AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 1006
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.... sec. 14A of the IT Act which is arbitrary, baseless, unjustified and bad in law. 2. Notwithstanding the ground no. 1 the learned CIT(A) has erred in law and facts of the case in confirming the addition of Rs. 34,01,563/- on account of disallowance by applying rule 8D read with sec 14A of the IT Act which is arbitrary, unjustified, baseless and bad in law. 3. The assessee craves to have the right to add, amend or modify the grounds of appeal. 3. The facts relevant to the issue in dispute are that the assessee company made investment in its subsidiary and other companies during the year as well as in earlier assessment years, however, no exempt income was earned by the assessee company from investments made and, the assessee did not make any disallowance in terms of section 14A of the Income Tax Act, 1961 (in short 'the Act'). The Assessing Officer invoked rule 8D of the Income Tax Rules, 1962 and made disallowance of Rs. 26,75,508/- under rule 8D(2)(ii) and disallowance of Rs. 7,26,055/- under rule 8D(2)(iii) of the Income Tax Rules. Thus, total disallowance of Rs. 34,01,563/- was made under section 14A of the Act read with rule 8D of the Income Tax Rules. The Ld. Commissi....
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....pon by us. 9. Thus, appeal of the assessee is allowed. ITA No. 4397/Del/2013 for AY: 2010-11 10. Now we take up the appeal in ITA No. 4397/Del/2013 in which following grounds are raised: 1. The learned CIT(A) has erred in law and facts of the case in confirming the addition made by the Assessing Officer for arriving at the satisfaction for the purpose of invoking rule 8D read with sec 14A of the IT Act which is arbitrary, baseless, unjustified and bad in law. 2. Notwithstanding the ground no. 1 the learned CIT(A) has erred in law and facts of the case in confirming the addition of Rs. 34,52,252/- on account of disallowance by applying rule 8D read with sec 14A of the IT Act which is arbitrary, unjustified, baseless and bad in law. 3. The learned CIT(A) has erred in law and facts of the case in confirming the addition of Rs. 3,20,055/- by alleging that the unchanged liabilities are no longer in existence and the assessee company has obtained the benefit in respect of the said sums by way of cessation which is incorrect, arbitrary, baseless, unjustified and bad in law. 4. The assessee craves to have the right to add, amend or modify the grounds of appeal. 11. ....
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....t applicable. The learned Authorized Representative further submitted that assessee company being a limited company, even if the balance has remained same for three years, the balance of creditors could not be added to the income of the assessee on the ground of the expiry of limitation, hence the addition made on account of cessation of liability was arbitrary, unjustified and bad in law. In support of the proposition, he relied on the decisions of the Tribunal in the case of Sh. Vardhman Overseas Ltd. Vs. Assistant Commissioner Of Income Tax reported in (2008) 24 Sot 393(Del) and Income Tax Officer Vs. Janak Steel Tubes (P) Ltd Reported in 31 TTJ 384(Del). 15. On the other hand, the learned Senior Departmental Representative supported the findings of the authorities below. 16. We have heard the rival submissions and perused the material on record. We find that as far as addition under section 41(1) of the Act is concerned, the two conditions, i.e., (1) allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability; (2) the assessee has obtained cash, or any amount in respect of such a loss or expenditure, or some ben....
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.... on the ground of expiry of limitation as, according to well settled law explained by Hon'ble Supreme Court in the case of Sugauli Sugar Works (P.) Ltd. (supra) in the absence of creditor, it is not possible for the Department to come to the conclusion that the debt is barred and has become unenforceable and there may be some circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act. It will be relevant to reproduce these observations of their Lordships from the said decision:- "The question whether the liability is actually barred by limitation is not a matter which can be decided by considering the assessee's case alone but it is a matter which has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable. There may be circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Lim....
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.... Lordships, it will be inferred that it has not been shown by learned CIT(A) that the assessee has acquired any benefit from this particular liabilities which are still outstanding in the balance sheet of the assessee and it has also not been shown that these liabilities have ceased finally without the possibility of revival. In our opinion, the onus has wrongly been shifted by the Revenue on the assessee. The assessee has shown these liabilities outstanding in its balance sheet. Therefore, there was no occasion to treat the said amount as taxable under s. 41(1) of the Act and if Department intends to assess the same by applying the provisions of s. 41(1), then the onus will be on the Revenue to show that the liability which is appearing in the balance sheet has ceased finally and there is no possibility of the revival of the liability. 17. Further in the case of Income Tax Officer Vs. Janak Steel Tubes (P) Ltd (supra), the Tribunal held that credit outstanding for more than three years cannot be added to the income of the assessee merely because the origin of the liability was beyond three years and it cannot be said that the limitation has run out. The relevant paragraph of th....