TaxTMI 
TaxTMI 
2017 (6) TMI 1146
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....) of the Act were duly served and necessary details were called for and furnished from time to time during the course of assessment proceedings. Various additions were made by ld. Assessing Officer following consistent view of his predecessor in the previous years and most of the issues have travelled upto the Tribunal in the previous years and are settled either in favour of assessee or in favour of Revenue. Assessment was completed at an assessed income of Rs. 69,98,64,710/-. 3. In appeal before first appellate authority assessee succeeded partly. Now both assessee and Revenue are in appeal before the Tribunal. 4. First we take up assessee's appeal in ITA No.1041/Ahd/2012 wherein ground no.1 reads as under :- 1. The order passed by the learned Commissioner of Income Tax (Appeals) is erroneous and contrary to the provisions of law and facts and therefore requires to be suitably modified. It is submitted that it be so done now. 5. This ground is of general nature, which needs no adjudication. 6. Ground no.2 reads as under :- 2. The learned Commissioner of Income Tax (Appeals) has erred in disallowing the appellant's claim for deduction u/s. 36(l)(v....
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.... therefore, the date of application should be taken as the effective date for granting status of Public Financial Institution. On this issue we do not agree with the C1T(A). we however find that; other conditions of section 36(1)(viii) are not complied with by the assessee. The milk produced by the assessee is not amounting to manufacture and therefore the assessee was not engaged in providing long term finance for industrial and agricultural development or development of industrial facility and again it had no capital which is necessary to compute the aggregate of the amount to be carried to special reserve account as twice the amount of the paid up share capital and of the General reserve. The assessee failed to comply with these other conditions and therefore it would not be entitled the deduction. 10. We further observe that the decision of the Co-ordinate Bench for Asst. Year 2003-04 has been followed by the Tribunal for Asst. Year 2004-05 and 2007-08 in ITA Nos. 3200 & 3201/Ahd/2010. Respectfully following the decision of Co-ordinate Bench, we are of the view that the issue now stands decided against the assessee and therefore, we find no reason to interfere with the order....
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....eed to send the matter back to Assessing Officer for the year. 13. Ld. AR further submitted that similar facts for Asst. Year 2004- 05 and 2007-08 came for adjudication before the Tribunal, Ahmedabad and the issue has been restored back to the file of Assessing Officer for re-adjudication. 14. Ld. DR could not controvert the submissions of ld. AR and had no objection if the issue is restored back to the file of Assessing Officer. 15. We have heard the rival contentions and perused the record placed before us. The issue raised in this ground is against the action of ld. CIT(A) sustaining the disallowance of Rs. 89,75,600/- being grant given to various unions and federations, claimed as expenditure u/s 36(1)(viii) of the Act. Further appreciating the contention of ld. AR that the issue has been adjudicated by the Co-ordinate Bench in the past relating to appeals for Asst. Year 2004-05 and 2007-08, we find that in ITA No.3200 & 3201/Ahd/2010 & others following issue came up before the Co-ordinate Bench wherein the matter was restored back to the Assessing Officer for re-adjudication observing as under:- 15. The ground no.4 of the assessee is as under: "4. The Id.C....
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....y entitled to higher depreciation as per the said entry of Appendix 1 to Income Tax Rules. It be so held now. 18. At the outset ld. AR requested for not pressing this ground and therefore, the same is dismissed as not pressed. 19. Ground no.5 reads as under :- 5. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance Rs. 2,63,75,906/- by applying section 14A. In the facts and circumstances of the case it is submitted that no disallowance under section 14A is required to be made. It is submitted that it be so held now. 5.1.The learned Commissioner of Income Tax (Appeals) has erred in not appreciating the fact that section 14A is not applicable to the appellant as the investments in securities yielding tax free income were made from own funds of the appellant and no expenses are incurred in relation to earn the exempt income. 5.2.The learned Commissioner of Income Tax (Appeals) has erred in law in confirming the application of Rule 8D, where the AO has not brought on record his dissatisfaction in respect of the appellant's claim of expenditure incurred for earning tax free income. 5.3.Alternatively, the ....
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....ce : "6. Next ground of appeal is regarding disallowance of Rs. 2,91,91,481/- by applying section 14A. Appellant had claimed exemption in respect of interest income of Rs. 14,77,45,77I/- and dividend from IDMC and IIL of Rs. 1,62,87,732/-. Appellant's submission was that investments on which exempt income was earned were not out of interest bearing funds. Assessing Officer accepted appellant's contention that major part of the interest, i.e. Rs. 13,63,85,79s/- paid to Government of India was not relatable to exempt. income and apportioned only the balance interest of Rs. 22,26.837/- paid to banks u/s. 14A as per Rule 3D. Assessing Officer also allocated administrative and managerial expenses of Rs. 2,88,21,521/- as per rule 8D besides interest of Rs. 3,69,960/- hereby making total disallowance of Rs. 2,9191,481/-. 6.1. In appeal, attention was drawn to submissions dated 26,8.2009 to the Assessing Officer that investments in securities from which exempt income was received, were made from own funds. Regarding administrative expenses, it was contended by the appellant that if at all, such expenses would be Rs. 44,000/- only, being salary of person receiving ....
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....assets. The same works out to Rs. 3,69,960/-. Disallotvdnce of Rs. 2,91,91,481/- is directed to be made U/S.14A. 10.6 I agree with the above decision of the then ld. CIT(A) -IV,. Baroda and following his decision on the issue, I hold that the AO is correct in making disallowance of expenditure of Rs. 2,63,23,840/- in view of working as per rule 8D details of which are given in the assessment order. I, therefore, confirm the disallowance of expenditure of Rs. 2,6323,940/- as made by the AO as per rule 8D. thus the grounds of appeal no.6,6.1, 6.2 & 6.3 of the appellant are hereby dismissed. 23. It is pertinent to note that amendment in Rule 8D of IT Rules came into effect from Asst. Year 2008-09. Further we find that the case of the assessee has to be examined in the light of the fact that the assessee is a statutory body constituted under the National Dairy Development Board Act, 1987 and under the Income tax Act is assessed as Company in view of the provisions of section 2(17) read with clause (ia) of section 2(26). The assessee has no authorized or issued or paid up share capital. Hence the assessee is a peculiar case where though is a company it has no share holders. Nation....
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....d surplus held by the assessee vis-à-vis the investments made fetching exempt income. Given below are the details showing own funds as against investments for above six years :- Financ ial Year Free Reserves & Surplus Dep fund (non cash exp) Provision bad& doubtful debts (non cash exp) Provision for diminution in value of investmen t (non cash exp) Total Own Funds Investment made in this year on which income considered exempt in A.Y. 2008- 09 02-03 18302.01 1110.28 12120.00 61.21 31593.50 1980.00 03-04 19587.83 1104.59 11450.00 25.10 32167.52 1291.40 04-05 20102.1.6 1113.35 10860.00 25.10 32100.6 200.50 05-06 20534.98 1222.66 10157.37 25.10 31931.11 450.00 06-07 20921.92 1334.85 9957.53 0.10 32214.40 0.00 07-08 21347.73 1179.21 9464.58 0.10 31991.62 19.99 26. Further the interest expenditure incurred by the assessee during the year comprises interest paid to Government of India at Rs. 10.94 crores and interest paid to banks at Rs. 71.40 lacs. Taking both the facts together and also in view of various judicial pronouncements ref....
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....e activities of NDDB mainly for promoting development of dairies, specific research, training etc. and also the fact that Revenue has been unable to prove any expenditure directly incurred for earning exempt income, we intend to make an ad hoc disallowance of Rs. 10 lacs taking it as a special case as against Rs. 2,53,16,471/- worked out by applying 0.5% on the average investments on Rs. 50.33 crores. Accordingly, out of the total disallowance of Rs. 2,63,25,906/- we sustain the disallowance to the extent of Rs. 10 lacs. 29. Ground no.6 reads as under :- 6. The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of prior period expenditure of Rs. 5,02,942/-. 6.1.In an}' event Commissioner of Income Tax (Appeals) ought to have given direction to allow the expenses in the respective years. 30. Ld. AR submitted that during the year total prior period expenses were of Rs. 3316039/- out of which Rs. 2353987/- has been disallowed in the return of income and fairly accepted that the correct amount of disallowance is of Rs. 2553155/-. Ld. AR also submitted that an amount of Rs. 303794/- was also written off as prior period expenses ....
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....ing as a nodal agency and income is diverted at source and does not belong to the appellant. 8.1.Without prejudice to above, if the interest is considered as income of the assessee, direction be given to allow the expenditure in the same year in which they are incurred as deduction. It be so done now. 9. The learned Commissioner of Income Tax (Appeals) has erred in not deleting disallowance of Rs. 3,28,745/- being contribution made to Employees' Recreation Trust by invoking provisions of section 40A(9) of the Act. It is submitted that in the facts and circumstances of the case, section 40A (9) is not applicable and no disallowance was required to be made. 12.In view of order of Hon'blc IT AT in appellant's case for Assessment Year 2004-05 & 2005-06, the AO may be directed to allow depreciation on the closing Written Down Value of the Block of assets for the immediately preceding year as may be finally determined in earlier year. 35. At the outset ld. AR submitted that the above ground nos.7, 8, & 9 have been adjudicated by the Tribunal in their appellate order for Asst. Year 2007-08 vide ITA Nos.3200 & 3201/Ahd/2010 and others and raised no objection i....
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....s issue is consequential to Tribunal decision in A.Y.2003-2004 to 2005-2006. He submitted that the AO should be directed to take closing WDV of the assets in the preceding year, as the opening of WDV in the present year. The learned DR of the Revenue supported the orders of the authorities below. 27. We have considered rival submissions. We are of the considered opinion that this is settled position of law that the closing WDV of the preceding year has to be adopted as opening WDV of the present year to work out the depreciation allowable to the assessee. The AO is directed accordingly. He should pass necessary orders in the light of the above discussion after providing reasonable hearing to the assessee. 28. Regarding ground no.2, it is fairly conceded by the learned AR of the assessee that this issue was decided by the Tribunal against the assessee in A.Y.2003-2004 and subsequent years. Accordingly, in the present year also, this ground is rejected. 29. For the ground no.3 also, it was fairly conceded by the learned AR of the assessee that the issue was decided against the assessee by the Tribunal for A.Y.2003-2004 and subsequent year. Accordingly, this ground is also re....
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....elaborately dealt similar issue and has held as follows :- A plain reading of sections 234B and 234C makes it abundantly clear that these provisions are mandatory in nature and there is no scope of waiving of the said provisions. [Para 8] However, in order to attract the provisions contained in sections 234B and 234C, it must be established that the assessee had the liability to pay advance tax as provided in sections 207 and 208 within the time prescribed under section 211. A mere reading of sections 207, 208 and 211 leaves no doubt that the advance tax is an amount payable in advance during any financial year in accordance with the provisions of the Act in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year. Thus, in order to hold an assessee liable for payment of advance tax, the liability to pay such tax must exist on the last date of payment of advance tax as provided under the Act or at least on the last date of the financial year preceding the assessment year in question. If such liability arises subsequently when the last date of payment of advance tax or ev....
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.... justified in deleting interest levied on the assessee under section 234B ? Answer; In view of the facts and circumstances of this case our answer is in the affirmative, i.e., in favour of the assessee and against the Department. Reasons 15. Although we agree with the conclusions of the Tribunal, we prefer to give our own reasons in support of our conclusion that on the facts and circumstances of this case, levy of interest under section 234B on the assessee is not justified. Firstly, the decisions of the Tribunal on the interpretation of the contracts regarding on period and off period salary were conflicting. Ultimately, the Legislature has stepped in to clarify the position by the Finance Act, 1999. In this connection, it is important to note that section 234B imposes interest, which is compensatory in nature and not as a penalty - Union Home Products Ltd. v. Union of India [1995] 215 ITR 758. 7661 (Kar). Secondly, although section 191 of the Act is not overridden by sections 192, 208 and 209{1)(a)(d) of the Act, the scheme of sections 208 and 209 of the Act indicates that in order to compute advance tax the assessee has to, inter alia, estimate his current income and c....
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....cer to grant for TDS. We observe that when this issue came up before ld. CIT(A) no concrete finding was given by him as can be seen from his observation which reads as follows :- 15. The ground of appeal no. 12 of the appellant is that the AO has erred in not granting credit for TDS, even though, as per AO's the appellant had filed indemnity bond. In this regard, the appellant has not filed any details with regard to claim of amount of TDS and the person who had deducted the tax at source etc. and on what basis such claim of TDS has been rejected by the AO. It is also not known whether the AO had not granted credit for TDS while processing the return of income u/s 143(1} or while completing the assessment u/s 143(3) of the IT Act. On perusal of assessment order in the case of appellant for the above year which is under consideration it is seen that issue regarding non granting of credit for TDS has not been discussed anywhere in such assessment order. In my opinion the issue with regard to non granting of credit of TDS is arising from the intimation u/s 143(1) and not from the order u/s 143(3) of the Act and therefore above ground of appeal no.12 cannot be entertained at thi....
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....ly rightly added in the total income of the assessee by the A.0. 56. At the outset ld. AR submitted that this ground of Revenue is squarely covered in favour of assessee by the decision of the Tribunal in assessee's own case for asst. year 2007-08. Ld. AR further submitted that the Tribunal in asst. year 2007-08 held that since no deduction has been allowed to the assessee in the year of making the provision, and it cannot be allowed because provision is not allowable u/s 36(1)(iii), write back of such provision cannot give rise to an income under section 41(1) of the Act. This decision has been upheld by Hon. Jurisdictional High Court in assessee's own case in CIT vs. NDDB in Tax Appeal No. 195 of 2014 vide judgment dated 6th May, 2014 and no further appeal has been preferred by the Department. 57. On the other hand, ld. DR supported the order of Assessing Officer. 58. We have heard the rival contentions and perused the record. Ld. Assessing Officer while framing assessment order assessed the provisions written back at Rs. 34.93 crores approx. as income u/s 41(1) of the Act taking a view that reversal of provision during the year definitely resulted into income. We furthe....
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.... reference to "Assessment" only so far as application of section 41 (1) is concerned. Without there being allowance or deduction of expense or trading liability in an "assessment ", section 41 (1) has no application. Courts have held that section 41(1) has no application, 'even in those cases where income in the assessment was determined as percentage of turnover/ sales and the expenditure in question was not actually allowed as deduction. It was held in the case of Naubatram Nandram vs. CIT (1972) 86 ZTR 805 (MP) that section 10(2A) of 1922 Act [same us section 41 (1) oj'1961 Act] is applicable only where a deduction or allowance is actually allowed to 'the assessee in earlier year and not to a case where merely income is estimated as a percentage of estimated sales value. In the case of Tirunelveli Motor Bus Services Pvt. Ltd. vs. CIT (1970) 78 ITK 255, the Supreme Court held the view of Tribunal that no expense could be said to have been allowed in an assessment made by estimating appellant's income. Prior to AY. 2003-04, appellant was not a taxable entity as per the NDDB Act. Provision for bad debts/contingencies were made from A.Y. 1990-91 onwards. Upto A.Y. 20....
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....essing Officer that no deduction towards provision for contingencies/ bad debts was allowed u/s 36(1)(viia) or otherwise in assessments for A.Y. 2003-04 to AY. 2007-08. If anj amount of such provision is found as allowed u/s 36(1)(viia) or otherwise in the assessments for A.Y. 2003-04 to 2007-08; to that extent, the provision written back is to be taxed u/ s 41 (1)." 6.8 Since the Ld. CIT(A) has deleted the addition (i.e. the disallowance of claim of deduction of excess provision written back) in view of the reasons as mentioned by him in his above appellate order for A.Y 2007-08 and respectfully following such decision I hold that the amount of t 34,93,06,7477- being excess provision of earlier year written back as disallowed by the A.O for the year under consideration is also not correct and, therefore, I delete the same. Thus the second around of appeal of the appellant is allowed. 59. We further observe that similar issue came up before the Tribunal in asst. year 2007-08 in ITA No.3200 & 32001/Ahd/2010 and the decision taken by the Tribunal is reproduced below :- 32. The ground no.l is as under: "J(i). On (he facts and in the circumstances of the c....
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....not allowable deduction in that year, because under this section, actual write off is allowable and not the provision. This is a prerequirement of section 41(1) that where the allowance or deduction has been made in the assessment for any year, in respect of loss, expenditure or trade liability incurred by the assessee, and the same is subsequently ceased or has been remitted, men there is income under section 41(1) of the Act. Since in the present case, no deduction has been allowed to the assessee, in the year of making the provision, and it cannot be allowed because provision is not allowable under section 36(l)(vii)s write back of such provision cannot give rise to an income under section 41(1) of the Act. We therefore decline to interfere in the order of the learned CIT(A) on this issue. This ground is rejected. 60. The above decision of the Co-ordinate Bench was upheld by Hon. Jurisdictional High Court in Tax Appeal No. Tax Appeal No. 195 of 2014 vide judgment dated 6th May, 2014 wherein Hon. High Court has observed as under :- Facts are not seriously in dispute. Respondent-NDDB was enjoying exemption from payment of income tax till A..Y 2002-03. During the previous yea....
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....dingly, this ground of Revenue is dismissed. 62. Ground no.2 reads as under :- 2. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in deleting addition of Rs. 8,62,604/- u/s 41(1) of the Act being prior period income generated on account of write off of the liabilities which were unclaimed by the parties without considering the fact that writing off such amount reduced the liability of the assessee and resulted into income of the assessee. 63. Ld. DR supported the order of Assessing Officer. 64. On the other hand ld. AR submitted that the balance written off of Rs. 8,62,604/- (Rs.26261 & Rs. 83634) pertains to parties prior to Asst. Year 1998 & 1990-91 respectively when the assessee was not taxable entity and it cannot be said that the amounts were allowed as expenditure or as trading liability. There is no dispute to the fact that the parties have not claimed such amount. 65. Ld. AR further submitted that similar issue came up before the Tribunal and has been decided in favour of assessee. 66. We have heard rival contentions and perused the record. Through this ground Revenue is aggrieved with the order of ld. CIT....