TaxTMI 
TaxTMI 
2018 (5) TMI 417
X X X X Extracts X X X X
X X X X Extracts X X X X
.... :- "1.(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing officer to re-open the assessment u/s.147 of the Income Tax Act, 1961 in the appellant's case and the reasons assigned for doing so are wrong and contrary to the facts and circumstances of the case, provisions of the Income Tax Act, 1961 and the Rules made thereunder. (b) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in holding that the reassessment opened u/s. 147 is legal and valid. 2(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the action of the learned Assessing Officer in reducing Provision for bad and doubtful debts allowable under section 36(1)(viia)(c) from the profits derived from business of long term finance operations for the purpose of computing deduction u/s. 36(1)(viii) and thereby erred in confirming the action of the learned Assessing Officer in disallowing the appellant's claim of deduction made u/s. 36(1)(viii) of the Income....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the assessee. In the impugned assessment finalised u/s 147/148 r.w.s. 143(3) of the Act, the Assessing Officer took the stand that deduction u/s 36(1)(viii) of the Act allowed in the original assessment was in excess of the amount permissible in law. Firstly, as per the Assessing Officer, while computing the profits derived from business of long term finance for the purposes of computing deduction u/s 36(1)(viii) of the Act, the deduction allowable u/s 36(1)(viia)(c) of the Act towards Provision for bad and doubtful debts was liable to be reduced. Secondly, as per the Assessing Officer, the manner of computing deduction u/s 36(1)(viii) of the Act accepted at the time of original assessment was wrong; and, such dispute is manifested in Ground of appeal no. 3 before us. 5. Insofar as the first aspect is concerned, the stand of the assessee is that deduction u/s 36(1)(viia)(c) of the Act is admissible from the total income of the assessee whereas deduction u/s 36(1)(viii) of the Act is allowable with reference to the eligible business only, i.e., income derived from the business of long term finance computed under the head 'Profits and Gains of Business or Profession'. As the busin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isputed by the Revenue before us. 7. The history of the dispute clearly bring out that the stand of the assessee has been accepted by the Revenue inasmuch as the decisions of the CIT(A) for Assessment Years 2010-11 and 2011-12 have been accepted, and for the two assessment years of 2014-15 and 2015-16, even the assessing authority has accepted the position. Though, the principle of res judicata is not applicable to income-tax proceedings, yet, it is a trite law that consistency and uniformity in approach on an issue which permeates in more than one assessment year deserves to be ensured by the income-tax authorities. In this context, one may gainfully refer to the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Radhasoami Satsang, Saomi vs CIT, 193 ITR 321 (SC). Thus, without dilating further on the rival stands, and with a view to ensuring consistency and uniformity in approach on the same issue for different assessment years, we deem it fit and proper to uphold the stand of the assessee on this aspect. Thus, Ground of appeal no. 2 is hereby allowed. 8. The next Ground of appeal relates to the manner of computing the deduction u/s 36(1)(viii) of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... no capital asset would remain with the appellant at the end of the lease period and the reasons assigned by him for rejecting the claim are wrong and contrary to the facts and circumstances of the case, the provisions of the Income Tax Act, 1961, and the Rules made thereunder. (c) On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in not appreciating that the annual rent payable by the appellant is nominal/concessional as compared to market rate of rent which was much higher as per evidence submitted by the appellant and the reasons assigned by him for rejecting the claim are wrong and contrary to the facts and circumstances of the case, the provisions of the Income Tax Act, 1961, and the Rules made thereunder. (d) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in not appreciating that the amortisation of such premium is allowable under generally accepted principles of accounting and the reasons advanced for 'rejecting the same are wrong and, contrary to the facts and circumstances of the case, the provisions of the Income tax Act, 1961, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner of Income Tax (Appeals) ought to have allowed the deduction for contribution to Credit Guarantee Fund Trust for Micro and Small Enterprise (CGTMSE) amounting to Rs. 50,00,00,000/- and the reasons assigned for not doing so are wrong and contrary to the provisions of the Income Tax Act, 1961, and the Rules made thereunder. (b) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) ought to have allowed the deduction of Rs. 50,00,00,000 irrespective of the fact that the appellant had not made any such claim of deduction for contribution to CGTMSE in the Return of Income in light of: (i) the proposition laid down in National Thermal Power Corporation vs. CIT (229 ITR 383) (SC); (ii) the principles laid down in Circular No.14(XL-35) dated 11-4-1955 of the Central Board of Direct Taxes; (iii) the principle laid down in Commissioner of Income-tax v. Chandulal Keshavlal & Co. [1960] 38 ITR 601 (SC) and (iv) the principle laid down in Kedarnath Jute Mfg. Co. Ltd., 82 ITR 363 (S.C.), Sutlej Cotton Mills Ltd., 116 ITR 1 (S.C.), Fort Properties P. Ltd., 208 ITR 232 (Bom.) and Tuticorin Alkali Chemicals & Fertilizers Lt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt for Assessment Year 2004-05 in assessee's own case, as above. While we uphold the disallowance as made by the lower authorities in view of the precedents, at the same time, the Assessing Officer is directed to apply in this year the final decision on the question of law pending before the Hon'ble High Court in assessee's own case for Assessment Year 2004-05 above, as and when it reaches finality. With the said remarks, the Ground of appeal no. 1 is decided against the assessee. 16. Insofar as the Ground of appeal no. 2 is concerned, the dispute relates to the disallowance made by income-tax authorities u/s 14A of the Act. In this context, the Assessing Officer noted that assessee had earned Dividend income of Rs. 4.57 crores and Long Term Capital Gain of Rs. 44.66 crores, which was exempt u/s 10(34) and 10(38) of the Act respectively. In the return of income initially filed, assessee did not disallow any expenditure as being incurred in relation to earning of the exempt income, as required by Sec. 14A of the Act. In para 8 of the assessment order, the Assessing Officer notes that a revised computation of income was filed by the assessee on 26.08.2008, wherein, inter-alia,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such a decision of the CIT(A) has been accepted by the Revenue and no appeal was preferred on this count. It was, therefore, contended that the disallowance be restricted to the level of disallowance accepted by the Revenue in Assessment Year 2004-05. 18. On the other hand, the ld. DR has primarily relied upon the reasoning taken by the CIT(A) to the effect that the amount of Rs. 16,56,77,690/- has been worked out by the assessee suo moto in its revised return of income and is, therefore, liable to be disallowed. 19. We have carefully considered the rival submissions. Sec. 14A of the Act prescribes that no deduction shall be allowed in respect of an expenditure incurred by the assessee in relation to an income which does not form part of the total income under the Act. The dispute before us stems from the suo moto disallowance of Rs. 16,56,77,690/- made by the assessee in its revised return of income. However, in para 8.2 of the assessment order, it is noted by the Assessing Officer that assessee claimed during the assessment proceedings that such disallowance should not be made for the reason that there was no specific nexus between the expenditure incurred and the exempt incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ence that the claim was not made in the return of income. According to the assessee, it was a financial institution set-up under the SIDBI Act, 1989 for promotion and development of micro, small and medium enterprises and in pursuance to that, it made contribution to the impugned Trust, which was set-up by the Government of India and the assessee jointly. The assessee also asserted that it would make no difference to the claim for deductibility u/s 37(1) of the Act if the amount was not debited to the Profit & Loss Account and that, in any case, the said amount was debited to the Profit & Loss Account in the previous year relevant to the Assessment Year 2008-09 and in such a year, no deduction was claimed by the assessee. 21. The CIT(A) has proceeded to affirm the action of the Assessing Officer primarily on the ground that it was a fresh claim, not made through the return of income; and, it was also not shown as an expenditure by way of a debit in the Profit & Loss Account. Against such a decision, assessee is in further appeal before us. 22. The learned representative pointed out that similar claim came up for consideration before the Tribunal in Assessment Year 2004-05 vide IT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der passed u/s 250 of the Act dated 01.06.2012 (supra). Therefore, considering the entirety of facts and circumstances of the case, we find enough justification to accept the plea of the assessee for allowing deduction of Rs. 50 crores representing contribution made to Credit Guarantee Fund Trust for Micro and Small Enterprises. Accordingly, order of the CIT(A) is set-aside and the Assessing Officer is directed to allow the claim, as above. Thus, assessee succeeds on this aspect. 25. In the result, appeal of the assessee is partly allowed, as above. 26. Now, we may take up the appeal of Revenue in ITA No. 4219/Mum/2011. In this appeal, although Revenue has raised two Grounds of appeal, but the solitary issues relates to the assessee's claim for write-off of bad debts amounting to Rs. 4,85,02,847/-. The Assessing Officer disallowed the claim of assessee primarily on the ground that it related to business activity of the earlier years when the income of the assessee was otherwise exempt from tax. We find that the CIT(A) has allowed the claim following his decision in assessee's own case in the earlier assessment years. Against such a decision, Revenue is in appeal before us. 27. B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the end of the lease period and the reasons assigned by him for rejecting the claim are wrong and contrary to the facts and circumstances of the case, the provisions of the Income Tax Act, 1961, and the Rules made thereunder. (c) On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in not appreciating that the annual ground rent payable by the appellant is nominal/concessional as compared to market rate of rent which was much higher as per evidence submitted by the appellant and the reasons assigned by him for rejecting the claim are wrong and contrary to the facts and circumstances of the case, the provisions of the Income Tax Act, 1961, and the Rules made thereunder. (d) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in not appreciating that the amortisation of such premium is allowable under generally accepted principles of accounting and the reasons advanced for rejecting the same are wrong and contrary to the facts and circumstances of the case, the provisions of the Income tax Act, 1961, and the Rules made thereunder. 2(a) On the facts ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eturn of income of earlier years. (d) On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) ought to have accepted the alternative without prejudice working disallowance made by the appellant amounting to Rs. 40,33,387/- u/s. 14A in light of the following: (i) the disallowance redetermined is based on the reasonable proposition of the establishment expenses; (ii) the disallowance is based on scientific basis having regard to number of personnels involved in investment department and proportionate establishment expenses in the ratio of the total number of employees of the appellant company and (iii) the working of disallowance u/s. 14A is a correct claim having regards to the accounts of the appellant. 4.(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in not allowing the deduction for contribution to Credit Guarantee Fund Trust for Micro and Small Enterprise (CGTMSE) Rs. 32,99,95,750/- and the reasons assigned for doing so are wrong and contrary to the provisions of the Income Tax Act, 1961, and the Rules made thereunder. (b) On the facts....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 32. Insofar as Ground of appeal no. 2 is concerned, the dispute therein is similar to Ground of appeal no. 2 dealt with by us in the earlier part of this order in assessee's appeal for Assessment Year 2004-05 vide ITA No. 4045/Mum/2011. Since the facts and circumstances are similar, following our earlier decision, assessee's claim for calculating the deduction eligible u/s 36(1)(viii) of the Act without reducing the profits derived from the business of long term financing operations by the amount of Provision for bad and doubtful debts allowable u/s 36(1)(viia)(c) of the Act, is upheld. Thus, on this aspect, assessee succeeds. 33. Ground of appeal no. 3 is with regard to disallowance of Rs. 5,64,81,040/- made by the Assessing Officer u/s 14A of the Act by applying the computation formula provided in Rule 8D of the Rules. The Assessing Officer noted that though in the year under consideration assessee had earned income by way of Dividends and Long Term Capital Gain, which was exempt to the extent of Rs. 44,16,76,565/-, the assessee had not disallowed any expenditure related to the earning of such income as required by Sec. 14A of the Act. The Assessing Officer applied the provisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and proper to affirm the decision of the CIT(A) in remitting the matter back to the file of Assessing Officer for reworking/estimating the disallowance u/s 14A of the Act with a modification that the Assessing Officer shall take into consideration our directions for Assessment Year 2006-07 and thereafter recompute the disallowance u/s 14A of the Act, if any. Needless to mention, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard and only thereafter pass a speaking order on this limited aspect. Thus, on this aspect, assessee succeeds for statistical purposes. 37. Ground of appeal no. 4 relates to assessee's claim for deduction of Rs. 32,99,95,750/- representing contribution to Credit Guarantee Fund Trust for Micro and Small Enterprises. A similar claim has been dealt with by us in the appeal of the assessee for Assessment Year 2006-07 vide Ground of appeal no. 3. Following our decision therein, in this year too, the claim of assessee is allowed as the facts and circumstances remain the same. Thus, on this aspect, assessee succeeds. 38. The last Ground in this appeal is against the interest levied u/s 234C of the Act. On this aspect, the plea of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ayable by the appellant is nominal/concessional as compared to market rate of rent which was much higher as per evidence submitted by the appellant and the reasons assigned by him for rejecting the claim are wrong and contrary to the facts and circumstances of the case, the provisions of the Income Tax Act, 1961, and the Rules made thereunder. (d) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in not appreciating that the amortisation of such premium is allowable under generally accepted principles of accounting and the reasons advanced for rejecting the same are wrong and contrary to the facts and circumstances of the case, the provisions of the Income tax Act, 1961, and the Rules made thereunder. 2(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the action of the learned Assessing Officer in reducing Provision for bad and doubtful debts allowable under section 36(1)(viia)(c) from the profits derived from business of long term finance operations for the purpose of computing deduction u/s.36(1)(viii) and thereby erred in co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entical question of law is pending before the Hon'ble Bombay High Court for Assessment Year 2004-05. Considering the same, while we uphold the disallowance as made by the lower authorities in view of the precedent, following the Declaration filed by the assessee u/s 158A(1) of the Act, the Assessing Officer is directed to apply the final decision on the question of law pending before the Hon'ble High Court in assessee's own case for Assessment Year 2004-05, as and when it reaches finality. Thus, with these remarks, the Ground of appeal no. 1 raised by the assessee is dismissed. 42. Insofar as Ground of appeal no. 2 is concerned, the dispute therein is similar to Ground of appeal no. 2 dealt with by us in the earlier part of this order in assessee's appeal for Assessment Year 2004-05 vide ITA No. 4045/Mum/2011. Since the facts and circumstances are similar, following our earlier decision, assessee's claim for calculating the deduction eligible u/s 36(1)(viii) of the Act without reducing the profits derived from the business of long term financing operations by the amount of Provision for bad and doubtful debts allowable u/s 36(1)(viia)(c) of the Act, is upheld. Thus, on thi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plated u/s 14A(2) of the Act is mandatory and that the application of Rule 8D(2)(iii) of the Rules is not automatic for the purposes of computing the disallowance u/s 14A of the Act. 45. On the other hand, the ld. DR has defended the orders of the lower authorities in this regard. In this context, reference has been made to the discussion by the CIT(A) in para 8.3 of his order wherein it is stated that the fact of suo moto disallowance by the assessee itself shows that the disallowance u/s 14A of the Act was merited and, therefore, the action of Assessing Officer to apply Rule 8D(2)(iii) of the Rules in order to compute the disallowance is justified. 46. We have carefully considered the rival submissions. In this case, the dispute between the assessee and the Revenue pertains to the quantification of disallowance envisaged u/s 14A of the Act. Pertinently, Sec. 14A of the Act prescribes that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to an exempted income, i.e., an income which does not form part of the total income under the Act. Sec. 14A(2) of the Act empowers the Assessing Officer to determine the amount of expenditure incurred ....