TaxTMI 
TaxTMI 
2017 (6) TMI 68
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.... 2. All the appeals and CO are heard together and being disposed of by way of this consolidate order for the sake of convenience. First we will deal with ITA No.609/Kol/2013for A.Y. 07-08. 3. Only issue raised by Revenue in this appeal is that Ld. CIT(A) erred in allowing unabsorbed depreciation brought forward from the assessment years 1992-93 to 1997-98 to be carried forward in the year under consideration. 4. Facts in brief are that assessee is a limited company and engaged in cement manufacturing business. The original assessment was framed u/s 143(3) of the Act vide order dated 19.11.2009 wherein the unabsorbed depreciation of the earlier year was allowed to be carried forward to the year under consideration. The details of unabsorbed depreciation stand as under:- Sl.No A.Y Amount (Rs) 1 92-93 14,02,04,315 2 93-94 11,40,93,432 3 94-95 50,49,72,790 4 95-96 61,19,88,996 5 96-97 Nil 6 97-98 91,09,53,629 5. Aggrieved assessee preferred an appeal before Ld. CIT(A) who allowed the appeal in favour of The aforesaid brought forward of unabsorbed depreciation was allowed to be carrie....
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....l Bench of the ITAT and so, given the judicial hierarchy, the judgment of the Hon'ble High Court of Gujarat shall hold the field. The Hon'ble High Court has held that the amendment was applicable from the assessment year 2002-03 which means that any unabsorbed depreciation available to n assessee on the 1st day of April, 2002 has to be dealt with in accordance with the provisions of section 32(2) as amended by the Finance Act, 2001 and not by the provisions of section 32(2) as it stood before the said amendment. The Hon'ble High Court also noted that once the CBDT Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set-off of unabsorbed depreciation had been dispensed with the unabsorbed depreciation from the assessment year 1997-98 to 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, and, had to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and consequently, was available for carry forward and set-off against the profits and gains of subsequent years without any limit whatsoever. Following the decision of the Hon'ble High Court of Gujarat in the case of General Mo....
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....ion for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. It is held that any unabsorbed depreciation available to an assessee on 1st day of April, 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. And once the Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from assessment year 1997-98 up to the assessment year 2001-02 got carried forward to the assessment year2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever." Similarly, we also find that the Hon'ble jurisdictional High Court in GA No. 1930 of 2016 dated 11.08.2016 in the case of CIT vss. M/s India Jute And Industries Ltd. has decided the issue in favour of assessee and against the Revenue. The relevant extract of the order is reproduced below:- "Challenging the af....
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.... forward and setoff of unabsorbed depreciation." From the above it is clear that the intention of the legislature is to provide the benefit of brought forward unabsorbed depreciation to be allowed for unlimited years. It is a fact that the amendment in section 32(2) by the Finance Act will be effective from 1st April 2002, but intention behind the amendment could only be interpreted as if it has the effect retrospectively. In addition to above we also find that the Hon'ble jurisdictional High Court in the case of M/s India Jute And Industries Ltd. (supra) after having reliance in the case of General Motors (supra) we hold that the decisions of the Special Bench of ITAT in the case of Times Guarantee has been overruled. Thus we find no reason to interfere with the finding of the Ld. CIT(A). Under the circumstances, this issue of Revenue's appeal is dismissed. AO is directed accordingly. 8. In the result, Revenue's appeal is dismissed. Coming to Revenue's appeal in ITA No.610/Kol/2013 for A.Y. 08-09. 9. First issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by the AO for Rs. 14,28,510/- u/s 40A(9) and 36(1) of the Act on ac....
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.... operative portion of the said order is reproduced below:- "5. Heard the rival submissions, peruse the material available on record and the case law cited by the Ld. Authorised Representative of the assessee. we find that this issue is covered in favour of the assessee vide order of the Hon'ble ITAT dated 30.06.2006 relating to assessment year 1995-96 in assessee's own case while deciding the departmental appeal. The relevant portion of the order dated 30.6.2006 passed by the Tribunal is reproduced hereunder:- 'We after hearing both the parties and taking into consideration the orders of tax authorities find that since the ld. CIT(A) while deleting the addition has given a categorical finding by observing that it was made for the welfare of the employees and therefore the decision of the Hon'ble Kerala High Court in the case of P. Balakrishnan, Commissioner of Income Tax -vs- Travancore Cochin Chemicals Ltd (supra) was well applicable which has not been rebutted or controverted by the ld. Departmental Representative for the Revenue before us. We, therefore, respectfully following the decision of Hon'ble Kerala High Court reported in 243 ITR 284, confirm the action....
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....l decisions relied upon. In the case of JK Paper Ltd, the Hon'ble ITAT 'C' Bench, Ahmedabad after referring to the judgments of the various High Courts has held, under similar facts and circumstances, that the rebate allowed by the lender was not assessable as income u/s. 28(iv) or 41(1). It was explained on behalf of the appellant that the loan under consideration was taken and utilised for acquiring fixed assets which has not been disputed by the AO in his assessment order. In the case of CIT vs Xylon Holding (P) Ltd, the Hon'ble Bombay High Court has held that the cessation of liability on account of repayment of loan taken to purchase capital asset does not result in a revenue receipt and is not taxable u/s. 28(iv) or 41(1). In view of the above, I am of the opinion that the case of the appellant is covered directly by the above decisions of the Hon'ble ITAT Ahmedabad and Bombay High Court. Respectfully following the above decision, the addition of Rs. 43,05,78,782/- is directed to be deleted. Ground no 2 is allowed." The Revenue, being aggrieved, is in appeal before us on the following ground:- "(ii) That the Ld. CIT(A) has failed to appreciate the ratio laid....
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.... have been allowed as a deduction in earlier year(s). However, waiver off interest portion out of loan taken for trading activities and other expenditure allowed as deduction in the earlier year(s) would be brought to tax under section 41(1) of the Act in the year(s) of write-back. The provisions of section 28 of the Act deals with profits and gains of business or profession and clause (iv) thereof says that the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be chargeable as income under the head "Profits and gains of business or profession". In the instant case, the fact that the loan was utilized for the acquiring of fixed assets has not been disputed by the AO. Thus, it is clear that the instant loan was not utilized for the trading liability of the assessee and therefore the waiver off the same cannot amount to income which is chargeable to tax. In holding so, we find guidance & support from the judgment of Hon'ble Delhi High Court in the case of CIT v. Tosha International Ltd. [2011] 331 ITR 440/[2009] 176 Taxman 187 wherein it was held as under : "The assessee was engaged in the man....
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....h Court of Bombay held that no allowance or deduction having been allowed in respect of loan taken by assessee for purchase of capital assets, section 41(1) was not attracted to remission of principal amount of loan. In the instant case, the assessee has not got any deduction on account of acquisition of capital assets as the same has been reflected in the balance sheet and not in the P and L account, and also the remission of the principal amount of loan so obtained from the bank and financial institution had not been claimed as expenditure or trading liability in any of the earlier previous year. So far as waiver of interest is concerned, the assessee-company itself has treated the same either as income or has not claimed the same as expenditure in the computation of income filed before the lower authorities." 4. We see no reason to interfere with the conclusions of the Tribunal as the same have been rendered on a correct appreciation of law. The principles enunciated in Mahindra & Mahindra Ltd. v. CIT [2003] 261 ITR 501 (Bom.) are fully applicable and we see no reason to take a different view. 5. Consequently, no substantial question of law arises for our consideration. Th....
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....red directly by the above decisions of the Hon'ble ITAT Ahmedabad and Bombay High Court. Respectfully following the above decisions, the addition of Rs. 43,05,78,782/- is directed to be deleted. Ground no 2 is allowed." The Revenue, being aggrieved, is in appeal before us on the following ground:- "(iii) That the Ld. CIT(A) has erred in facts and circumstances of the case in admitting, going against the ration laid down by the Hon'ble Supreme Court in the case of Goetze India Ltd -vs-CIT [284 ITR 323 (SC) (2006)], the fresh claim of the assessee in respect of additional depreciation on interest capitalized which was never made by the assessee in the return of income or in the course of assessment and consequently, in directing to allow the additional claim of depreciation of Rs. 72,69,648/-." 21. Before us both the parties relied on the order of Authorities Below as favourable to them. 22. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that the Hon'ble Co-ordinate Bench of this Tribunal has decided the issue in favour of assessee in assessee's own case in ITA No.1275/Kol/2010 (sup....
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....any time limit. 24. The facts and issue are same as in ITA No.609/Kol/2013 for A.Y. 2007-08 following our decision on this issue as embodied in para-7 of this order, hence, this ground of Revenue's appeal is dismissed. AO is directed accordingly. 25. Next issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleing the addition made by the AO for Rs.13,85,41,566/- on account of bad debts written off in the computation of income. 26. The AO during assessment observed that the bad debts claimed as deduction by the assessee in computation of income have not been debited in the profit and loss a/c. On question for the aforesaid deduction of bad debts by the AO the assessee submitted that the bad debts have been written off against the provision of bad debt which were created in earlier years. These provisions were created in earlier years by debiting profit & loss account and these were also disallowed and offered to tax. Therefore, the bad debt actually written off in the books were written off against the provisions. Therefore, the same was not reflected in the profit and loss a/c. However, the AO disregarded the claim of assessee by observing that bad debt has....
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....ore us on the following ground:- "(v) That the Ld. CIT(A) has failed to appreciate the accounting treatment of the Bad Debt Written Off and hence he has erred in distinguishing the assessee of the assessee from the case of the decision of Hon'ble Kerala High Court in CIT-vs- Hotel Ambassador (2002) [253 ITR 430(Ker.)], relied upon by the AO and, accordingly, in directing to delete the disallowance to the tune of Rs. 13,12,19,105/-." 28. Before us both the parties relied on the order of Authorities Below as favourable to them. 29. We have heard rival contentions of both the parties and perused the materials available on record. From the foregoing discussion, we find that assessee has debited the provision for bad debt in the earlier year which were offered to tax. It is because under the Income tax Act, the provisions for bad debts are not allowable expenses until and unless these are actually written off in the books of account. However, in the year under consideration, the bad debts have actually been written off and adjusted with the provisions which were made earlier years in the books of accounts. The necessary details of the provision made in the earlier year are ....
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....f unabsorbed depreciation brought forward from the earlier years. However, the AO observed that there was no brought forward loss and therefore no relief can be given to the assessee on account of brought forward loss while computing the book profit u/s. 115JB of the Act. 32. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who granted relief to assessee by observing as under:- "14. Ground no 8 relates to the computation of book profit u/s. 115JB. The issue which requires adjudication is whether the appellant is entitled to deduction of the lower of the amount of brought forward business loss or unabsorbed depreciation as per the books of account even though the debit balance in the profit and loss account was adjusted against the share premium account and revaluation reserve in pursuance to a scheme of compromise sanction by the Hon'ble High Courts of Orissa and Gujarat. The Ld. AR has submitted that the issue has been decided in the case of the appellant for the assessment years 2006-07 and 2007-08 by the Hon'ble ITAT 'A' Bench, Kolkata in ITA No. 1470/Kol/2009 and ITA No.1275-1417/Kol/2010. This issue has been discussed in detail in my order dated the 28th....
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....m consideration and accordingly, AO is required to determine amount of loss brought forward or unabsorbed depreciation for each of years without taking said adjustment into consideration and allow deduction in respect of lesser of two amounts. Hence, both questions framed by us are answered in favour of assessee on the given facts and circumstances of the case. In view of the above facts and circumstances, we all this issue in favour of assessee and against Revenue." As the aforesaid order of the Co-ordinate Bench of this Tribunal is binding on us and therefore respectfully following the same, we do not find any infirmity in the order of Ld. CIT(A). We uphold the same. This ground of Revenue's appeal is dismissed. 35. Last ground in this appeal of Revenue is general in nature and does not call for any separate adjudication. 36. In the result, Revenue's appeal is dismissed. Coming to Revenue's appeal in ITA No.611/Kol/2013 for A.Y. 09-10. 37. First issue raised by Revenue in this appeal is that Ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of Rs.15,98,435/- u/s 40A(9) and 36(1) of the Income-tax Act on account of Staff Welfare Expenses.....
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....s CO is that Ld. CIT(A) erred in disallowing the expense of Rs.2,02,56,220/- u/s 14A of the Act. 51. The assessee in the year under consideration has declared dividend income and interest income of Rs.2,42,95,577/- and Rs.3,900/- respectively which was claimed as exempted u/s 10(34), 10(15) of the Act. The assessee has not disallowed any expense in relation to the aforesaid exempted income on the ground that no expense was incurred in connection with the aforesaid income. It was also submitted that the own fund was invested in the impugned assets and therefore no interest expense has been incurred. However, the AO disregarded the claim of assessee by observing that the decision for the purchase / sale and retention of investment are very crucial and top management is always involved in such decision making process. Therefore, the AO invoked the provisions of Rule 8D of the IT Rules, 1962 and accordingly made the disallowance as under:- Sl.No Rule Head of expense Amount (Rs) 1 8D(2)(i) Direct Expenses Nil 2 8D(2)(ii) Interest expense 60,20,220/- 3 8D(2)(iii) Indirect expense 1,42,36,000/- The aforesaid impugned amount were disall....
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....yment your kind attention is further drawn to the principles enunciated by Honble ITAT 'A' Bench, Kolkata in the case of Damodar Valley Corporation v. Addl. CIT (2016) 180 TT] 82 (Kol-A). The relevant portion of the aforesaid order is reproduced herewith for your kind perusal. - (underlined by us to lay emphasis) a) "On availability of own funds with the assessee for making investments. (i) We also find that the assessee had got sufficient own funds to make these investments and the learned AO had not brought any nexus between the borrowed fund vis-a-vis the investments made by the assessee. Without doing the same, he cannot directly presume that the investments were made out of borrowed funds. If the actions of the learned AO and learned CIT(A) arc to be upheld, then no assessee could make any investments when there is a interest bearing loan to be repaid. The fact of making the investments has to be viewed from the point of commercial expediency and from the point of view of businessman and not from the viewpoint of the Revenue. It is well settled that businessman knows his interest best. We place reliance on the decision of Hon'ble Bombay High Court in the case....
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....of the assessee and straightaway embarked upon computing disallowance under r. 8D of the Rules on presuming the average value of investment at ½ percent of the total value. In view of the above and respectfully following the Co-ordinate Bench decision in the case of 1.K. Investors (Bombay) Ltd., supra, we uphold the order of CIT(A)." CIT vs. R.E.I. Agro Ltd. in G.A. 3022 of2013 in ITAT 161 of2013 dt.23rd December 2013 rendered by Calcutta High Court : "The AO also disallowed the expenditure under s. 14A of the IT Act, 1961 without first recording that he was not satisfied with the correctness of the claim as regards the claim that no expenditure was made by the assessee. Challenging the order of the Tribunal, the present appeal has been filed. We have heard Mr. Bhowmik and are of the opinion that no point of law has been raised. Therefore, this appeal is dismissed." Hence, we hold that the action of the learned AO in directly embarking on r. 8D(2) of the Rules without recording any satisfaction as mandated in r. 8D(1) of the Rules is not appreciated and hence no disallowance under sec. 14A of the Act by applying rule. 8D of the Rules could be made in the facts....
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.... in this case also it was held by the Hon'ble Tribunal, Kolkata 'A' Bench that disallowance under Rule 8D has to be computed by taking into consideration only those shares which had yielded dividend income in the year under consideration. 54. On the other hand, Ld. DR heavily relied on the order of Authorities Below and left the issue to the discretion of the Bench. 55. We have heard the rival contentions of both the parties and perused carefully considered the materials on record; including the judicial pronouncements cited and placed reliance upon. The issue in the instant case relates to the disallowance made by the lower authorities under the provisions of section 14A of the Act viz-a-viz rule 8D of Income Tax Rules 1962. The assessee has earned exempt income but no corresponding expense was disallowed by the assessee in relation to such income on the ground that no expenditure was incurred. Therefore the AO invoked the provisions of section 14A and rule 8D of Income Tax Rules for the purpose of the disallowance. In the instant case we find that the AO has derived its satisfaction by recording in the assessment order as detailed under :- "3.1.2 ... it was o....
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....en used in the investment on the basis of documentary evidence as held by the jurisdictional High Court in the case of Dhanuka & Sons Vs. CIT reported in 12 taxmann.com 227 wherein it was held as under : The mere fact that those shares were old ones and not acquired recently was immaterial. It was for the assessee to show the source of acquisition of those shares by production of materials that those shares were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of any loan. If those shares were purchased from the amount taken in loan, even for instance, five or ten years ago, it was for the assessee to show by the production of documentary evidence that such loaned amount had already been paid back and for the relevant assessment year, no interest was payable by the assessee for acquiring those old shares. In the absence of any such material placed by the assessee, the authorities below rightly held that proportionate amount should be disallowed having regard to the total income and the income from exempt source. In the absence of any material disclosing the source of acquisition of shares which was within the spe....