECHA, J.) (J.P. DEVADHAR, J.)