TaxTMI 
TaxTMI 
2018 (4) TMI 430
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.... in respect of interest, despite the fact that own funds or non interest bearing funds are more than the investments made in investments giving exempt income, has not been adjudicated by the CIT(A). This fact came to light only when a conference was held with the learned Sr. Counsel Shri F. V. Irani who advised the assessee to file cross objection in view of the proposition of Hon'ble Jurisdictional High Court in the case of HDFC Bank Ltd. vs. DCIT 366 ITR 505. The relevant para of the condonation petition reads as under: - "7. During a conference held on 13.02.2018 with Mr. F.V. Irani, Counsel, in connection with the hearing of the above appeal fixed for hearing on 14.02.2018, it was realized that the no Cross Objection was filed by the Cross Objector against the disallowance confirmed by the CIT(A). The Counsel also pointed out that issue under Cross Objection is squarely covered in favour of the Cross Objector by the Jurisdictional Bombay High Court decision in the case of HDFC Bank Ltd v/s DCIT 383 ITR 529 (Born) and CIT v/s HDFC Bank Ltd 366 ITR 505 (Bom) and CIT v/s Reliance Utilities & Power Limited 313 ITR 340 (Bom). 8. The Cross Objector inadvertently and....
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....(2)(ii) since the Cross Objector has not incurred any interest expenditure in relation to the exempt income and investments in non-strategic / non group company investments were made out of own funds, interest free funds and internal accruals which are much more than investments yielding exempt income. Revenue 1. The order of the CIT (A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case and in law, the Hon. CIT(A) has erred in directing the AO to recomputed the disallowance under rule 80(2)(ii) on the investments other than strategic investments amounting to Rs. 75.23 crores as on 01.04.2011 and Rs. 21.04 crores as on 31.03.2012. 3. On the facts and in the circumstances of the case and in law, the Hon. CIT(A) has erred in directing the AO to compute the disallowance under rule 8D(2)(ii) after excluding investment of Rs. 328.80 crores as on 01.04.2011 & Rs. 328.78 crores as on 31.03.2012 relying on the decision of the Hon. ITAT in the case of Garware Wall Ropes Ltd. (65 SOT 83) without appreciating the fact that the decision of the Hon. (TAT has not been accepted by the department and appeal has been adm....
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....en made in subsidiary companies to meet the regulatory requirements, for e.g. IRDA requires that life insurance companies should be adequately capitalized to meet the solvency requirement. The primary object of holding these investments is to hold controlling stake in the subsidiary company and not to earn any income out of the same. The appellant submitted a detailed chart showing investment held in subsidiaries companies, nature of business, regulated by ]RDA. SEW etc., percentage of holding in each subsidiary. All subsidiaries are 100 per cent owned by the appellant except life insurance business where holding is 74 per cent. Therefore, even on this count, the appellant has clearly explained that investment in subsidiary companies, which are strategic in nature, are to be excluded while making disallowance under rule 8D(2)(ii) r.w.s.14A.The principle laid down by the Hon'ble Mumbai Tribunal in the case of Garware Wall Ropes Ltd. vs. ACIT (ITA No.5408/M/2012) is squarely applicable in the present case. 4.9 In view of the above factual position and the clear findings by the AO and the Ld. CIT(A) in the earlier assessment years, and relying upon judicial pronouncements....
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....ld as stock in trade only, that assessee had not earned any dividend from the investments made for the year under appeal, that the investment was made in the shares of unquoted companies, that it had made strategic investment in group companies.A perusal of the balance sheet of the assessee revealed that the funds available to it was far more than the investment made during the year under consideration.The assessee had made investment of Rs. 48.43 crores,that the funds available to it in form of share capital, reserves & surplus,share application money and unsecured loans and others was Rs. 1,14,44, 54,709/-.Therefore it has to be presumed that investments were made out of the own fund and not from the borrowed funds.We find that in the case of HDFC Bank Ltd.(67taxmann.com 42) the Hon'ble Bombay High Court has held that when there were sufficient own funds there was a presumption that investment in tax-free securities was made out of own funds. In the case of Pan India network infravest Pvt.Ltd.(ITA/3378/Mum/2013-AY.2009-10,dated11/05/016),we have held as under : "5.We have heard the rival submissions and perused the material before us.There is no doubt that the assessee h....
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....me Tax (Appeal) and affirmed the same, thus, this ground of the Revenue is also having no merit, consequently, dismissed."" Respectfully, following the same we decide the effective ground of appeal against the AO." In our opinion, in absence of any exempt income no disallowance could be made u/s.14A of the Act. Considering the facts-like availability of sufficient own funds, non-receipt of exempt income during the year, and strategic investment in the sister concerns-we hold that the FAA was not justified in upholding the disallowance. Reversing his order we decide effective ground of appeal in favour of the assessee. Considering the above and respectfully following the judgment of HDFC Bank Ltd.(supra),we decide first ground in favour of the assessee, holding that the FAA was not justified in confirming the disallowance under the head interest expenditure." The learned Counsel for the assessee also referred to the issue of strategic investments in the orders of Tribunal for AY 2008-09 to 2011-12 referred above (supra). 7. In view of the above, we are of the view that the assessee has availability of sufficient own funds which was claimed by assesse....
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....or A.Y.2010-11 (vide para No.8 of Page 10 of his order bearing No. CIT(A)-4/IT100/DCIT.3(2)/2011-12 dated 04.02.2013) and A.Y.2011-12 (vide para No.9.2 of page 36 bearing No. CIT(A)-4/lT- 84/DCIT.3(2)/2012-13 dated 20.8.2013). Since the facts in the present appeal are identical to those in A.Y.2010-11 & A.Y.2011-12. respectfully following the decisions of my learned predecessor and the rule of consistency, the AO is directed to allow bad debt u/s 36(1)(vii) independent of the claim and balance available for the purpose for 36(1)(viia). The AO is directed to delete the addition amounting to Rs. 10567,435261-. Accordingly, this ground is allowed." Aggrieved, now Revenue is in appeal before us. 10. At the outset, the learned Counsel for the assessee filed copy of tribunal orders for AY 2008-09 to 2011-12 in ITA No. 1657,1929/Mum/2012 and ITA No. 3491,3592,3593,6394 and 6217/Mum/2013 order dated 18-04-2017 and referred to Para 6 which reads as under : - "6. Disallowance of bad debts of Rs. 45.74 crores is the subject matter of ground no.3.During the course of hearing the AR stated that the issue stands finally decided by the order of the Hon'ble Apex Court, delivered in ....
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.... to the benefit of deduction of the provision for bad and doubtful debts under section 36(1)(viia) . The legislative intent was to encourage rural advances and the making of provisions for bad debts in relation to such rural branches. The court would give an interpretation to these provisions which would serve the legislative object and intent, rather than to subvert them. The purpose of granting such deductions would stand frustrated if these deductions are implicitly neutralized against other independent deductions specifically provided under the provisions of the Act. The deductions permissible under section 36(1)(vii) should not be negated by reading into this provision, limitations of section 36(1)(viia) on the reasoning that it will form a check against double deduction. The language of section 36(1)(vii) of the Act is unambiguous and does not admit of two interpretations. It gives a benefit to all banks, commercial or rural, scheduled or unscheduled, to claim a deduction of any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year. This benefit is subject only to section 36(2) of the Act. The p....
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....iting the same to P & L account amounting to Rs. 48,58,60,549/- on the ground that the liability on account of ESOP has been crystallized in the year when the ESOP have been vested and / or exercised during the year under assessment in view of the decision of Bangalore Tribunal, Special Bench of ITAT in the case of Biocon Ltd. Vs. DCIT 368 ITR 206 (Bang. Trib). The AO disallowed the claim of assessee on the reason that department has not accepted the decision of Tribunal in special bench in the case of Biocon Ltd. (supra) and hence, he disallowed this amount by observing in Para 6.3.10 and 6.3.11 as under: - "6.3.10 The Assessee has heavily relied upon the Special Bench decision in the case of Biocon (supra). The assessee has also made the claim of Rs. 48,58,60,549 in the return of income in. I have gone through the working submitted by the assessee which is in accordance with the principles laid down in Biocon (supra). However, the Department has not accepted the decision and appeal has been filed with Hon'ble Karnataka High Court. The High Court has admitted the question of law in the said case. Therefore, the claim of the assessee made in accordance with the principl....
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....peal had been filed by the department against the said order before the Hon'ble High Court of Karnataka. We find that it is not the case of the department that either the order of the 'Special Bench' of the Tribunal in the case of Biocon Ltd. (supra) had been set aside or the operation of the same had been stayed by the Hon'ble High Court. We are unable to comprehend that as to how the A.O despite conceding that the claim of the assessee as regards allowability of the discount of ESOP's was in accordance with the principle laid down by the 'Special Bench' of the Tribunal in the case of Biocon Ltd. (supra), could still decline to adjudicate the issue under consideration in terms with the order of the 'Special Bench'. We are seriously taken aback by the aforesaid observations of the A.O, and are of a strong conviction that as on the date on which the assessment was framed, the order of the 'Special Bench' of the Tribunal did hold the ground, therefore, he remained under a statutory obligation to have passed his order in conformity with the view taken by the 'Special Bench', which we find had also been followed by the jurisdictional ....