TaxTMI 
TaxTMI 
2016 (3) TMI 1194
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.... account of Annual Technical Services (ATS) fees paid to Infosys. It is the say of the ld. counsel that the grievance of the revenue cannot be entertained because of the Circular of the CBDT restricting the revenue to file appeal below the tax effect which is Rs. 10 lakhs. The ld. D.R. fairly conceded to this. 4. We have carefully gone through the grounds of appeal taken by the revenue admittedly the tax effect on the deleted amount is less than Rs. 10 lakhs, therefore, revenue's appeal is dismissed in the light of the Circular of the CBDT No. 21/2015 dated 10.12.2015. ITA No. 577/Ahd/2011 for A.Y. 2006-07. Ground no. 1 relates to the claim of depreciation of Rs. 313.34 lacs on Wind Energy Generators. 5. This issue has been considered by the A.O at para 4 of his assessment order wherein he has followed the findings given in the assessment order for A.Y. 05-06 and following the findings of his predecessor, the claim of depreciation was disallowed. When the matter was agitated before the ld. CIT(A). The CIT(A) also followed the findings of his predecessor and dismissed assessee's appeal. 6. Before us, the ld. counsel for the assessee stated that the issue is no more re....
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....on leased assets has been decided by Honourable Apex Court in the case of ICDS Ltd (supra). One of the question before the Hon. Supreme Court was "whether the Assessee is entitled to depreciation vehicles finance by it which is neither owned nor used by the Assessee by virtue of the business" the Hon. Supreme Court held as under: " The provision on depreciation in the Income-tax Act, 1961, reads that the asset must be "owned, wholly or partly, by the assessee and used for the purposes of the business". Therefore, it imposes a twin requirement of "ownership" and "usage for business" for a successful claim under section 32 of the Act. The section requires that the assessee must use the asset for the "purpose, of business". It does not mandate usage of the asset by the assessee itself. As long as the asset is utilized for the purpose of business of the assessee, the requirement of section 32 will stand satisfied, notwithstanding non-usage of the asset itself by the assessee. The definitions of "ownership" essentially make ownership a function of legal right or title against the rest of the world. However, it is "nomen genera-lissimum", and its meaning is to ....
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....Ltd. (supra) has arguments of the assessee on the impugned issue, thereby, impliedly, reversed the ratio in the decisions of MidEast (supra) and Induslnd (supra). We find that tests laid down in MidEast case was primarily to ascertain the genuineness of the transaction entered by the assessee with its lessee, which was done by the CIT(A) in each case. 31. In any case, the issue of SLB transaction and in particular the issue of ownership of asset, also has been laid to rest by the Hon'ble Apex Court in the case of ICDS Ltd. Vs CIT, in CA No. 3286 to 3290 of 2008, wherein the question that was sought to be answered was whether the appellant (assessee) is the owner of the vehicles which are leased out by it to its customers". The Hon. supreme Court of India, concluded, extracted from para 28, "From a perusal of the lease agreement and other related factors, as discussed above, we are satisfied of the assessee's ownership of the trucks in question" (para28, page28). 32. Coming to the issue of finance lease, wherein the CIT(A) sustained the disallowance because the usage of the equipment lease out could not be substantiated. On going through the decision of the jur....
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....e for the year under consideration also and made a further disallowance of Rs. 42.68 crores. Assessee carried the matter before the ld. CIT(A) but without any success. Before us, the ld. counsel for the assessee stated that an identical issue was considered by the Tribunal in earlier years also. The ld. consel placed the order of the Tribunal. Per contra, the ld. D.R. could not bring any distinguishing decision/facts before us. 11. We have given a thoughtful consideration to the facts in issues, we also gone through the decisions of the Tribunal in assessee's own case for A.Y. 02-03, 04-05 & 05-06. We find that a similar issue was considered first by the Tribunal in A.Y. 02-03 in ITA Nos. 152/Ahd/06, 815/Ahd/07 & 4387/Ahd/07. We find that the Tribunal has also considered the additional grievance of the assessee relating to the deletion of the suo motu disallowance made by it. The relevant facts and the findings of the Tribunal on this issue reads as under:- 15. During the course of assessment proceedings, AO noticed that Assessee had submitted that it had investments to the tune of Rs. 413.60 Crore on which the assessee has earned tax free income. AO also noticed that A....
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....of borrowal = 9.4% of Rs. 390.32 Cr. Rs. 36.68 crores Total expenses incurred for earning tax-free income is determined at Rs. 36.68 crores Disallowances u/s 14A Rs. 36.68 crores Already disallowed by assessee Rs. 6.23 crores Balance disallowable Rs. 30.45 crores 16.The disallowance worked out by the AO was Rs. 36.68 Crore but since the Assessee had already suo motu disallowed Rs. 6.23 Crore, he made disallowance of balance amount of Rs. 30.45 Crore. Aggrieved by the order of AO, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions made by the Assessee granted partial relief to the Assessee by holding as under: 6.3 After considering the submissions of the appellant and the case laws relied upon, I am of the opinion that the action of the A.O. is not correct as regards disallowing interest expenses amount after allocating it to the investments for exempted income. The appellant has filed the details before the A.O. admitting that only part of the interest bearing funds is used for investing in the investments giving tax exempted income. The interest cost is calculated at Rs. 6.23 Cr. which is offered for tax....
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....n to tax free funds worked out to 327%. He further submitted that in view of the fact that interest free funds was far in excess of tax free investments, no disallowance u/s 14A was called for. He further submitted that the disallowance made suo motu by the Assessee of Rs. 6.23 Crore should also be reversed for the reason that on identical facts in the case of Assessee, the Hon. Tribunal had deleted the addition made u/s 14A and which was also upheld by Hon. Gujarat High Court in Tax appeal no. 118/Ahd/2013. He placed on record at page 335 to 372 the order of Tribunal for A.Y. 2003-04 and at page 373 to 378 the order of Gujarat High Court. The learned A.R. further submitted that since no amount of disallowance u/s 14A can be made in the case of the Assessee and therefore urged to delete the entire disallowance u/s 14A. He further submitted that the deletion of entire disallowance u/s 14A can be raised by the assessee for the first time before Tribunal and for which he placed reliance on the decisions in the case of National Thermal Power Company Limited vs. CIT 1998 229 383 ITR (SC), Jute Corporation of India vs. CIT (1991) 187 ITR 688 (SC). He also placed reliance on the decision ....
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....ree investments were to the tune of Rs. 589 crore. Thus the interest free funds were far in excess of the investments. CIT (A) has given a finding that the facts in AY 2003-04 are identical to the facts of the case in AY 2002-03 and accordingly he has followed the decision of CIT (A) for AY 2002-03. These facts have not been controverted by the Ld. D.R. nor have they brought on record any facts to the contrary. Hon'ble Bombay High Court in the case of CIT Vs Reliance Utilities & Power Ltd (supra) has held that if there are interest free funds available to an assessee sufficient to meet its investments and at the same time the assessee has raised a loan it can be presumed that the investments were from interest free funds available. In the present case, since the assessee has suo moto disallowed Rs. 5.53 crore u/s 14A, respectfully following the decision of Bombay High Court, we are of the view that in the facts of the present case, no further disallowance over and above than what has been disallowed by the Assessee is called for. As far as disallowance of other administrative expenses is concerned, the undisputed fact is that the disallowance has been made by the AO without giv....
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....ance of loss on write off of preference shares. 13. During the course of the scrutiny assessment proceedings, the A.O noticed that the assessee has claimed bad debts written off at Rs. 67.60 crores, the assessee provided a list which involved 43 debtors. On perusing the said list, the A.O noticed that the assessee has written off Rs. 11 crores as "preference shares written off". Assessee was asked to justify the same. Assessee filed an explanation stating that it has advanced money to Sanghi Industries Ltd. By way of term loan, it was explained that the preference shares were allotted on private placement basis to the bank in lieu of interest accrued and overdue on such parent term loans. It was further explained that the overdue interest represents money lent in ordinary course of the banking business and if such investment becomes non performing in accordance with the RBI guidelines, it is bad debt covered under section 36(i)(vii) of the Act. It was claimed that this irrecoverable advance in the form of preference shares has been written off. 14. After considering the submissions made by the assessee, the A.O found that the query related to the preference shares of Rs. 11 c....
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....claiming that the investments/securities held by a Bank are in the nature of stock in trade and has to be valued as per the norms/guidelines fixed for the valuation of inventories. It is the claim of the ld. counsel that even otherwise, the assessee is entitled to value its securities at Nil when the recoverable value is Zero. It is the contention of the ld. counsel that even otherwise, the assessee is entitled for the claim of write off. Per contra, the ld. D.R. strongly supported the findings of the revenue authorities. 17. We have given a thoughtful consideration to the facts in issues. We have also considered the decision of the Hon'ble Supreme Court in the case of UCO Bank (supra). We find force in the contention of the ld. counsel that as per the ratio laid down by the Hon'ble Supreme Court in the case of UCO Bank (supra), the bank is free to value its inventories "securities" at cost or market price whichever is lower. Since the entire issue of write off has not been looked upon by the lower authorities in this perspective, we, therefore, restore the matter to the files of the A.O. The A.O is directed to examine this issue in the light of the ratio laid down by the Hon'bl....
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....bank enters into purchase/sale of corporate and retail loans through direct assignment/special purpose vehicle (SPV). In most case, post securitization, the bank continues to service the loans transferred to the assignee/SPV. The bank also provides credit enhancement in the form of cash collaterals and/or by subordination of cash flows to Senior Pass Through Certificate (PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/disclosure is made at the time of sale in accordance with AS-29- provisions, contingent liabilities and contingent assets. Gains on securitization transaction is recognized over the period of the underlying securities issued by the SPV. Loss on securitization is immediately debited to Profit and Loss Account. 7.2.Further, it is seen that 'Notes to account' (Para 5.1.15) reads as under:- 31.03.07 (Rs in Cr.) Number of loan accounts securitized 2.00 Book value of loan assets securitized 547.16 Sale consideration received for the securities assets 550.09 Net gain/loss over net bo....
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....efore, the assessee has no liability whatsoever on these transactions afterwards. Since there is no uncertainty to the income on these transactions there is no question of postponing the income. The ld. CIT(A) confirmed the addition made by the A.O. Before us, the ld. counsel for the assessee once again stated that being a bank it has to mandatorily follow the guidelines issued by the RBI. It is the say of the ld. counsel that it is not the case of the revenue authorities that the assessee has not followed the guidelines of the RBI. Therefore, the action of the A.O and also of the ld. CIT(A) are against the facts of the case. Per contra, the ld. D.R. strongly relied upon the order of the revenue authorities. 27. Having heard the rival submissions, we have carefully considered the orders of the authorities below. It is a settled proposition of law that what is relevant for Income Tax on the basis is the real income as held by the Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd. 225 ITR 746. Various High Courts have given due recognition to RBI guidelines which determined the taxation of banks/NBFC. The Hon'ble Uttaranchal High Court in the case of Nainital Bank Lt....
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.... 244A and not granting proper interest on refund arose on account of TDS credits given in rectification order u/s. 154 of the Act. After considering the facts and the submissions, the ld. CIT(A) held as under:- 2.3 I have considered the facts of the case; rectification order and appellant's written submission. To examine the facts relevant to the issue in detail calculation of interest in various orders passed by AO were referred. It is seen that assessing officer granted interest under section 244A while processing the return under section 143 (1) which was not withdrawn even when assessment under section 143 (3) resulted in substantial demand more than the refund granted. Assessing officer further granted interest while giving appeal effect to the order under section 250. In the order passed under section 154 while giving credit of certain IDS certificates, assessing officer withdrew part of the interest paid under section 244A and granted additional interest on refund worked out on IDS credit given in the order. All these facts show that calculation of interest under section 244A is not properly done by the assessing officer. It is possible that AO has not withdrawn cor....