TaxTMI 
TaxTMI 
2017 (11) TMI 1839
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....ncome exempt under section 10(23G) of the Income-tax Act, 1961 (for short "the Act"). 3. Brief facts are, the assessee is a banking company. During the assessment proceedings, the Assessing Officer while verifying the return of income filed by the assessee found that the assessee had claimed deduction of an amount of Rs. 449,09,06,039, as exempt under section 10(23G) of the Act. Whereas, the assessee, voluntarily disallowed interest expenditure amounting to Rs. 298,44,79,282 in terms of section 14A of the Act. Subsequently, during the assessment proceedings, the assessee revised its computation of income by claiming exemption under section 10(23G) for an amount of Rs. 335,45,07,578, whereas, the assessee disallowed interest expenditure of Rs. 224,82,91,904, relatable to exempt income. Thus, in effect, assessee claimed exemption under section 10(23G) for Rs. 110,62,15,674. The Assessing Officer, after calling for various details from the assessee and examining the same along with assessee's explanation in support of claim of deduction was of the view that exemption under section 10(23G) is to be restricted to the net income derived on account of financing of infrastructure sector....
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....ying the gross profit rate is not correct. She submitted, in assessee's own case, in the preceding assessment year, the Tribunal while deciding the issue had directed the Assessing Officer to deduct the expenditure directly relatable to earning of exempt income for computing net income under section 10(23G) of the Act. The learned Authorised Representative submitted, in the impugned assessment year, the assessee before the learned Commissioner (Appeals) has submitted a working of net exemption claimed under section 10(23G) of the Act which has been looked into by the learned Commissioner (Appeals) while issuing appropriate direction to the Assessing Officer for computing exemption under section 10(23G) of the Act. Therefore, no further disallowance can be made. 6. We have heard rival contentions and perused the material available on record. As it appears from the facts on record, the Assessing Officer while computing deduction under section 10(23G) has presumed that the entire investment for infrastructure was out of borrowed funds which according to us is not correct. In our view, only those expenditure directly relatable to the earning of exempt income can be reduced / set-off....
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....e inclined to restore the matter back to the file of the Assessing Officer for deciding afresh keeping in view the directions of the Tribunal reproduced herein above. At this stage, we must observe, though, the learned Departmental Representative had submitted before us that the issue relating to part disallowance of administrative expenditure was not considered earlier by the learned Commissioner (Appeals) and the Tribunal, however, we do not agree with the same. We have noted that in the preceding assessment year, the assessee itself has disallowed 1% out of the administrative expenditure while computing net exempt income under section 10(23G) of the Act. Accordingly, ground no.1 raised by the Revenue corresponding to ground no.2 raised by the assessee are allowed for statistical purposes. 8. Ground no.2, raised by the Revenue corresponding to ground no.3, raised by the assessee are on the common issue of allocation of interest and other expenditure for earning tax free interest income under section 10(15) of the Act. 9. Brief facts are, during the assessment proceedings, the Assessing Officer noticed that in the relevant previous year assessee had earned interest income on....
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....submitted, as far as disallowance of administrative expenditure is concerned, the learned Commissioner (Appeals) has directed the Assessing Officer to work out the allocable expenditure towards exempt income. She, therefore, submitted, in assessee's own case for the preceding assessment year, the Tribunal has decided the issue in favour of the assessee even in so far as it relates to disallowance of administrative expenses. 12. Learned Departmental Representative submitted, interest expenditure relating to utilisation of borrowed funds for earning exempt interest income should be disallowed. He further submitted, part of the administrative expenditure allocable to earning of exempt interest income should also be disallowed. 13. We have heard rival contentions and perused the material available on record. As far as disallowance of interest expenditure for computing net exempt income is concerned, we are of the view that if the investment made in exempt income yielding assets are made out of interest free funds available with the assessee, there cannot be any disallowance of interest expenditure. Therefore, what is required to be seen is whether sufficient interest free funds a....
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....ng upon certain judicial precedents held that since, lease transaction is really in the nature of finance transaction only, the portion relatable to finance charges comprised in leased rent is only chargeable in the hands of the lessor. In this context, he relied upon similar view taken by him in assessee's own case for preceding assessment year. Accordingly, he disallowed assessee's claim of depreciation leased assets. However, since, the principal portion of the lease rentals was greater than the depreciation claimed by the assessee, the Assessing Officer worked out the net disallowance to a negative figure of Rs. 117,10,41,280 and reduced it from the total income of the assessee. While doing so, the Assessing Officer also disallowed depreciation of assets capitalized prior to assessment year 1994-95 which were not disallowed in those assessment years. Being aggrieved of such disallowance, assessee preferred appeal before the first appellate authority. 16. The learned Commissioner (Appeals) following his decision in assessee's own case for the assessment year 2001-02 as well as the decision of the Tribunal and CBDT Circluar allowed assessee's claim of depreciation on leased as....
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....aring for both the parties have agreed before us that the issue is covered by the decision of the Tribunal in the preceding assessment years. Notably, in assessment year 2000-01, the Tribunal while deciding identical issue in ITA no.4657/Mum./2004 and ITA no.4826/Mum./2004, dated 31st January 2017, has restored the matter back to the file of the Assessing Officer for considering afresh. In fact, in assessment year 2002-03 also in assessee's own case, the Tribunal while deciding identical issue in ITA no.836/Mum./2008 and ITA no.392/Mum./2008 dated 7th July 2017, has restored the issue to the Assessing Officer for considering afresh keeping in view the directions of the Tribunal in the preceding assessment year. Therefore, consistent with the view expressed by the Tribunal in the preceding assessment year as referred to above, we restore the issue to the file of the Assessing Officer for considering afresh with similar direction and only after reasonable opportunity of being heard to the assessee. Ground no.4, raised by the Revenue is allowed for statistical purposes. 22. Ground no.5, raised by the Revenue corresponding to ground no.4, in assessee's appeal are on the issue of dis....
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....as made investment in dividend earning assets out of surplus available, hence, no interest disallowance should be made. In this context, she relied upon the decision of the Tribunal in assessee's own case for assessment year 2000-01 in ITA no.4657/Mum./2004 and ITA no.4826/Mum./2004 dated 31st January 2017. 26. Learned Departmental Representative relied upon the observations of the Assessing Officer. 27. We have heard rival contentions and perused the material available on record. The main contention of the assessee against disallowance of interest expenditure is, investment in dividend earning assets were made out of surplus interest free funds available with the assessee. We find substantial merit in the aforesaid submissions of the learned Authorised Representative. If surplus interest free funds are available with the assessee to take care of the investments made in shares giving rise to dividend income, no disallowance of interest expenditure can be made in view of the decision of the Hon'ble Jurisdictional High Court in HDFC Bank Ltd. (supra). As far as managerial / administrative expenditure are concerned, we have noted, in the assessment year 1997-98, the assessee....
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....able to the assessee taking guidance from tribunal's orders of earlier years. This ground is treated as allowed for statistical purposes". 13. After hearing both the sides, we find that the AO while examining the assessee's own funds vis-à-vis investments in shares will follow the decision of the Hon'ble Bombay High Court in the case of HDFC Bank Ltd. (supra) and Reliance Utilities & Power Ltd. (supra). In case, the investment is made out of assessee's funds, then, no interest expenses is to be allocated to the interest income. Accordingly, we set aside this issue to the file of the AO to verify the facts. This issue of the assessee is allowed for statistical purposes and the issue in Revenue's appeal is dismissed." 28. Consistent with the view expressed by the Co-ordinate Bench of the Tribunal reproduced herein above, we direct the Assessing Officer to verify the facts and decide the issue keeping in view the directions of the Tribunal herein above. Ground no.5, raised by the Revenue corresponding to ground no.4, in assessee's appeal are allowed for statistical purposes. 29. In ground no.6, the Revenue has challenged the deletion of addition made by the Asses....
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...., the assessee has written-off the debts in its books of account as bad debts, hence, it is sufficient compliance to the provisions of section 36(1)(vii) read with section 36(2) of the Act. She submitted, the debts were advanced in regular course of assessee's business. She submitted, all the relevant and necessary evidence regarding write-off of bad debt were produced before the Assessing Officer during the assessment proceedings. She submitted, once the assessee has actually written-off the bad debt in its books of account, the Assessing Officer has no power to call upon the assessee to prove the fact that the debts have actually become bad and irrecoverable as per the amended provisions of section 36(1)(vii) of the Act. In this context, she drew our attention to the details of bad debt and the reasons why the write-off was necessary. Learned Authorised Representative relying upon CBDT circular no.511 dated 23rd January 1990, submitted, as per the amended provisions of the Act, the claim for bad debt is allowable in the year in which it is written-off as irrecoverable in the accounts of the assessee. In support of her contention, she further submitted, in the earlier years 2011-1....
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.... actual debt. We may further add, even if the assessee's claim of write-off in respect of a particular debt having become bad is allowed in the impugned assessment year, the Revenue is protected under section 41(4) of the Act to bring the amount to tax in case such debt is recovered by the assessee in any subsequent assessment year. With the aforesaid observation, we restore the issue to the file of the Assessing Officer for adjudicating afresh in terms with our directions herein above. Ground no.6, is allowed for statistical purposes. 35. In ground no.7, the Revenue has challenged the deletion of addition made on account of addition made to annual letting value towards notional interest. 36. Brief facts are, during the assessment proceedings, the Assessing Officer found that the assessee has leased out certain properties and earned rental income which has been shown as business income. The Assessing Officer, however, was of the view that the income has to be assessed as income from house property. She further found that while letting out the property, the assessee has received security deposits of substantial amount. The Assessing Officer was of the view that since the asses....
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.... received. In this context, we rely upon the ratio laid down by the Hon'ble Jurisdictional High Court in Tip Top Typography (supra). In view of the aforesaid, we do not find any reason to interfere with the order of the learned Commissioner (Appeals) on this issue. Ground no.6 raised by the Revenue is dismissed." 48. That being the case, we uphold the order of the learned Commissioner (Appeals) by dismissing ground no.7 raised by the Revenue. 49. In ground no.8, Revenue has challenged deletion of addition made by the Assessing Officer on account of software expenditure. 50. During the assessment proceedings, the Assessing Officer having found that the assessee has claimed software expenditure of Rs. 226,33,999, called upon the assessee to furnish necessary details and after examining the details furnished by the assessee, the Assessing Officer held that such expenditure incurred by the assessee is in the nature of capital expenditure. Accordingly, disallowing assessee's claim of deduction, he allowed depreciation @ 60%. Thus, excess deduction claimed by the assessee amounting to Rs. 90,53,600, was added back to the income of the assessee. Assessee challenged the additi....
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....he decisions referred to by the learned Commissioner (Appeals) similar view has been expressed. That being the case, we do not find any reason to interfere with the order of the learned Commissioner (Appeals) on this issue. Accordingly, we uphold the order of the learned Commissioner (Appeals) by dismissed ground no.9 raised by the Revenue. 57. In ground no.10, the Revenue has challenged the allowance of assessee's claim of deduction under section 36(1)(viia) of the Act. 58. During the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction under section 36(1)(viia) in respect of provisions for bad and doubtful debt on rural advances. The Assessing Officer observed, the assessee is not qualified to exercise his option under the first proviso to section 36(1)(viia) of the Act. He also observed, the assessee has not produced any evidence to show that the deduction in respect of any provisions made by the assessee for any assets which classified by RBI as doubtful assets or losses in accordance with the guidelines issued by the RBI. He further opined that deduction allowable to the assessee is 7.5% of the total income and 10% of the total r....
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....n of book profit before the learned Commissioner (Appeals). Before the first appellate authority the assessee justified the book profit computed by it. The learned Commissioner (Appeals) after considering the submissions of the assessee directed the Assessing Officer to compute the book profit as worked out by the assessee subject to the modification to be made on account of relief granted to the assessee towards expenditure disallowable under section 14A of the Act. Admittedly, the assessee has not challenged the aforesaid decision of the learned Commissioner (Appeals). Learned Departmental Representative has also not advanced any substantive argument to defer from the view expressed by the learned Commissioner (Appeals). In any case of the matter, as per the decision of the Co-ordinate Bench in Krung Thai Bank v/s JDIT, 45 DTR 218, and subsequent decisions of different Benches of the Tribunal, provisions of section 115JB AND 115J of the Act are not applicable to banking companies. In view of the aforesaid, we do not find any reason to interfere with the order of the learned Commissioner (Appeals) on this issue. Accordingly, we uphold the order of the learned Commissioner (Appeals....
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....ratio of 15.63% shown by the assessee quantified the expenditure attributable to earning of exempt income under section 10(23G) of the Act at Rs. 43,75,09,156, after reducing the said amount from the exempt income claimed by the assessee under section 10(23G) of the Act at Rs. 69,24,18,459, the balance amount of Rs. 25,49,09,303, was disallowed from the claim of exemption under section 10(23G) of the Act. The assessee challenged the decision of the Assessing Officer before the first appellate authority. 68. As far as the assessee's eligibility for exemption under section 10(23G) of the Act is concerned, the learned Commissioner (Appeals) following CBDT circular no.762 dated 18th February 1998, held that the assessee is eligible to claim exemption under section 10(23G) of the Act, since, as per the said circular, a company which has made investments by financing of long term loan by way of acquiring shares or providing long term finance to an enterprise wholly engaged in the business of infrastructure development shall be treated as infrastructure capital company. The learned Commissioner (Appeals) observed, the companies in which the assessee has made investment the income from ....
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....em or any other public facilities of a similar nature has made notified by CBDT. Further, the expression long term finance has been explained to mean any loan or advance which is re-payable along with interest during the period not less than five years. Thus, a reading of CBDT circular no.762 dated 18th February 1998, makes it clear that even a company which is directly not carrying out development of infrastructure facilities would also be eligible for exemption if invests in shares or providing long term finance to an enterprise engaged in the business of providing infrastructure would be treated as infrastructure capital company. Undisputedly, the assessee has fulfilled the aforesaid condition as it has made investments or has advanced loans to companies engaged in the business of infrastructure development. Therefore, the assessee is eligible for claiming exemption under section 10(23G) of the Act. The decision of the Tribunal, Amritsar Bench, in case of Jammu & Kashmit Bank (supra), is also applicable to the facts of the present case. Moreover, in the preceding assessment years, the Revenue has never questioned assessee's eligibility to claim exemption under section 10(23G) of....