2009 (10) TMI 79 - AT - Income Tax

Tribunal upholds decisions on expenses, bad debts, and interest disallowance under tax law

The Tribunal declined to rectify its order regarding the claim of expenses for mobilization of deposits from NRIs and disallowed a part of the deduction ... Mistake Apparent Issues:1. Rectification of order regarding claim of expenses for mobilization of deposit from NRIs.2. Deduction under section 36(1)(viia) of the Act.3. Disallowance of interest paid to head office.Issue 1: Rectification of order regarding claim of expenses for mobilization of deposit from NRIs:The applicant sought rectification of the Tribunal's order regarding the claim of expenses for mobilization of deposits from NRIs incurred at Dubai. The Tribunal had remanded the matter back to the AO with certain directions, stating that the deposits raised at Dubai were not utilized in India for business purposes. However, the applicant argued that over Rs. 850 crores in NRIs' deposits were mobilized and brought into India during the relevant accounting period, supported by a filed balance sheet. The Tribunal noted that the applicant failed to provide specific details on how the deposit raised at Dubai was channeled into the Indian branch's business. Despite considering all arguments and material presented, the Tribunal found no mistake apparent on record and declined to rectify the order.Issue 2: Deduction under section 36(1)(viia) of the Act:The Tribunal disallowed a part of the deduction for provision for bad debts under section 36(1)(viia) of the Act, stating that the provision created is only net of debit and credit entries. The applicant contested this, arguing that the provision under section 36(1)(viia) is never released and credited to the Profit & Loss account. The applicant provided a detailed chart tracking the year-wise movements in the provision account under section 36(1)(viia) to demonstrate that the provision was not net of debit and credit entries. Despite the submissions, the Tribunal held its decision, emphasizing that the power under section 254(2) is to rectify a mistake apparent on record, not to review decisions extensively considered. The Tribunal concluded that no rectifiable mistake existed.Issue 3: Disallowance of interest paid to head office:The Tribunal disallowed interest paid by the assessee to its head office at London and ANZ Banking Co., London, aggregating to Rs. 32,20,00,000. The applicant argued that the Tribunal incorrectly recorded the figures and needed correction. The Departmental Representative clarified that the payment was claimed to be made to the head office and a separate entity, ANZ, London. However, the Tribunal found no mistake apparent on record, as the claim was disallowed based on the nature of payments and tax implications. The Tribunal reiterated that it cannot review its order under section 254(2) and dismissed the application.In conclusion, the Tribunal's judgment addressed issues related to rectification of expenses claim, deduction under section 36(1)(viia) of the Act, and disallowance of interest payments. The Tribunal emphasized the limitations of rectification under section 254(2) and upheld its original decisions based on the arguments and evidence presented during the proceedings.