2015 (12) TMI 1237 - AT - Income Tax

Tribunal rules on income, disallowance, and deduction under Income Tax Act.

M/s Raymond Ltd. Versus Deputy Commissioner of Income-Tax, Circle 2 (3), Mumbai

The Tribunal addressed issues concerning income from house property, disallowance under section 14A, treatment of premature sales tax loan repayment, and ... Treatment of income under the head income from house property - Held that:- This issue has been decided against the assessee and in favour of the Revenue by the Tribunal for assessment years 1999-2000, 2000-2001 and 2001-2002. Disallowance made u/s 14A of the Act read with rule 8D - Held that:- This issue is no more res integra as the applicability of Rule 8D has been held to be prospective from assessment year 2008-2009 by the decision of the Hon'ble High Court of Bombay in the case of Godrej & Boyce Ltd. Mfg. Co. v. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT]. We, therefore, restore this issue to the file of the A.O. to be decided afresh without applying Rule 8D after giving a reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Treatment of premature repayment of sales tax loan at net present value as revenue receipt chargeable for tax - Held that:- Hon'ble High Court of Karnataka in the case of CIT v. McDowell & Co. Ltd. [2014 (11) TMI 272 - KARNATAKA HIGH COURT] has laid down the ratio that where the assessee, due to certain scheme, made premature payment of deferred sales-tax and on such payment entire liability to pay tax stood discharged, section 41(1) was not applicable. A similar view was taken by the Special Bench of the Tribunal in the case of Sulzer India Ltd. (2012 (8) TMI 203 - ITAT MUMBAI). - Decided in favour of assessee. Denial of deduction claimed u/s 35D - Held that:- The impugned assessment year, i.e., assessment year 2005-2006 is the last assessment year, i.e., the tenth year of claim of deduction, which has been denied since the Steel Unit has been sold by the assessee. On a perusal of section 35D shows that the Act is silent in the case when a unit is sold. Section 35D(5) of the Act refers to the transfer before the expiry of the period of 10 years to another Indian company in a scheme of amalgamation and section 35D(5A) refers to the transfer before the expiry of the period in a scheme of demerger. There is no clause in the section which debars the assessee from claiming the expenses as a write off on sale of the undertaking. We, therefore, do not find any reason for declining the claim of the assessee. - Decided in favour of assessee. Issues involved:1. Treatment of income under the head income from house property.2. Disallowance made u/s 14A of the Act read with rule 8D.3. Treatment of premature repayment of sales tax loan at net present value as revenue receipt.4. Denial of deduction claimed u/s 35D of the Act.Issue 1: Treatment of income under the head income from house property:The assessee contested the direction of the CIT(A) to determine the annual value of the property at 12% of the cost of land and building. The Tribunal upheld the decision against the assessee based on previous judgments. The Tribunal followed the decision of the coordinate bench for assessment years 1994-95 to 1998-99. The appeal was dismissed as the issue had been decided against the assessee previously.Issue 2: Disallowance made u/s 14A of the Act read with rule 8D:The Tribunal held that the applicability of Rule 8D was prospective from assessment year 2008-2009 based on the decision of the Hon'ble High Court of Bombay in a specific case. The issue was restored to the AO for fresh consideration without applying Rule 8D. The grounds related to this issue were treated as allowed for statistical purposes.Issue 3: Treatment of premature repayment of sales tax loan at net present value as revenue receipt:The AO treated the premature repayment of sales tax loan as a revenue receipt, which was contested by the assessee. The Tribunal referred to specific judgments in favor of the assessee, including a decision by the Special Bench of the Tribunal and the Hon'ble High Court of Karnataka. The Tribunal ruled in favor of the assessee, stating that the benefit derived from the premature repayment was not a revenue receipt but a capital receipt.Issue 4: Denial of deduction claimed u/s 35D of the Act:The AO denied the deduction claimed u/s 35D of the Act as the Steel Division had been sold by the assessee. The Tribunal analyzed the provisions of section 35D and found no clause debarring the assessee from claiming the expenses as a write-off on the sale of the undertaking. The Tribunal set aside the finding of the CIT(A) and directed the AO to allow the claim of deduction u/s 35D of the Act. The appeal was partly allowed in this regard.In conclusion, the Tribunal addressed various issues related to income from house property, disallowance under section 14A, treatment of premature repayment of sales tax loan, and denial of deduction claimed u/s 35D of the Act. The judgments were based on legal precedents and specific provisions of the Income Tax Act, resulting in a partial allowance of the appeals filed by the assessee.