TaxTMI 
TaxTMI 
2019 (11) TMI 1368
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....respect of residential properties. On the facts and circumstances of the case the appellant submits that the disallowance of depreciation of Rs. 11,31,212/- is not justified and the said disallowance may be deleted. 2. On the facts & circumstances of the case the Learned Commr. of Income Tax (A) has erred in confirming the disallowance of the amortization of the premium paid on leasehold land on which the commercial complex has been constructed by the appellant amounting to Rs. 22,32,084/-. On the facts & circumstances of the case the appellant submit that the disallowance of the claim of amortisation of land premium amounting to Rs. 22,32,084/- is not justified and the said disallowance may be deleted. 3. On the facts & circumstances of the case the Learned Commr. of Income Tax (A) has erred in confirming the disallowance u/s 14A amounting to Rs. 24.37 crores attributing the interest relating to the exempt income earned by appellant. On the facts & circumstances of the case the appellant submit that the determination of interest attributable to earning interest income which is exempt u/s 10 is not justified and the said disallowance may be deleted. 4. On....
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....n favour of the assessee by the Tribunal for the A.Y. 2004-05 to A.Y. 2007-08. It is further submitted that consequential order was passed by the Assessing Officer for the A.Y. 2004-05 vide order dated 31.12.2018 allowing depreciation. 5. On the other hand, Ld. DR strongly supported the orders of the authorities below. 6. We have perused the order of the Tribunal for the A.Y. 2004-05 in ITA No. 3203/Mum/2008 and ITA.No. 3156/Mum/2008 dated 28.06.2017 wherein the Tribunal decided this issue in favour of the assessee at page No. 4 Para No. 3.2 observing as under:- "3.2 We have heard the rival contentions and perused the cited case laws. We find that Hon'ble Delhi High Court in the cited case laws has observed that under the new scheme of depreciation prescribed in amended Section 32, the depreciation is to be allowed on WDV of each 'block of assets' at such percentage as may be prescribed and therefore, with the introduction of concept of 'block of assets', an individual asset loses its identity and there was no requirement to compute depreciation for each and individual asset separately. Making these observations, the assessee was allowed depreciat....
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....fy the fact with regard to deduction claimed u/s 24(a) in the light of our discussions given hereinabove. In case, the assessee claimed deduction u/s.24(a), then the same needs to be disallowed." 8. We have observed that the Tribunal while disposing off appeal for the A.Y. 2005-06 to A.Y. 2007-08 directed the Assessing Officer to allow the depreciation as claimed by the assessee on residential premises however it is also directed to verify the fact as to whether deduction U/s.24(a) was claimed by the assessee or not and if it is claimed the same is to be disallowed. As the facts being identical respectfully following the said decision, we direct the Assessing Officer to carry out similar exercise as directed by the Tribunal in the order for the A.Y. 2005-06 to A.Y. 200708 and decide accordingly. This ground is partly allowed. 9. Coming to Ground No. 2 of grounds of appeal the Ld. Counsel for the assessee fairly submitted that this ground relating to disallowance of amortization of premium paid on leasehold land has been decided in favour of the Revenue in ITA No. 3203/Mum/2008 and ITA.No. 3156/Mum/2008 dated 28.06.2017 at Para No. 4.6 observing as under: - "4.6. The ....
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....are Capital and Reserves & surplus stood at Rs. 725.23 crores as against investment of Rs. 1394.44 crores, which prima-facie weakens the argument advanced by Ld. AR. However, the Ld. AR has contended that investment includes strategic investments, investment not capable of earning exempt incomes and investment held as stock in trade, which are not includible in the value of investments for the purpose of Section 14A disallowance. The Ld. AR has provided before us detailed working of adjusted investments in the light of his contentions. Also, we note that in the preceding paragraph, we have already restored the matter back to the file of AO to find out the closing stock valuation of the securities held as stock in trade and the income of which has been offered under the head business income. Therefore, in the light of these facts / observations, we remit the matter back to the file of AO to re-compute the said disallowance qua interest and administrative expenses after properly appreciating the capital structure of the assessee. The assessee is also directed to substantiate its claim forthwith in the light of our observations before the lower authorities, falling which the authoriti....
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....wing the above said orders of the Tribunal we restore this issue to the file of the Assessing Officer to follow the directions of the Tribunal for the A.Y. 2004-05 to 2007-08 and recompute the disallowance in accordance with the directions therein. We also direct the Assessing Officer to recompute the disallowance keeping in view the decision of the special bench of Delhi in the case of ACIT v. Vireet Investments Private Limited [165 ITD 27]. This ground is allowed for statistical purpose. 16. Ground No.4 of grounds of appeal is relating to disallowance of lease equalization charges. Ld. Counsel for the assessee submits that this issue has been decided in favour of the assessee for the A.Y.2004-05 to 2007-08 by the Tribunal. It is further submitted that the Assessing Officer allowed the deduction for lease equalization for the A.Y.2004-05 by passing consequential order dated 31.12.2018. It is also submitted that the Hon'ble Bombay High Court in I.T. Appeal No. 411 of 2014 dated 14.02.2019 has dismissed the revenue's appeal for the A.Y.1994-95 to A.Y.1998-99. 17. On the other hand, Ld. DR strongly supported the orders of the authorities below. 18. We have heard the riva....
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...., in the light of these observations and following the judicial precedence, the matter is restore back to the file of AO with the direction to decide the issue afresh after giving adequate opportunity to the assessee to substantiate his claim in this regard. It is clarified that to maintain consistency, the depreciation which is to be considered for the purpose of calculating lease equalization charges would be the Income Tax Depreciation and not the book depreciation as held by the Tribunal in earlier years. The grounds stands allowed for statistical purpose." 19. The Tribunal for the A.Y. 2005-06 to A.Y. 2007-08 in ITA.Nos. 3339/Mum/2011, ITA.No. 3340/Mum/2011 and 3341/Mum/2011 dated 30.04.2019 at Para No. 24 and 25 considered this issue observing as under: "24. We have heard both the parties, perused materials available on record and gone through the orders of authorities below. An identical issue has been considered by the Co ordinate Bench of the Tribunal in asessee's own case for AY 2004-05. The Tribunal, after considering relevant facts held that lease equalisation reserve is an allowable deduction, however, for the purpose of computation of quantum of allowances....
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.... the judicial precedence, the matter is restore back to the file of AO with the direction to decide the issue afresh after giving adequate opportunity to the assessee to substantiate his claim in this regard. It is clarified that to maintain consistency, the depreciation which is to be considered for the purpose of calculating lease equalization charges would be the Income Tax Depreciation and not the book depreciation as held by the Tribunal in earlier years. The grounds stands allowed for statistical purposes." 25. We further noted that the Hon'ble Supreme Court has considered an identical issue in light of accounting standard prescribed by ICAI and held that lease equalisation reserve computed as per accounting standards prescribed by ICAI is an allowable deduction because there is no express bar in the IT Act, 1961 regarding application of such accounting standards. The Hon'ble Court further held that only real income i.e. finance income should be taxed for the purpose of Income Tax which can be arrive only after applying such method which is prescribed in the guidance note. Therefore, we are of the considered view that prima-facie, the issue is settled by the decision....
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....statistical purposes." 22. The Tribunal for the A.Y. 2005-06 to A.Y. 2007-08 in ITA.Nos. 3339/Mum/2011, ITA.No. 3340/Mum/2011 and 3341/Mum/2011 dated 30.04.2019 at Para Nos. 31 & 32 considered this issue observing as under: "31. We have heard both the parties, perused materials available on record and gone through the orders of authorities below. The issue of depreciation on toll road as well as estimation of income from such road is subject matter of consideration by the Tribunal for AY 2004-05. The Tribunal after considering rival submissions of the assessee and also relied upon certain judicial precedence held that the depreciation on toll road is not allowed as plant and machinery because the assessee is neither owner of the asset nor said asset is in the nature of plant and machinery. However, the Tribunal allowed depreciation as intangible asset being right to collect the toll. Similarly, in respect of estimation of income from toll road, direct the AO to ascertain correct facts with regard to attainment of arbitration proceedings before estimation of income. The relevant findings of the Tribunal are as under:- "11.10 We have heard the rival contentions. ....
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....his regard. The grounds of assessee's appeal stands allowed for statistical purposes." 32. In this view of the matter and consistent with view taken by the Co-ordinate Bench of the Tribunal in assessee's own case for earlier period, we restore this issue to the file of the AO and direct him to decide in accordance with direction given by the Tribunal for AY 2004-05. 23. Following the said decision, we restore this matter to the file of the Assessing Officer with a direction to decide the issue following the directions of the Tribunal for the A.Y. 2005-06 to 2007-08. This ground is allowed for statistical purpose. 24. Ground No.6 of grounds of appeal of the assessee is relating to the addition made towards notional interest in respect of toll road from Madhya Pradesh State Industrial Development Corporation. 25. It is submitted that by the Ld. Counsel for the assessee that this issue was also decided by the Tribunal in Para No. 11.10 for the A.Y.2004-05 and Para Nos. 32 for the A.Y. 2005-06 to 2007-08 and the Assessing Officer passed consequential order dated 31.12.2018 for the A.Y. 2004-05 restricting addition only to the amount awarded by arbitrator of Arbitratio....
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....ssue of computation of book profit with reference to 14A disallowance is bearing on the outcome of computation of disallowance u/s 14A of the Act in light of our discussions given in the grounds of appeal taken for the assessee's in its appeal. Therefore, we restore this issue back to the file of the AO and direct him to first re-compute disallowance contemplated u/s 14A and then decide this issue in accordance with findings of the Special Bench of ITAT, Delhi in the case of ACIT vs Vireet Infest Pvt. Ltd. (supra) and also the Hon'ble Bombay High Court in the case of CIT vs Ms/ Bengal Finance Investment Pvt. Ltd. in Income Tax Appeal No.337 of 2013." 28. Respectfully following the said decision, we direct the Assessing Officer to recompute the disallowance U/s. 14A following the observations of the Tribunal for the A.Y. 2005-06 to A.Y. 2007-08. This ground is allowed for statistical purpose. 29. Ground Nos. 8 and 9 of the grounds of appeal relates to levy of interest U/s. 234B and 234D of the Act which are only consequential and thus, we restore these grounds to the file of the Assessing Officer to decide in accordance with law. 30. Now we take up the appeal of the assesse....
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....income due from MPSIDC. The appellant prays that they are not entitled to and have not received any interest income from MPSIDC and hence the direction of the Learned Commr. of Income Tax (A) to tax the estimated interest income may be set aside. 7. On the facts & circumstances of the case the Learned Commr. of Income Tax (A) has erred in confirming the additions of Rs. 2,41,00,000/- based on the information of AIR transactions The appellant states that they have not entered into transactions for Rs. 2,41,00,000/- as recorded in the AIR Information. The appellant prays that the addition confirmed by the CIT (Appeals) may be deleted. 9. On the facts & circumstances of the case the Learned Commr. of Income Tax (A) has erred in confirming the disallowance of Rs. 85,81,73,026/- being the expenditure relating to exempt income while computing book profit u/s. 115JB. On the facts and circumstances of the case the appellant submits that the disallowance of Rs. 85,81,73,0267- is not justified and be deleted. 32. Ground Nos. 1 of Grounds of appeal for the A.Y. 2009-10 is relating to disallowance of depreciation on residential properties. This ground which is similar to G....
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....bmission that the assessee has not entered into any transaction in respect of the addition made to the extent of Rs..2.41 Crores. Thus, we restore this issue to the file of the Assessing Officer with a direction to Assessing Officer to furnish necessary information to the assessee so as to reconcile the transactions by the assessee. The Assessing Officer shall provide complete details in respect of the transactions for the purpose of the reconciliation by the assessee. Thus, this issue is restored to file of the Assessing Officer for denovo adjudication after providing adequate opportunity of being heard. 41. Ground No .8 of the grounds of appeal is relating to disallowance of interest on loan given to IL & FS Employees Welfare Trust. Briefly stated the facts are that, while completing the assessment Assessing Officer noticed that during the year under consideration assessee has given interest free loans to IL & FS Employees Welfare Trust. The Assessing Officer is of the view that the loan given is for non-business purposes and taking note of the fact that the assessee is having mixed funds i.e., borrowed as well as own funds, proportionate interest of Rs..30.01 Crores @ 5.63% w....
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....ssee. In the circumstances, we are not inclined the disturb the finding of the Ld. CIT(A) hence, the action of the Ld.CIT(A) is sustained. Ground raised by the assessee is rejected. 47. Ground No. 9 of Grounds of appeal for the A.Y. 2009-10 is relating to disallowance u/s. 14A While computing book profits u/s. 115JB of the Act. This ground which is similar to Ground No.7 in the appeal for the A.Y. 2008-09 has been decided while disposing off the appeal and the decision taken therein shall apply mutatis mutandis for this year also i.e. A.Y. 2009-10. We order accordingly. 48. Now we take up the appeal filed by the revenue in ITA.No. 3700/Mum/2013 for the A.Y. 2008-09. 49. Revenue has raised the following grounds in its appeal: - "On the facts and in the circumstances of the case and in law the Ld. CIT appeal erred in:- 1(i). restricting the disallowance u/s.14A to Rs. 25.03 crs. as against Rs. 47.47 crs computed by the AO; thereby erred in not accepting the working required as per Rule 8D of the Income Tax Rules as applied by the AO during assessment. l(ii). restricting the Interest attributable to the earning of exempt income to Rs. 24.37 crs. as ....
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....company is only engaged in managing its investments within group entities. 7. deleting the adjustment of Rs. 28,48,716/- made by the AO on account of Lease Equalisation Reserve while ... ailing the Book Profit u/s.115JB(2) of the Act. 8. restricting the amount of disallowance U/S.14A to Rs. 25.03 crs as against Rs. 47.47 crs made by AO towards adjustment of expenses attributable to exempted income while compiling the Book Profit u/s.115JB(2) of the Act." 50. Ground No. 1 of Grounds of appeal of the Revenue is relating to disallowance u/s. 14A r.w. Rule 8D of the Act. This ground which is similar to Ground Nos. 8 & 9 in the appeal of the assessee for the A.Y. 2008-09 has been decided while disposing off the appeal and the decision taken therein shall apply mutatis mutandis for this appeal also. Since we have decided this issue by restoring the ground to the file of the Assessing Officer this ground is also restored to the file of the Assessing Officer. We order accordingly. 51. Ground No.2 of grounds of appeal relates to disallowance of software development expenditure. Ld. Counsel for the assessee submits that this issue has been decided in favour of the ass....
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.... 20.2 We have considered the rival contentions and inclined to agree with the findings of Ld. CIT(A) who after appreciating the relevant material came to the right conclusion that the impugned expenditure being revenue in nature, were allowable to the assessee. A bare perusal of the said expenses reveals that the said expenditure are primarily revenue in nature and the Ld. AO disallowed the same on mere presumption. However, Ld. CIT(A) examined the same and provided relief to the assessee after appreciating the material and therefore, we find no reason to interfere with the same. The revenue's ground of appeal stands dismissed." 61. In view of the matter and consistent with view taken by the Coordinate Bench, we do not find any infirmity in the findings of the Ld. CIT(A) and hence, we are inclined to upheld the findings of the ld. CIT(A) and reject the ground taken by the Revenue.' 54. No distinguishable facts have been brought to our notice. Thus respectfully following the said decision, we uphold the order of the Ld. CIT(A) and reject the ground raised by the revenue. 55. Ground No. 3 of Grounds of appeal of the revenue is relating to addition of notional interes....
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....spectfully following the said decision of the Tribunal in assessee's own case we direct the Assessing Officer to delete the disallowance made towards payments to clubs. This ground is allowed. 60. Ground No.5 of grounds of appeal of the revenue is in respect of deleting the disallowance of Rs..1,33,690/- for short deduction of TDS. 61. The Assessing Officer while completing the assessment noticed from the Tax Audit Report that there was a short deduction in respect of the expenditure of Rs..1,33,690/- and applying the provisions of section 40(a)(ia) of the Act Assessing Officer disallowed the said expenditure. On appeal the Ld. CIT(A) deleted the disallowance. 62. Ld. Counsel for the assessee strongly placing reliance on the decision of the Calcutta Bench in the case S.K. Tekriwal's [46 taxmann.com 444] submitted that there shall not be any disallowance when there is a short deduction of tax. 63. Ld. DR vehemently supported the orders of the Assessing Officer. 64. We have heard the rival submissions and perused the orders of the authorities below. The Calcutta Bench of the Tribunal in the case of S.K. Tekriwal's [48 SOT 515] held as under: - "5. From the ord....
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....on of tax u/s 192 of the Act with the fact that the alleged consultants, in their individual assessments declared these payments as salary payments and accepted by revenue as it is. Further, it is held that the assessee had deducted tax u/s. 192 of the Act as against the allegation of revenue that the provisions of section 194J of the Act would be attracted as these consultants are in the capacity of professionals. The Bench held that the provisions of section 40(a)(ia) of the Act will not apply as the said provision can be invoked only in the event of non-deduction of tax but not for lesser deduction of tax. In that case the assessee has deducted tax u/s. 192 of the Act as against section 194J of the Act as against the claim of revenue. 6. In the present case before us the assessee has deducted tax u/s. 194C(2) of the Act being payments made to sub-contractors and it is not a case of non-deduction of tax or no deduction of tax as is the import of section 40a(ia) of the Act. But the revenue's contention is that the payments are in the nature of machinery hire charges falling under the head 'rent' and the previous provisions of section 194I of the Act are applicable. Accord....
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....alling under various TDS provisions, the assessee can be declared to be an assessee in default u/s. 201 of the Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act." 65. This decision of the Tribunal has been affirmed by the Hon'ble Calcutta High Court in the case of CIT v. M/s. S.K. Tekriwal in ITA.No. 183 of 2012 dated 03.12.2012 holding as under: - "The Court : We are satisfied that the order under challenge is a just order. The reasoning appearing at paragraph 6 of the judgment and/or order under challenge reads as follows : 6. In the present case before us the assessee has deducted tax u/s. 194C(2) of the Act being payments made to subcontractors and it is not a case of non-deduction of tax or no deduction of tax as is the import of section 40a(ia) of the Act. But the revenue's contention is that the payments are in the nature of machinery hire charges falling under the head 'rent' and the previous provisions of section 194I of the Act are applicable. According to revenue, the assessee has deducted tax @ 1% u/s. 194C(2) of the Act as against the actual deduction to be made at 10% u/s. 194I of the Act, thereby l....
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....g the provisions of section 40(a)(ia) of the Act. Accordingly, we confirm the order of CIT (A) allowing the claim of assessee and this issue of revenue's appeal is dismissed." 66. Facts being similar respectfully following the above decision, we hold that there cannot be any disallowance u/s. 40(a)(ia) for short deduction of TDS. Thus, we do not find any infirmity in the order passed by the Ld.CIT(A) and we uphold the order of the Ld.CIT(A) on this issue. 67. Ground No.6 of grounds of appeal relates to disallowance of claim for deduction U/s. 36(1)(viii) of the Act. 68. Briefly stated the facts are that, Assessing Officer while completing the assessment denied deduction claimed U/s. 36(1)(viii) observing as under: "17.1 During the assessment proceedings, it was noticed that me assessing was claiming deduction u/s.36(1)(viii) of the Act of Rs. 63000000/-. It was further noticed from the annual report, that there was the major reorganization of the business w.e.f. 01.04.2007 in which the assessee has transferred i) its financial services business to M/s. ILFS Ltd., ii) depository back office and capital market related services to M/s. ILFS....
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....claim of the appellant. 13.2. During appellate proceedings, the appellant submitted as under: "Ground No. 6 deals with the rejection of the claim of the appellant of deduction u/s.36(l)(viii) (amounting to Rs. 6,30,00,000/-) on the inference that "the company after the reorganization has become a non-banking non-finance company and after the reorganization, the assessee is only engaged in managing its investments in group entities''. It is submitted that the inference of the Hon'ble AO is erroneous. Even after the reorganization, the company is engaged in the business of granting of loans to all its infrastructure and other group companies and it continues to be a Finance Company as stipulated by the RBI and continues to be under the direct supervision of the RBI even after the reorganization. The company has earned an interest income of Rs. 128.74 crores in FY 2008, breakup of which is as follows: Interest income on loans Rs. 110.02 crores Interest income on securities Rs. 18.72 crores The copy of the audited "Notes to Accounts" evidencing the same has already been enclosed. Further, as of March, 2008 the company has gran....
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....we sustained the order of the Ld.CIT(A) and reject the ground raised by the Revenue. 73. Ground No. 7 of the ground of appeal is relating to the deletion of adjustment of lease equalization reserve while computing the books profits U/s. 115JB(2) of the Act. 74. It is submitted that the Tribunal in assessee's own case for the A.Y.2004-05 restored this matter to the file of the Assessing Officer with a direction to recompute the book profits after consideration of the decision of the Hon'ble Supreme Court in the case of Virtual Soft Systems Ltd., 75. On the other hand, Ld. DR strongly supported the orders of the authorities below. 76. We have heard the rival submissions and perused the orders of the authorities below. We find that this issue has been decided by the Tribunal for the A.Y. 2005-06 to A.Y. 2007-08 in its order at Para No. 73 wherein the Tribunal held as under: - "73. We have heard both sides and perused the material available on record. This issue has been considered by the Tribunal for AY 2004-05, where, in respect of normal provisions of lease equalisation reserve, the issue has been restored back to the file of the AO to recompute lease equali....
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....the assessee has not substantiated if it earned the exempt income only out of its reserve fund. I(iii) restricting the Other Expenses attributable to the earning of exempt income. 2. holding that expenditure of Rs. 75,353/- was incurred by the assessee towards the license fee paid for acquiring right to use software and the said expenditure incurred on accounting software was allowable as revenue expenditure. 3. ought to have upheld the action of the AO in estimating the income from the toll road at Rs. 1,50,00,000 as the assessee has the right to receive such income from the Madhya Pradesh Govt. 4. in deleting the disallowance of payment made to clubs amounting to Rs. 18,59,191/-. 5(i). allowing the claim of deduction of Rs. 6,20,00,000/- u/s.36(l)(viii) of the Income Tax Act which otherwise the assessee was not eligible for. 5(ii). allowing the claim of deduction of Rs. 6,20,00,000/- u/s.36(l)(viii) of the Income Tax Act ignoring the fact that there was a major business re-organization w.e.f. 1.4.2007 through which the assessee company had transferred its (i) financial services business to M/s.ILFS Ltd, (ii) depository back of....