2015 (12) TMI 1532 - AT - Income Tax

Tribunal partially accepts appeal, remits issues for re-evaluation, dismisses others. Final order on Dec 11, 2015.

Sandvik Asia Limited Versus Jt. Commissioner of Income Tax, Special Range – 5, Pune

Sandvik Asia Limited Versus Jt. Commissioner of Income Tax, Special Range – 5, Pune - TMI Issues Involved:1. Deduction under section 36(1)(vii) for provisions of bad and doubtful debts.2. Exemption under section 10(33) for dividend income on Master shares and other units of UTI.3. Computation of relief under Section 80HHC.4. Addition of interest income paid to Income-tax Department.5. Deduction under Section 37(1) for lump sum know-how fees.6. Deduction under Section 37(1) for exchange fluctuation loss.Detailed Analysis:1. Deduction under section 36(1)(vii) for provisions of bad and doubtful debts:The assessee claimed a provision of Rs. 3,83,94,000 for bad and doubtful debts, which was disallowed by the CIT(A). The assessee argued that the provision was tax-deductible, citing the Supreme Court's decision in Vijaya Bank Vs. Commissioner of Income Tax, which held that mere reduction in loans and advances or debtors to the extent of the provision is sufficient to constitute a write-off. The Tribunal remitted the issue back to the Assessing Officer for fresh consideration in light of the Supreme Court's decision.2. Exemption under section 10(33) for dividend income on Master shares and other units of UTI:The assessee claimed exemption for Rs. 19,24,960 received as dividend income on UTI units under section 10(33). The CIT(A) rejected this claim, stating that such dividends are not exempt as UTI units are not shares. The Tribunal upheld the CIT(A)'s decision, referencing a previous Tribunal order which held that only 40% deduction should be allowed for such dividend income, not 100%.3. Computation of relief under Section 80HHC:The assessee contended that interest income and dividend income should be considered as 'Profits and Gains of Business or Profession' for Section 80HHC purposes. The CIT(A) rejected this claim. The Tribunal noted that similar issues had been decided against the assessee in a prior case (ITA No. 525/PN/2003 for AY 1997-98). Regarding the claim that rent received from Sai Service was deducted twice, the Tribunal remitted this specific issue back to the Assessing Officer for verification and correction if necessary.4. Addition of interest income paid to Income-tax Department:The assessee argued that a loss of Rs. 9,24,983 (difference between interest paid on income tax and interest granted on income-tax refund) should be determined under 'Income from other Sources' and set-off against business income. The Tribunal dismissed this ground, following its earlier decision in the assessee's own case for AY 1996-97.5. Deduction under Section 37(1) for lump sum know-how fees:The assessee claimed deduction for technical know-how fees under Section 37(1). The CIT(A) held that such expenses are capital in nature and covered by Section 35AB, allowing only 1/6th of the second installment and disallowing the third installment due to non-deduction of TDS. The Tribunal upheld the CIT(A)'s decision, referencing its prior ruling that Section 35AB applies to lump sum payments for technical know-how, and that the assessee is entitled to deduction on the full amount under Section 35AB.6. Deduction under Section 37(1) for exchange fluctuation loss:The assessee claimed an exchange fluctuation loss of Rs. 51,72,003 under Section 37(1). The Tribunal remitted this issue back to the Assessing Officer for re-computation, instructing to correctly compute the exchange fluctuation loss and determine the appropriate deduction.Conclusion:The Tribunal partly accepted the appeal, remitting some issues back to the Assessing Officer for re-evaluation and dismissing others based on prior rulings. The final order was pronounced on December 11, 2015.