TaxTMI 
TaxTMI 
2019 (1) TMI 208
X X X X Extracts X X X X
X X X X Extracts X X X X
....sue in these appeals of assessee for AY 2003-04, 2004-05 and 2005-06 in ITAs No. 2416,2417&2418/Mum/2011 is as regards to the orders of CIT(A) confirming the action of the AO in disallowing securitization expenses. For this assessee in all the three years filed identical worded grounds and facts are exactly identical. The relevant issue raised by assessee in AY 2003-04 in ITA No. 2416/Mum/2011 reads as under: - "1. The Learned CIT(A) has erred in law and on facts in confirming the disallowance of estimated future servicing expenses of Rs. 97,25,864 and estimated delinquencies of Rs. 1,94,51,729 pertaining to income realised on assignment of future receivables under hire purchase contracts. The Learned CIT(A) ought to have appreciated that as per accrual principles of mercantile accounting, all expenses related to income accrued have to be provided for and constitute an admissible expenditure." 3. At the outset, the learned counsel for the assessee stated that she has instructions from the assessee not to press this issue and hence, this issue is withdrawn. As the learned Counsel for the assessee, under the instructions of the assessee has not pressed this issue the same is d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le. 11. We are unable to see how can it be said that the appeal preferred by the assessee which was dismissed by the order dated 29th March, 1996 was not an appeal against an order passed under section 143(3) of the Act. The Assessing Officer could not have exercised jurisdiction except under section 143(3) of the Act. Reference in this regard may be made to the judgment in the case of Kooka Sidhwa & Co. vs CIT reported in [1964] 54 ITR 54 (Cal), wherein the following view was taken (page 62): In my judgment, the forms of the orders passed under section 23(3) of the Income-tax Act, 1922, are not exhaustive. The effect or substance of the order should be looked into to decide whether an appeal lies. The order passed by the Income-tax Officer revising the assessment, made orginally under the direction of the Appellate Tribunal, would partake the character of a fresh assessment order and would be no less an order as made under section 23(3) of the Act within the ordinary acceptation of the term from which an appeal would lie to the Appellate Assistant Commissioner. A right of appeal is a creature of the statute conferred on the assessee by section 30(I) of the Act. The said righ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in an order passed under section 154 of the Act, the order in substance and effect meant that the Income-tax Officer has passed an order under section 154 of the Act reducing the refund. The decision of the Madhya Pradesh High Court also proceeds on the basis that an order not granting refund is referable to section 237 of the Act and since the interest forms part of the refund the order refusing to grant interest is relatable to section 237 of the Act and it is appealable. Thirdly, where there is a total denial by the Revenue to grant interest on the refund due, on the basis of the decision of the Andhra Pradesh High Court, an appeal provisions should be construed in a reasonable manner and viewed in any manner, we are of the view that the order of the Income-tax Officer refusing to grant interest due to the assessee is an appealable order under section 246 of the Act. 14. We are in agreement with the views of the Madras High Court which also took into consideration the judgment of the Bombay High Court. 8. Thus, in the light of the judgments discussed above, it is held that the order resulting in payment of interest u/s 244A of the Act is appealable. We are of the conside....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orms in as much as the assessee has invested / lend more than 25% of common funds to single partly namely Niskalp Investment & Trading Co. Ltd. i.e. subsidiary of the assessee company. Accordingly, he disallowed a sum of Rs. 31,09,37,226/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) after considering the submissions of the assessee allowed the claim of assessee by observing in Para 4.3 as under: - "4.3 I have considered the facts of the issue and the written submissions made by the AR and find merit in them. The AO has merely disallowed the interest by holding that the payment of interest was in contravention of law. It is clear that the payment made on the loans borrowed by the appellant company is not in contravention of any legal provision. Only the appellant had lent more than 25% of own funds to a single party (Niskalp Investment & Trading Co. Ltd-a subsidiary company) in contravention of the RBI norms. There is merit in the AR's contention that firstly the payment of interest is deductible under section 36(1) and not under section 37(1) and that even under section 37, the said payment is not of the nature contemplated by the legislature while enactin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....given loans and advances to a single entity in contravention of RBI guidelines issued to NBFCs. Except this, nothing has been brought on record to indicate that the assessee has incurred an expenditure of Rs. 57.79 crores in contravention of RBI guidelines which comes within the ambit of Proviso to section 37(1) of the Act. The AO has not brought any materials against the assessee to prove that the RBI has passed any orders imposing fine or penalty. On the other hand, the assessee has filed enough evidence before the AO to prove that the guidelines issued by the RBI is only advisory in nature and any contravention of such guidelines can be cured by making an application before RBI for condonation of such violations using its powers. Therefore, we are of the considered view that disallowing notional interest on borrowings for the simple reason that the assessee has violated directives issued by RBI without any contrary materials to prove that the assessee has incurred such expenditure for contravention of the provisions of the Act is incorrect. Therefore, we are of the considered view that the AO was erred in disallowing interest expenditure of Rs. 57.79 crores u/s 37(1) of the Act.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....37/Mum/2013. As this ground has become infructuous, this issue of assessee's appeal is dismissed. 15. The next issue in ITA No. 2738/Mum/2011 for AY 2004-05 in Revenue's appeal is as regards to the order of CIT(A) deleting the addition made by AO on account of club fee. For this Revenue has raised the grounds in AY 2004-05 and 2005-06, which is common in both the years. The grounds raised are identically worded and facts are exactly identical. The relevant grounds raised by Revenue in AY 2004-05 i.e. ground No.3 reads as under: - "3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of club fees, ignoring the fact that the assessee had failed to prove the nexus of these expenses to the business." 16. The AO during the course of assessment proceedings notice that the assessee has debited a sum of Rs. 8,08,664/- towards club entrance fee and subscription fee. According to assessee these expenses are incurred by the company in respect of corporate membership held by the company in its own name, depending on business under certain executives have been nominated by the Member of the of the company. The AO disallow....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s in regard to exempt income under section 14A of the Act. The facts and circumstances are exactly identical in both the years and hence, we will take the ground from AY 2005-06. The relevant ground no.1 reads as under: - "The learned commissioner of Income-tax (Appeals) [CIT(A)] has erred in law and on facts in concluding that section 14A is applicable without verification of facts of the Appellant and directing the assessing officer to recompute the disallowance disregarding the fact that no expenditure had been incurred in relation to exempt income. The CIT(A) ought to have deleted the disallowance based on the facts of the case of the appellant." 20. Briefly stated facts are that the AO disallowed the expenses relatable to exempt income under section 14A of the Act at Rs. 2,08,17,440/-, out of which 2,05,27,000/- was pertaining to interest expenses and Rs. 2,90,440/- being for administrative expenses. The AO vide Para 5.10 and 511 disallowed as under: - "5.10 Consistent with the department stand on this issue as also applied to assessee's own case in earlier assessment years, the proportionate interest as worked out in the "without prejudice statement" filed by the ass....