TaxTMI 
TaxTMI 
2019 (6) TMI 700
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....nvestments made. 3. (i) On the facts and in the circumstances of the case, the Ld.CIT(A) has erred, both on facts and in law, in confirming the proportionate disallowance of interest of Rs. 5,17,566/- in respect of security deposit of Rs. 47,00,872/-. (ii) That the Ld.CIT(A) as erred, both the facts and in law, in ignoring the fact that the assessee being a Public Sector Company, the entire security deposit held by it is of the customers, and the interest thereon cannot be disallowed merely on the surmise that the security deposit is an unexplained deposit. 4. (i) On the facts and in the circumstances of the case, the Ld.CIT(A) has erred, both on facts and in law in confirming the addition of Rs. 3,36,80,000/- made by the A.O on account of prior period income. (ii) That the Ld.CIT(A) has erred in confirming the addition despite the fact that ]the said amount pertains to income or expenditure of earlier years which has been crystallized during the year under consideration." ITA No. 3299/DEL/2016 "1. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has erred in restricting the disallowance to only 0.5% of average investment income of Rs. ....
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....ng to 15,12,06,000/-. Thereby making total loss assessed at Rs. (1448,28,78,030/-) by the Assessing Officer. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A)partly allowed the appeal of the assessee. 5. As regards Ground No. 1 of Department's appeal, relating to addition u/s 14A read with Rule 8D amounting to Rs. 9,69,57,875/- made by the Assessing Officer, the Ld. DR submitted that the CIT(A) erred in restricting the disallowance to only 0.5% of average investment income of Rs. 1,33,74,000/- as against Rs. 9,69,57,875/-. 6. The Ld. AR submitted that during the year under consideration, assessee company has earned dividend income of Rs. 3,41,50,000/- on its investment made in LIC Mutual Funds. This fact is evident from Schedule - O in respect of Other Income mentioned in the Balance Sheet. The details of investments held by the assessee company are in Schedule - F of the Balance Sheet. The Ld. AR submitted that the own funds available with the assessee are much more than the investments made during the year. This fact was before the Assessing Officer as well as before the CIT(A). The details of own funds available with the asses....
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.... at the end of the year. The Total investments (closing balance) of Rs. 4946.58 million INR constitute 3.5% of the closing balance of share capital, reserves & surplus and loans totaling Rs. 1,41,021.56 million INR. In view of this factual position and also considering the fact that the assessee has interest free funds in the form of share capital and reserves & surplus of Rs. 66,464.81 million INR (being the closing balance), there is no reason why the appellant's claim that the interest bearing funds have not been used for making investment should not be accepted. Therefore, the disallowance of interest under rule 14 A r.w. rule 8D (2)(ii) of Rs. 71.853 million INR is deleted. However, as regards the disallowance under rule 8D(2)(iii), being 0.5% of the average investments (income from which is exempt), the undersigned does not agree with the order of my predecessor that no administrative expenses were incurred in connection with such investments. In a large organisation like appellant, the investments needs to be regularly monitored and man hours of staff are used apart from other administrative expenses. Therefore, the appellant's claim that no such expenditure was incurred is ....
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....ment of Hon'ble Jurisdictional High Court in the case of ACB India Ltd. v. ACIT in ITA No. 615/2014 dated 24.03.2015. Further reliance in this regard is placed on the judgment of this Hon'ble Tribunal in the case of SIL Investments Ltd. v. DCIT in ITA No. 5656/Del/2013 and 6046/Del/2013 dated 05.09.2016. The Ld. AR also relied upon the following judgments:- (a) ITAT Hyderabad in the case of Transport Corporation of India Ltd. v. ACIT in ITA No. 117/Hyd/2016 dated 21.09.2016 (b) ITAT Kolkata in the case of DCIT v. The Diamond Co. Ltd. in ITA No. 326/Kol/2014 dated 24.08.2016 (c) ITAT Mumbai in the case of Amrit Diamond Trade Centre Pvt. Ltd. v. ACIT in ITA No. 2642/Mum/2013 dated 15.01.2016 A perusal of Schedule - F of the Balance Sheet shows that the opening amount of Investment in LIC Mutual Funds was Rs. 34,96,00,000/-, while the closing amount of Investment was Nil, as the said mutual funds were sold off by the assessee company during the year under consideration. Therefore, the average investments from which the assessee had earned the dividend income works out as under: (a) Op. Investment - Rs. 34,96,00,000/- (b) Cl. Investment - Nil Avg. Investments - Rs. 17,48,00....
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....bscriber's deposit held to be payable by the assessee to the subscriber on termination of services to the extent of reconciled amount and therefore, it cannot be added to the income of the assessee specially in view of the assessee furnishing substantial details and reconciliation of the amount outstanding. Further the amount of interest related to that deposit is also deleted by the Id CIT(A) as the interest was payable with respect to subscriber deposit which is completely reconciled. In view of this we dismiss ground No. 1 to 4 of the appeal of the revenue." Since this issue is already decided in favour of the assessee for A.Y. 2006-07 and facts in the present Assessment Year is identical, hence Ground No. 2 of Revenue's appeal is dismissed. As regards Ground No. 3 of assessee's appeal is concerned, Tribunal in assessee's own case for A.Y. 2006-07 in ITA No. 4587/Del/2013 dated 05.09.2016, whereby the Hon'ble Tribunal while deciding assessee's appeal on similar ground has held as under : "17. We have carefully considered the rival contentions. The brief nature of the security deposit is that when customer demands for a connection same is collected and when it is disconnected ....
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....3 submitted. We do not agree with the finding of the Id CIT(A) to the extent of confirmation of the addition partly merely because reconciliation in these accounts with respect to the live connections are pending. The observation of the Id CIT(A) is also not correct that assessee submitted that this amount is under reconciliation and to that extent such credits are not fully explained. Before him assessee submitted that it is under reconciliation. Further when the character of deposit is determined, looking to the nature of operation geographically as well as large subscriber's base , it is not correct to hold that pending reconciliation the deposit become income of the assesse. In view of this we set aside this issue back to the file of the Assessing Officer to give proper opportunity to the assessee to provide reconciliation of the same and then if the amounts are not at all identifiable with respect to the customers then to that extent addition may be restricted. However, if this amount is identifiable with the subscriber and even if it is not claimed by the subscriber despite disconnection of the services assessee is under obligation to repay whenever demanded by the customer....