SHRM Food & Allied Services (P) Ltd. v. ITO (ITAT Mumbai)
We have considered rival contentions and found that Banque Nationale De Paris (herein after referred to as Bank) had extended overdraft facilities to the assessee company in the earlier years. These facilities were secured by way of hypothecations of all movable assets including book debts and stocks. Further, these facilities were guaranteed by Group SHRM–France, one of the shareholders of the assessee company. Since the assessee company was not able to repay the overdrafts availed and interest due thereon, the corporate guarantee given by Group SHRM–France was invoked by the Bank for recovery of the amount payable by the assessee company to the Bank. The amount payable by the assessee company to the Bank as at 31-3-2000 stood at Rs. 1,94,44,420.14 which included principal amount of Rs. 1,50,00,000 and interest component of Rs. 44,44,420.14. During the year ended 31-3-2001 relevant to assessment year 2001-02, Group SHRM–France, the shareholder of the assessee company paid a sum of Rs. 60,00,000 directly to the Bank towards the overdraft facilities extended by the Bank to the assessee company. In terms of the compromise settlement offer accepted by the Bank the balance amount was waived by the Bank. Consequently, the assessee company had credited a sum of Rs. 1,50,00,000 representing the principal component to its capital reserve account and a sum of Rs. 44,44,420 representing the interest component was credited to the Profit and Loss Account under the head “Other Income–Provision no longer required written back” and duly offered the same to tax.
