TaxTMI 
TaxTMI 
2017 (6) TMI 1146
X X X X Extracts X X X X
X X X X Extracts X X X X
....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)(viii) of Rs. 3,56,37,425/- following ITAT's order for A.Y. 2003....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 of ld. CIT(A). We uphold the same. Accordingly, this ground of assessee is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acts 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.CIT(A) has erred in confirming the disallowance oj grant of Rs. 78,88,592/- given to various cooperative societies and othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sted 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 disallowance should be restricted to Rs. 30,000/- which may be considered to be attributable to earn exempt income. It is submitted that it be so held now. 20. Ld. AR submi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 and depositing the cheques. Appellant referred to Mumbai High Court decision in the case of Godrej Boyce Manufacturing Co. Ltd. holding that Rule 8D is applicable only with effect from A. Y. 2008-09. 6.2. I have considere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. National Dairy Development Board (hereafter NDDB) has been constituted with-the objective of supporting of the Diary Cooperatives across the country by replicating the Amul Model. NDDB was not a taxable entity till A.Y. 2002-03 in view of the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 referred and relied by the assessee we find that assessee was having sufficient interest free funds and in order to cover the investments made which were approximately 40% of the total reserve and surplus held by the assessee at the close of the year and further Revenue has been unable to prove any nexus of flow of interest bearable funds to investments we find no reason to sustain the disallowance of Rs. 10,59,435/- u/s 14A ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otal 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 being old balance written off pertaining to financial year 1997-98. 31. On the other hand, ld. DR supported the orders of lower authorities. 32. We have heard the rival contentions and perused the record. Assessee is aggrieved with the order of ld. CIT(A) sustaining disallowance of prior period expenses of Rs. 502942/-. From going through the submissions of ld. AR we find that ld. AR has conceded for the disallowance of Rs. 199148/- being dif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 if the consistent view is taken for this year also. 36. Ld. DR duly supported the orders of lower authorities and has no objection if the decision for Asst. Year 2007-08 of the Tribunal is followed. 37. We have heard the rival contentions and perused the material on record. Ground no.7 relates to non-admission of additional ground. Ground no.8 relates to interest income of North Kerala Dairy project funds considered as taxable income and ground no.9 relates to disallowance of Rs. 3287....
X X X X Extracts X X X X
X X X X Extracts X X X X
....epreciation 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 rejected. 30. In the result the appeal of the assessee is partly allowed for statistical purposes. 39. Respectfully following the decision of the Co-ordinate Bench, we adjudicate ground nos.7, 8, 9 & 12 as follows.Ground no.7 additional grounds are admitted. 40. Ground no.8- consistently following the decision of the Coordinate Bench for Asst.year 2004-05 and subsequent years, we are of the view that interest income of North Kerala Dairy Project at Rs. 19925225/- is to be considered as taxable income. 41. Ground no.9- foll....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 even the last date of the Financial Year preceding the assessment year is over, it is inappropriate to suggest that still the assessee had the liability to pay 'advance tax' within the meaning of the Act. [Para 9] In the instant case, the last date of the relevant financial year was 31-3-2001 and on that day, admittedly, the assessee had no liability to pay any amount of advance tax in accordance with the law then prevailing in the country. Consequently, the assessee paid no advance tax and submitted its regular return on 31-10-2001 within the time fixed by law....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iod 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 calculate the tax on such income by applying the rates in force. That under section 209(1 }(d) the income-tax calculated is to be reduced by the amount of tax which would be deductible at source or collectible at source, which in this case has not been done by the employer company according to the law availing for which the assessee cannot be faulted. As stated above at the relevant time there were conflicting decisions of the Tribunal. A bona fide dispute was pending. The assessee had to estimate his current income- The words used under section 209(1 )(a) make the assessee estimate his curren....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nted 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 this place and therefore, such ground of appeal of the appellant is hereby dismissed. 54. We further observe that assessee has been granted short TDS on 2 accounts - (1) Through less credit of Rs. 3046921/- being the difference between TDS claimed by assessee at Rs. 34245870/- and as against TDS granted by Assessing Officer at Rs. 31198949/-. (2) Ld. Assessing Officer not accepting the claim of additional TDS of Rs. 722870/- as the certificates were received at a later date. In the given circumstances we find it to be justified for remitting back the issue of TDS credit claimed by assessee at Rs. 34245870/- an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt 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 further observe that assessee during the course of assessment proceedings submitted that the impugned amount of Rs. 34.93 crores approx. represented write back of excess provision for doubtful debts created in the earlier years as per norms of R.B.I and original provisions were made in the years when NDDB was not liable to income-tax as per section 64 of the NDDB Act and, therefore, the said amount cannot be brought under tax. Ld. AR further submitted that no deduction has been granted to it in the assessment year in which provisions were made and therefore the provisions written back during the year cannot be brought to tax. We further observe t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owed 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. 2002-03, no assessment of the appellant took place and it cannot be said that the provision for contingencies were allowed as deduction in the 'assessments' of appellant upto A.Y. 2002-03. Assessing Officer has referred to Explanation 6 to section 43(6), i.e. the concept of deemed allowance. However, there is no such similar mechanism provided in section 41 (1) by the law makers. Concept of deemed allowance of an item of expenditure cannot be applied in section 41 (1) in the absence of such provision. Moreover, appellant was not even a taxable entity upto A.Y. 2002-03 and no assessment took place till then. Without 'assessment' in these yea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 case and in la\v, the learned CIT(A) erred in deleting the addition of Rs. 24,15,74.441/-u/s 41(1) of the Act being the provision written back without appreciating the fact that the entire entity was exempt horn tax up to A. Y. 2002-03, therefore, claiming the deduction by way of excess provision written back of earlier years, amounts to double deduction, which is not permissible as per provisions of the Act. l(ii). The Id.CIT(A) failed to appreciate the fact that the write hack of the provision can only be claimed as a deduction if it is proved by the assesses that the provision made in the earlier year was disallowed and subjected to tax. In the instant case, the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 year relevant to A.Y 2007-08, the assessee wrote back certain provisions made in the earlier years. These provisions were made during the period when NDDB was enjoying the tax exemption. It is also not the case of the Revenue that the assessee made any allowances against any expenditure or trading liability. In background of such facts, we need to examine the view of the Tribunal. Section 41 of the Act pertains to profits chargeable to tax. Sub-section (1) of Section 41 provides that where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year, situation re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....990-91 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(A) deleting the addition of Rs. 8,62,604/- made u/s 41(1) of the Act being prior period income. The impugned amount consists of Rs. 26,261/- relating to Year 1998 and Rs. 8,36,343/- pertained to Asst. Year 1990-91. It is not disputed that the amount of Rs. 8,26,604/- has not been claimed by the parties. The important point to be noted herein is that the assessee was not taxable entity upto Asst. Year 2002-03 and the impugned amount falls in the years before the date from which assessee becomes a taxable entity. We observe that ld. CIT(A) has deleted the impugned disallowance by observing as follows :- 12.3 The reasons for making the addition of Rs. 8,62,604/- as mentioned by the AO in the assessment order as ....