2017 (4) TMI 1424 - AT - Income Tax

Tribunal's Favorable Decisions on Tax Issues Upheld, Some Remitted for Verification

The Dy. Commissioner of Income-tax, Chennai Versus Indian Overseas Bank, And Vice-Versa

The Tribunal's decisions in the case largely favored the Revenue, with several issues being dismissed against the assessee. The Tribunal upheld its ... Deduction u/s 36(1)(viia) to be restricted to the provision made in books as against the entire eligible amount - HELD THAT:- As decided in assessee's own case a look into the original assessment order clearly show that but for the deduction allowed to the assessee as claimed by it in its return, there was no discussion as to how Section 36(1)(viia) was applied and whether the limits were corrected worked out - No question was asked to the assessee during the course of assessment proceedings also with regard to the claim made by it under Section 36(1)(viia), insofar as it concerns the quantum of such claim. This obviously show that there was no application of mind by the Assessing Officer at the time of assessment. AO had not come to any conclusion at all having not considered the claim in the light of the conditions set out in Section 36(1)(viia) of the Act. We cannot say that he had taken a view which was in accordance with law. It is not a case where the Assessing Officer had adopted one of the courses possible in law. Of course, a cryptic order of the Assessing Officer by itself may not show that there was no thought given by him on a claim of the assessee. - decided against assessee. Addition u/s 14A - HELD THAT:- We have gone through the order of the assessment order. There is no finding in the assessment order regarding treatment of exempted income yielding assets as stock-in-trade. Hence, in our opinion, if it is treated as stock-in-trade by the assessee, then the claim of assessee is to be allowed Restricting the relief u/s.90 to the extent of tax paid in the foreign country - HELD THAT:- CIT(A) has quoted a notification No.S.O 2123(E) dated 28.8.2008, clarifying that in such a case involving a DTAA, an income has to be included in the total receipts and the necessary relief is to be granted by ‘elimination’ method or as per the terms of agreement seeking to avoid double taxation. He relies upon Finance Act, 2012 inserting explanation 3 to section 90 making the notification retrospectively applicable. Deduction under section 36(1)(viia) - HELD THAT:- Aggregate average advances outstanding at the end of each month and not the incremental advances granted during each month while computing deduction under section 36(1)(viia) Loss on revaluation of investments to be decided in favour of assessee Depreciation on UPS allowed at 60% - HELD THAT:- We dismiss the ground raised by the Revenue. Further, we make it clear that if it is allowed as bad debt in earlier years and recovered the same in the assessment year under consideration to be treated as income of assessee. 28. The Sixth ground is with regard to depreciation on UPS allowed at 60%. Allowability of provision for leave encashment - HELD THAT:- Provision made by the appellant-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. Applicability of the provisions of section 115JB - HELD THAT:- As decided in assessee's own case no application to its bank [2013 (4) TMI 919 - ITAT CHENNAI] Issues Involved:1. Computation of deduction under section 36(1)(viia) of the Income-tax Act, 1961.2. Disallowance under section 14A read with Rule 8D of the Income Tax Rules, 1962.3. Disallowance of contribution to staff welfare fund.4. Depreciation on UPS.5. Relief under section 90 for tax paid in a foreign country.6. Computation of aggregate average advances under section 36(1)(viia).7. Loss on revaluation of investments.8. Loss on revaluation of derivative contracts.9. Addition towards bad debts recovered.10. Allowability of provision for leave encashment.11. Applicability of section 115JB of the Income-tax Act.Issue-wise Detailed Analysis:1. Computation of Deduction under Section 36(1)(viia):The first issue was whether the term 'Place' in Rule 6EA should be interpreted as 'Panchayat' or 'Ward' for computing deduction under section 36(1)(viia). The Tribunal followed its earlier decision against the assessee, where it was held that the term should be interpreted as 'Panchayat.' Consequently, the assessee's ground was dismissed.2. Disallowance under Section 14A read with Rule 8D:The Tribunal addressed the disallowance of expenses under section 14A for earning exempt income. It was noted that if securities are held as stock-in-trade, the provisions of section 14A do not apply. The Tribunal remitted the issue back to the Assessing Officer (AO) to verify if the securities were indeed held as stock-in-trade.3. Disallowance of Contribution to Staff Welfare Fund:The Tribunal dismissed the ground raised by the assessee regarding the disallowance of contributions to the staff welfare fund. This decision was consistent with the Tribunal's earlier ruling against the assessee for the previous assessment year.4. Depreciation on UPS:The issue of whether UPS qualifies for higher depreciation at 80% was decided against the assessee. The Tribunal followed its earlier decision, which held that UPS is not an energy-saving device and does not qualify for higher depreciation.5. Relief under Section 90 for Tax Paid in a Foreign Country:The Tribunal dismissed the assessee's appeal regarding the restriction of relief under section 90 to the extent of tax paid in a foreign country. This decision was consistent with the Tribunal's earlier ruling against the assessee for the previous assessment year.6. Computation of Aggregate Average Advances under Section 36(1)(viia):The Tribunal upheld the CIT(A)'s direction to consider the aggregate average advances outstanding at the end of each month, rather than the incremental advances granted during each month, while computing the deduction under section 36(1)(viia).7. Loss on Revaluation of Investments:The Tribunal upheld the CIT(A)'s deletion of the disallowance of loss on revaluation of investments. It was noted that this issue had been decided in favor of the assessee in earlier years, and the Tribunal followed the same reasoning.8. Loss on Revaluation of Derivative Contracts:The Tribunal upheld the CIT(A)'s deletion of the disallowance of loss on revaluation of derivative contracts. This decision was consistent with the Tribunal's earlier ruling in favor of the assessee for the previous assessment year.9. Addition Towards Bad Debts Recovered:The Tribunal dismissed the Revenue's ground regarding the addition towards bad debts recovered. It was held that if the bad debts were not allowed as a deduction in earlier years, their recovery could not be taxed. However, if the bad debts were allowed as a deduction in earlier years, their recovery should be treated as income.10. Allowability of Provision for Leave Encashment:The Tribunal upheld the CIT(A)'s order allowing the provision for leave encashment. This decision was consistent with the Tribunal's earlier ruling in favor of the assessee, following the precedent set by the Hon'ble Supreme Court in the case of Bharat Earth Movers Ltd.11. Applicability of Section 115JB:The Tribunal upheld the CIT(A)'s order that the provisions of section 115JB are not applicable to the assessee. This decision was consistent with the Tribunal's earlier ruling in favor of the assessee for the previous assessment year.Conclusion:The appeals were partly allowed for statistical purposes, with several issues remitted back to the AO for fresh consideration based on the Tribunal's directions. The Tribunal's decisions largely followed precedents set in earlier years, ensuring consistency in the application of the law.