TaxTMI 
TaxTMI 
2015 (11) TMI 926
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....e circumstances of the case, the Ld. CIT(Appeals) erred in not granting relief u/s 43B of the Income tax Act 1961 in respect of interest aggregating to Rs. 14077397/- on term loan paid to ICICI during the previous year relevant to the assessment year 2001-02 when no claim for deduction was made by the Appellant on this account in any other assessment year. II. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) should have held that mistake in not recognizing interest expenditure aggregating to Rs. 14077397/- on term loan paid to ICICI on mercantile basis while preparing the Accounts for the assessment year 2001-02 should not debar the Appellant from claiming the same in the year of payment, i.e. assessment year 2001-02, under section 43B, when the said interest on term loan was not an allowable expenditure in any other assessment year in view of the provision contained in section 43B(d) of the Income Tax Act, 1961." 3. The assessee is a Government company wholly owned by the Government of West Bengal. It is a non banking finance company registered with the Department of Non-Banking Supervision, Kolkata Regional Office of Reserve Bank of India. ....
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....xpenses is not required and in this regard made reference to the decision of the Hon'ble Calcutta High Court in the case of Associated Pigments Ltd. Vs CIT (supra). With regard to the assessee not having filed the revised return of income, the ld. Counsel for the assessee referred to the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. Vs CIT 284 ITR 323 (SC) and submitted that the aforesaid decision only bars a claim being considered by AO without filing of a revised return of income and that such bar does not extent to the appellate authorities under the Act. Our attention was drawn to the following decisions for the proposition that the ratio laid down by the Hon'ble Supreme Court in the case of Goetze (India) Ltd does not apply to the appellate authorities under the Act. (i) Universal Subscription Agency P. Ltd. Vs. JCIT 293 ITR 244 (All) (ii) CIT vs Pruthvi Brokers & Shareholders (P) Ltd 349 ITR 336 (Bom) (iii) CIT vs. Sam Global Securities Ltd. 360 ITR 682 (Del) (iv) CIT vs. Rajasthan Fasteners P. Ltd. 363 ITR 271 (Raj) 7. He also drew our attention to the remand report of the AO filed before CIT(A) wh....
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....ly and allow the grounds raised by the assessee in this regard. ITA No.464/Kol/2008 (Revenue's appeal) 10. Ground No.1 raised by the revenue reads as follows :- "1. That the Ld. CIT(A) has erred in law as well as on facts by deleting the addition of interest of Rs. 1,24,31.423/- made on account of non-provision of interest on Nonperforming Asset (NPA)." 11. The factual background with regard to the ground raised by the revenue are that the assessee had not recognized as income interest that has to receive on loans that it had lent because these loans had become non-performing assets(NPA), within the meaning of the Prudential norms laid down in Non-Banking Financial Companies Prudential Norms (Reserve bank) Directions, 1998 (Prudential Norms). As per the aforesaid norms income on non- performing assets shall be recognized only when it is actually realized. The AO rejected the claim of the assessee and considered a sum of Rs. 1,24,31,423/- which was interest on NPA which was not recognized by the assessee as income in the books of accounts. The AO was of the view that the prudential norms of Reserve Bank of India are not binding when it comes to computing the to....
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....uch debts; (b) in the case of a public company, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed700b having regard to the guidelines issued by the National Housing Bank in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or the State financial corporation or the State industrial investment corporation or the public company to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier. Explanation : For the purposes of this section,- (a) "National Housing Bank" means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987); (b) "public company" means a company,- (i) which is a public company within the meaning of section 3 of the Companies Act, 1956 (1 of 1956); (ii) whose main object is carrying on the business of providing long-term finance for construction or purchase of houses in India for resid....
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....not notified under section 4A(2) of the Companies Act, 1956. We are of the view that section 4A is in respect of public financial institutions only, a category separately covered by Explanation (c) of section 43D. The assessee, being a State Industrial Investment Corporation, it is covered by Explanation (f) and it is of no consequence that it is not a public financial institution within the meaning of Explanation (c). 17. It is also pertinent to mention that the entire interest on NP A was offered to tax in the assessment year 2006-07. At page 32 of the printed accounts forming part of the Paper Book in ITA 324/K/20 12 for the assessment year 2006-07, the following note appears :- "INTERST ON NON PERFORMING ASSETS (N.P.A) With reference to Note No.7 to the Notes on Accounts for the accounting year 2004-05, it is noted that in consonance with the comments of the Comptroller and Auditor General of India, the Company has written back the entire provisions for doubtful debts recoverable from the agencies of the Govt. of West Bengal, which has been realized in full with interest on 3l.3.2007. Further interest accrued thereon till the end of the year has been .treat....
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....income which had accrued to it. As such, it was held that interest was chargeable to tax for the assessment years 1969-70 to 1971-72 on the basis of accrual. In that context, reliance was placed on State Bank of Travancores case to hold that the concept of real income cannot be employed so as to defeat the provisions of the Act and the Rules. Further there can be no dispute with regard to the proposition laid down in Tuticorin Alkali's case(supra) but the fact is that there is no accrual of income in so far as the assessee is concerned. 20. For the reasons given above, we are of the view that the CIT(A) was justified in coming to the conclusion that interest on NPA need not be recognized as income by the Assessee. The relevant ground of appeal of the Revenue is dismissed. 21. Ground No.2 raised by the revenue reads as follows :- "2. That the ld. CIT(A) has erred in law as well as on facts by deleting the addition of Rs. 11,74,79,000/- on account of interest on Recurring Deposits made on accrual basis." 22. The second ground in respect of interest on recurring deposit is also covered in favour of the assessee by the aforesaid order in ITANo.395/Kol/2006 order d....
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....om the assessment for that year. 25. On behalf of the revenue, reliance was placed on the judgment of the Hon'ble Supreme Court in CIT v T.N.K. Govindarajulu Chetty, (1987) 165 ITR 231 (SC). That case related to interest on land acquisition compensation and it was held that such interest accrued on year to year basis. In the instant case, there was no accrual since the interest was neither due nor receivable until maturity. The decision of the Hon'ble Supreme Court in CIT v. A.Gajapathy Naidu, (1964) 53 ITR 114 (SC) sought to be relied upon on behalf of the revenue actually supports the plea of the assessee in its contention that interest income is taxable only upon maturity when the right to receive interest accrued to the assessee. In Laxmipat Singhania v CIT, (1969) 72 ITR 291 (SC), relied upon on behalf of the revenue it was held that where the amount had escaped assessment on accrual basis it could not be taxed in another year on the basis of receipt. No such situation has arisen in the instant case inasmuch as accrual of interest is only upon maturity and there is no question of any income escaping assessment on accrual basis. On behalf of the revenue, it was also ....
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....espect of interest income on deposit with Pay & Accounts Office in the Appellant's own case for the immediately preceding assessment year 2002-03 on the same issue when facts in both the assessment years were identical. III. That the Ld. CIT(Appeals) erred in not following the Order of the jurisdictional Income Tax Appellate Tribunal in the Appellant's own case for the assessment year 2002-03 when the same was accepted by the Department." 32. The facts with regard to the aforesaid grounds of appeal are as follows: The assessee has made deposits from time to time with the Pay & Accounts office of the Government of West Bengal. When these deposits were made initially, it did not carry any interest. By a letter dated 13th June. 2001 the Principal Secretary to the Government of West Bengal wrote to the Principal Accountant General (A&E) to the effect that the deposits of the Public Sector Undertaking were maintained under Public Accounts Major Head 8342, which was an interest bearing account. However, the State Government had not been paying interest for the said deposits and the office of the Accountant General raised an objection and suggested that these accoun....
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....vernment of West Bengal actually decided the rate of interest and therefore interest income should be deemed to have accrued to the Assessee as and from the said date. According to the CIT(A) the letter dated 5.3.2004 and 31.3.2204 was only a confirmation of what was already decided and was not a letter which creates liability of the Government to pay interest and the right of the Assessee to receive interest. On such reasoning, the order of the AO was confirmed by the CIT(A). 36. We have heard the rival submissions and perused the letters dated 13.6.2001 and 5.3.2004 and 31.3.2001, copies of which are placed at pages 43 to 50 of the paper filed by the Assessee in ITA No.389/Kol/2008 for AY 2001-02. It would be seen from the letter dated June 13, 2001 (page 43) that the Principal Secretary wrote to the Principal Accountant General (A & E) for approval in respect of the Government's decision to pay interest on deposit with Pay & Accounts Office at the same rate at which the State received loan against Central Plan Assistance from the Department of Expenditure, Ministry of Finance, Government of India. The decision of the State Government was thus subject to approval and it ca....
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....e was reversed following the RBI Prudential Norms and Directives on the relevant assets becoming Non-Performing Assets (NPA) and written off in the Profit and Loss Account and shown by way of reduction from the interest income in the previous year relevant to the assessment year 2003-04." 39. The material facts relating to the 4th ground are that during the previous year relevant to the assessment year 2003-04 the assessee had to reverse interest income of Rs. 26,43,24,776/- accounted for in earlier financial years since the assets concerned became NPA during the previous year ended March 31, 2003 relevant to the assessment year 2003-04 according to RBI's prudential norms. The assessee having accounted for such interest income in the earlier years wrote it off as irrecoverable. The debtors on account of accrued interest were reduced to the extent of Rs. 26,43,24,776/- and the same amount was reduced from the interest income credited to the profit and loss account. The effect of reduction of the said amount from the interest income on the credit side of the profit and loss account was the same as that of a debit to the profit and loss account. The assessee having written off ....
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....d if factually it is found that there was such a write off than the deduction claimed by the Assessee had to be allowed as deduction as the conditions for allowability of such deduction laid down u/s.36(1)(vii) of the Act are satisfied. The decision referred to by the CIT(A) in the case of State Bank of Hyderabad (supra) is a case where factually there was no write off as bad debts in the books of accounts. The said decision will not apply to the facts of the present case. We therefore allow ground No.IV subject to verification of the write off in the debtors account as stated above. 43. In the result, the appeal by the Assessee is partly allowed. 44. In the result appeal by the Assessee is partly allowed and that by the revenue is dismissed. ITA No.580/Kol/2008 & ITA No.568/Kol/2008: 45. ITA No.568/Kol/2008 is an appeal by the Revenue while ITA No.580/Kol/2008 is an appeal by the Assessee. Both these appeals are directed against the order dated 14.2.2008 of CIT(A)-VI, Kolkata, relating to AY 2004-05. ITA No.568/Kol/2008: (Revenue's appeal): 46. The grounds of appeal raised by the revenue in this appeal reads thus: "1. That the Ld. CIT(A) has erred in....
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....deduction under this clause and Chapter VI-A):" .......... Explanation : For the purposes of this clause- (v) "State industrial investment corporation" means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and eligible for deduction under clause (viii) of this sub-section (viii) in respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty per cent. of the profits derived from eligible business computed under the head "Profits and gains of business or profession" (before making any deduction under this clause) carried to such reserve account: Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess. Explanation: In this clause,- (a) "specified entity" means,- (i) a financial corporation specified in section 4A of the Compan....
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....erred to in clause (ii) or clause (iii) or clause (iv) or clause (vi) of sub-section (4) of section 80-IA; and (iii) an undertaking referred to in sub-section (10) of section 80-IB; (h) "long-term finance" means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years; 50. Both the grounds relate to the assessee's claim for deduction of provision made in accordance with section 36(1)(viia)(c) of the Act amounting to Rs. 1,45,93,510/-. The Assessing Officer held that the assessee having not been notified under section 4A(2) of the Companies Act, 1956, it was not covered by section 36(1)(viia)(c). The CIT(A) extracted the proviso to section 36(1)(viii) in his order and observed that in the absence of detail the assessee's entitlement could not be ascertained in the light of the said proviso. 51. Aggrieved by the order of the CIT(A) the Assessee has raised the aforesaid grounds before the Tribunal. We have heard the rival submissions and perused the relevant statutory provisions. 52. The deduction in respect of provision for bad and doub....
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....ity" in terms of Explanation (a)(ii) to section 36(1)(viii). The assessee being a Government company as defined in section 617 of the Companies Act 1956 is a" public sector company" as per section 2(36A) of the Act. The assessee is engaged in "eligible business" in terms of Explanation (b)(i) read with clauses (g) and (h) of the Explanation. The assessee is engaged in the business of providing long term finance for industrial and agricultural development and for development of infrastructure facilities in India. In this connection, attention is invited to clause (2) of the main objects of the assessee extracted hereinabove. The infrastructure facilities for the development of which the assessee provides finance fall within the purview of the Explanation to clause (i) of section 80IA(4). The finance provided by the assessee is repayable along with interest during a period of more than five years. 55. The aforesaid provision of Rs. 1,45,93,510/- was written back during the previous ear relevant to the assessment year 2006-07. Although the AO had not allowed deduction of the said amount for the assessment year 2004-05 he subjected the provision written back to tax in the assessment....
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.... ITA No. 604/Kol/2012 & ITA No. 324/Kol/2012: 61. ITA No.604/Kol/2012 is an appeal by the Revenue while ITA No.324/Kol/2012 is an appeal by the Assessee. Both these appeals are filed against the order dated 30.12.2011 and relate to AY 2006-07. ITA No.324/Kol/2012: (Assessee's Appeal): 62. The ground raised by the Assessee reads as follows: "1. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) should have held that write back of provision for Doubtful/Sub-standard Assets of Rs. 14593511/- by the Appellant could not be brought to tax again in the assessment year 2006-07 when the same was already taxed in earlier assessment year 2004-05." 63. While deciding grounds of appeal of the Assessee for AY 2004-05, We have already seen that the Assessee in that year claimed as deduction a sum of Rs. 1,45,93,510 as provision for Bad and doubtful debts u/s.36(1)(viia)(c) of the Act. This was not allowed as a deduction as claimed by the Assessee by the AO and the CIT(A). While deciding the appeal of the Assessee for AY 04-05 in ITA No.580/Kol/2008, We have already allowed the claim of the Assessee for the aforesaid deduction. In the present A....
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.... the Assessee the learned Assessing Officer should be directed to exclude interest of Rs. 1,45,63,00,272/- from the income of the Assessment year 2006- 07." 68. This additional ground has been dealt with while dealing with ground No.3 in ITA No.984/Kol/2011 which is an appeal by the Assessee for AY 2007-08, in this very same order. For the reasons stated therein this additional ground of appeal is dismissed. 69. In the result, the appeal by the Assessee is dismissed. ITA No.604/Kol/2011 (Revenue's Appeal): 70. There is a delay of 14 days in filing this appeal by the Revenue. The same has been explained as owing to intervening public holidays and break down of photo copy machine. We have considered the reasons assigned for the delay in filing the appeal and are of the view that the delay in filing the appeal has occasioned owing to reasonable and sufficient cause. The delay is accordingly condoned. 71. The only ground of appeal raised by the revenue in its appeal reads thus: "1. That on the facts and circumstances of the case, Ld. CIT(A) erred in law in not considering the legal point that the revised return of assessee was not valid having been filed bey....
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....that he did. Interest under section 234C is payable in case of shortfall in payment of advance tax instalments with reference to the tax due on the returned income. It was submitted that in a case like the assessee's, delay occurs on account of statutory audit and CAG audit and subsequent adoption of accounts at the annual general meeting. After such audit and adoption, there is a likelihood of variation between the income shown in the original return filed within the due date on the basis of unaudited accounts and the income as per the audited accounts. By the time the audited accounts become available, even the period for filing the revised return expires. This has been happening in the assessee's case for several years. It has been the practice in the assessee's case to accept revised computation on the basis of audited accounts for the purpose of completing the assessment. In the assessment order for the assessment year 2006-07 the Assessing officer made the following observation :- "The income as per revised computation is accepted as conventionally for undertakings of Govt this kind of delay due to late statutory audit had been allowed earlier." 74. We....
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....ths on the amount of the shortfall from thirty per cent or, as the case may be, sixty per cent of the tax due on the returned income; (ii) the advance tax paid by the assessee on his current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income: Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of underestimate or failure to estimate- (a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2, and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b), as the case may be, had such income been a part of the total income, as part of the remaining instalments of advance tax which are due or where no such instalments are due], by the 31st day of March of the financial year. Provided further that noth....
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....s charged for deferment of advance tax and is charged with reference to tax due on returned income. "Tax due on returned Income" has been defined in explanation to 234C(1) as tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable. The plea of the Assessee that the charging of interest u/s.234C of the Act should be with reference to the tax on total income declared in a revised computation of income filed and not on the tax payable on the total income declared in the original return of income is contrary to the provisions of explanation to Sec.234C(1) of the Act. Charging of interest is mandatory and if there are good ground waive interest than it is for the Assessee to seek appropriate remedies open to it in law. The CIT(A)'s order in our view is contrary to the provisions of law and cannot be sustained. Accordingly, the appeal of the revenue is allowed. 76. In the result, the appeal by the Assessee is dismissed and that by the Revenue is allowed. ITA No. 1028/Kol/2011 & ITA No.984/Kol/2011: ....
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.... Assessing Officer during the course of assessment proceedings for the assessment year 2006-07, the relevant order passed on 10th December, 2008. IV. That on the facts and in the circumstances of the case the Ld. CIT(Appeals) was not justified in treating a sum of Rs. 750000/- as not admissible under the Income Tax Act, 1961 when the same was claimed by the Appellant as normal revenue expenditure being 1/10th of the amortization expenses for change in Object Clause and the said amount had all along been granted to the Appellant upto assessment years 2006-07. V. That the Appellant craves leave to alter, amend and/or to take additional grounds before or at the time of hearing this appeal." 81. We shall first take up for consideration the first two grounds of appeal raised by the Assessee. If on those grounds we come to a conclusion that the assessment done by the AO ignoring the details filed in the course of assessment proceedings then we have to set aside the order of CIT(A) and direct the AO to make an assessment de novo in the light of the audited statements of income available for the relevant assessment year. With this prelude, we will take up grounds No.1 ....
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....e also submitted explanation for the difference between the revised return and the revised computation of income (Pages 108C and 108D of the Paper Book in ITA No. 984/K/11). One of the major items of difference was on account of interest of Rs. 145.63 crores on NPA which was offered to tax in the assessment year 2006-07 and therefore, excluded from the revised computation filed for the assessment year 2007-08 on June 23, 2009. The CIT(A) also rejected the assessee's additional ground in respect of the interest of Rs. 145.63 crores relying upon Goetze (India)'s case, which is subject matter of Ground 0.3 of the assessee's appeal. The assessee's submissions in respect of Goetze (India)'s case have been made while dealing with ITA 388/K/08 for the assessmet year 2001-02. 85. After considering the rival submissions, we are of the view that the order of CIT(A) has to be set aside and the AO should be directed to make an assessment de novo on the basis of the audited statements available. In this regard, we are also of the view that the principle laid down in Goetze India's case (supra), will not bind the appellate authorities as clarified by the Hon'ble Su....
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....t for the assessment year 2008-09. It had invested Rs. 25 crore in SBI-SHF Liquid Plus Units - Institutional Plan Daily Dividend on 11.12.2007 which had since been realized on 5.3.2008. Dividend earned on the said investment was Rs. 39,29,933/- for a period of 88 days (from 11.12.2007 to 5.3.2008). A further sum of Rs. 25 crore was invested by the Assessee in SBI-SHF Liquid Plus Units- Institutional Plan Daily Dividend on 28.3.2008 and dividend aggregating to Rs. 172914/- accrued thereon for a period of 4 days (28.3.2008 to 31.3.2008). Thus, the Assessee had made investments of Rs. 25 crore for 92 days (88 days plus 4 days) in two tranches, on which dividend aggregating to Rs. 41,02,847/- had been earned. While determining the quantum of interest expenses disallowable u/s 14A read with Rule 8D in relation to abovementioned exempt dividend income, the Assessee had considered the average cost of funds worked out at 8.90% p. a. for the financial year 2007-08 as reported in the Directors' Report (Page-6 of the Printed Accounts). Interest at the rate of 8.90% p.a. for 92 days on investments of Rs. 25 crore worked out to Rs. 55,92,896/-, which the Assesseee had considered disallowabl....
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....s of the Assessee observing as follows: "4. I have carefully considered the observations of the Assessing Officer in the assessment order and submissions of the appellant. The issue is regarding disallowance of % % expenditure as per Rule 80 (2)(iii), relating to the investment in Haldia Petrochemical Ltd. The Appellant-Company is a wholly owned public sector enterprise of the Government of West Bengal. The Appellant is primarily engaged in the business of providing finance for infrastructural development in the State of West Bengal and the Appellant is required to follow the guidelines made by the State Government from time to time. HPL was formed near Haldia Port in the district of Midnapore in the State of West Bengal as a joint venture and the Government of West Bengal is a major shareholder. On the basis of request by said HPL, the Appellant-Company had granted unsecured loans for the purpose of laying gas pipe line and other infrastructural activities to the extent of Rs. 175.00 crore at interest rate of 16% p.a. up to February 2002, the Appellant had accounted for interest income to the extent of Rs. 19.62 crore. However, the said interest could not be realised from....
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....where a loan as a compulsion is converted into preference shares which has not yielded any dividend, the plea of the appellant on equity principle is accepted that the expenses under rule 80(2)(iii) should not be disallowed on the said amount of Rs. 194.62 crores worth of preference shares of HPL. The appellant has accepted that an amount of Rs. 63,22,363/- is disallowable under rule 80(2)(iii) read with section 14A. These grounds of appeal are partly allowed. 93. Before the Tribunal, the revenue's ground of appeal relates to disallowance under section 14A read with rule 8D. It was submitted on behalf of the Assessee that as against dividend income of Rs. 41,02,847/-, the assessee offered Rs. 55,92,89-6/- for disallowance [increased to Rs. 63,22,363/- before CIT(A)]. The AO did not specify a single reason as to why the assessee's claim of expenditure was not acceptable and straightaway embarked upon computing disallowance under rule 8D. Such action of the AO is wholly unsustainable in view of the judgments of the Hon'ble Calcutta High Court in GA No.2290 of 2013, ITAT No.157 of 2013, v Shri Ashish Jhunjhunwala decided on January 8,2014 and in GA No.3022 of 2013,, ITA....
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....Bang/2013. CIT Vs. Holcim India Pvt. Ltd. 57 Taxmann.com 28 (Del) 97. We have given a careful consideration to the rival submissions and perused the decisions referred to by the learned counsel for the Assessee. The proposition laid down in the aforesaid decision is that in the absence of existence of tax free income there can be no disallowance u/s.14A of the Act. In the present case however there was exempt income and therefore provisions of Sec.14A of the Act have to be applied. The learned counsel for the Assessee has however argued that since no dividend was received on Preference shares the investment in preference share should not be considered for the purpose of determining Average Value of Investments u/rule 8D(2)(iii) of the rules. We are unable to agree with such a proposition. The decisions relied upon by the learned counsel for the Assessee do not lay down such proposition of breaking up individual investments and see whether those investments yielded tax free income and exclude those invesments for the purpose of working out average value of investments under Rule 8D(2)(iii) of the Rules. We are however of the view that the disallowance under Sec.14A of the Act ....
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....n the earlier assessment year. Reliance was also placed on the decision in the case of Radhaswami Satsang vs. CIT [193 ITR 321} wherein the Hon'ble Supreme Court observed at page 329 that "We are aware of the fact, strictly speaking res judicata does not apply for income tax proceeding. Again, each assessment year being unique, what is decided in one year may not apply in the following year but when' a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." 100. The CIT(A) however upheld the order of the AO, observing as follows: "I have carefully considered the observations of the Assessing Officer in the assessment order and submissions of the appellant. The expenditure incurred by assessee is not kind of expenditure allowed u/s 350 of the Income Tax Act, 1961. The expenditure was incurred on change of object clause which is a capital expenditure. The provisions of section 350 (i) (ii) apply only in connection with setting up ....
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....tical facts that the disallowance of expenses u/s.35D of the Act which is to be allowed over a period of 10 years cannot be disallowed in the 7th year. In that case, Preliminary expenses were amortized claimed as deduction u/s. 35D. The same was allowed in the first year and thereafter for the following 6 AYs. In the 7th AY, the AO restricted deduction on ground that only eligible expenses were allowed to be spread over u/s. 35D and therefore, expenses only to extent that had nexus to eligible projects were admissibl. However, Tribunal, noted that in last seven years, no such disallowances were made and directed such benefit to be granted. On appeal by the Revenue, the Hon'ble Gujarat High Court held, since last several years, AO had granted such claim on same consideration. The Hon'ble High Court held that following rule of consistency, Tribunal therefore, correctly held that such claim could not have been suddenly disallowed and the Revenues' appeal was dismissed. In the present case also the allowance of expenses has been made in the past and it was sought to be disturbed for the first time in AY 07-08. Such action cannot be sustained. Respectfully following the deci....