TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 419
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....earned Commissioner of Income-tax (Appeals) - 3 ('CIT (An erred in remanding the matter to Additional Commissioner of Income-tax, Range 1(3), Mumbai ('Addl. CIT') and not deleting the addition made in relation to the leasehold refurbishment expenses of Rs. 4,49,08,640 claimed by the Appellant as revenue expenditure. Ground 2 The learned CIT (A) erred in confirming the disallowance made by Addl. CIT in relation to the provision for depreciation on investments of Rs. 26,554,000 on the basis that investments in debentures under consideration is shown under the head 'Investments' and not under the head 'Stock-in trade' in its Balance-Sheet. The Appellant submits that the learned CIT(A) failed to appreciate the submissions made by the appellant during the course of appellate proceedings. The learned CIT(A) has observed that some critical questions remained unexplained by the Appellant. In this regard, the Appellant submits that the learned CIT(A) has not granted any reasonable opportunity of hearing for the same. Ground 3 The learned CIT(A) erred in remanding the matter to Addl. CIT and not deleting the addition of Rs. 22,000,000 in relation to th....
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.... non-banking finance company. The assessment for Assessment Year 2007-08 was completed on 28.12.2010. The Assessing Officer while passing the assessment order made the following additions/disallowance: 1. Leasehold / Refurbishment expenses - Rs. 4,49,08,640/- 2. Income accrued on preference shares - Rs. 18,76,06,128/- 3. Debt issue expenses - Rs. 1,83,32,000/- 4. Provision for depreciation on investments - Rs. 265,54,000/- 5. Provision for doubtful advances - Rs. 2,20,00,000/- 6. Disallowance under Section 14A - Rs. 7,81,083/- 7. Excess tax Depreciation on Computers - Rs. 45,46,456/- 4. On appeal before the ld. CIT(A), the assessee was given partial relief on lease hold refurbishment expenses and on disallowance under section 14A. Thus, further aggrieved by the order of ld. CIT(A) both the parties have filed their respective appeal by raising the grounds of appeal as narrated above. 5. We have heard the submission of both the parties and perused the material available on record. 6. Ground No.1 relates in relation to lease-hold refurbishment expenses. The ld. AR of the assessee submits that this ground of appeal is covered in favour of ass....
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....e of conducting the business of the assessee more profitably or more successfully. In the present case also, since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the High Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure." Therefore, we find that the assessee may have received benefit of enduring nature but the same was not sole and decisive factor of determining the nature of impugned expenditure. The impugned expenses were only to conduct the business more profitably and therefore, allowable to the assessee as revenue expenditure. Therefore, after considering all the factors as discussed above and noting that the impugned expenditure did not bring into existence any capital asset, we see no reason to interfere with the findings of the Ld. CIT(A) and hence, the expenditure being revenue in nature and incurred towards refurbishment of leasehold properties were allowable to the assessee as revenue expenditure. The r....
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.... Allowed as Business Loss 2008-09 Assessment u/s 143(3) 10,14,000 Disallowed - - 2009-10 Assessment u/s 143(3) (1,41,000) Provision reversed and offered to tax and accepted by the department - - 2020-11 Assessment u/s 143(3) 61,66,000 Accepted as allowable deduction - - Note 1: The assessment of AY 2009-10 was reopened u/s 147 of the Income-tax Act, 1961. However, no addition on account of provision for depreciation on investment was made by the Assessing Officer. 11. The ld. AR of the assessee submits that provision for loss on valuation of current investment or loss on sale of current investment is allowable deduction while computing income under the head "Profit & Gains of Business or Profession". In support of his submission, the ld. AR of the assessee relied upon the following decision: * DDIT vs. Chohung Bank [126 ITD 448 (Mumbai Trib.)] * CIT vs. Bank of Baroda [262 ITR 334 (Bombay HC)] * Yes Bank Ltd. vs. DCIT [46 ITR (T) 121 (Mumbai Trib.)] * JCIT vs. Rabo India Finance Limited (ITA No.3169/M/2011) 12. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 13. We have considered the rival sub....
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....n the year under consideration. 14. Before us, the ld. AR of the assessee vehemently argued that the revenue has accepted the claim in Assessment Year 2006-07, 2009-10 & 2010-11. However, disallowed in Assessment Year 2005-06, 2007- 08 & 2008-09 only. The ld. AR of the assessee strongly relied upon the various decision of Tribunal and High Courts as noted above. In case of DDIT vs. Chohung Bank (supra), the co-ordinate bench of Tribunal while considering the issue of loss on sale of security as business loss passed the following order: 5. The next issue taken up by the revenue is against the allowing of loss on sale of securities as 'Business loss' in assessment year 1999-2000. The facts apropos this ground are that the assessee incurred loss of Rs. 77,000 on sale of Government securities. The Assessing Officer observed that it was a capital loss liable to be disallowed. On being show caused, the assessee stated that the Government securities were held by the bank as "current investment" in accordance with the norms laid down by the Reserve Bank of India. It was further stated that buying and selling of securities was a normal business activity of a banking company and the curre....
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.... on facts and circumstances, the Tribunal was right in holding that assessee was entitled for deduction on account of depreciation in value of investment and consequently debited the disallowance of Rs. (xxx) answered the question in favour of assessee by passing the following order: For appreciation of facts and submission is extracted below: "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to deduction on account of depreciation in the value of investments and, consequently, debiting disallowance of Rs. 11,82,35,007?" FACTS 2. Assessee is a Nationalised Bank. Assessee-bank had in its possession, during the relevant assessment year, shares and securities worth several crores. The method of valuation followed by the assessee was to value investments at cost or market value whichever was lower. During the year of account, depreciation with regard to securities held by the assessee was to the tune of Rs. 11,82,35,007. The assessee-bank claimed deduction. This was disallowed by the ITO. The assessee-bank went in appeal to the Commissioner of Income-tax (Appeals), who took the view that the said investm....
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....rt observed that the assessee-bank had not valued the stock of shares and securities in its books of account in accordance with the method of "Cost or Market Price whichever is lower"; if this method was not followed in preparing Investment Trading Account, then the assessee-bank cannot claim notional loss/notional method of stock valuation for computing income. The High Court took the view that the book results could be rejected by the ITO under section 145(1) of the Income-tax Act if the method adopted by the assessee-bank did not disclose a proper and true income. That, merely because in the past the system followed by the assessee-bank was not questioned was no ground to say that it should be accepted for all times. Consequently, the matter came before the Supreme Court. The Apex Court came to the conclusion that preparation of balance sheet by the assessee-bank was governed by Banking Regulation Act, 1949. That, under the Third Schedule to that Act, balance sheet and profit & loss account have been prescribed. That, in the prescribed form, there is a Column of "Property & Assets". Item 4 provides for Investments (Mode of Valuation i.e. Cost or Market Value). Note (f) in Colu....
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.... sheet were required to be maintained in the statutory form. However, such entries in the balance sheet were not decisive or conclusive. In such cases, it was open to the ITO and the assessee to ascertain true and proper income while submitting income-tax returns. That, for valuing the closing stock, it was open to the assessee to value the stock at cost or market price whichever is lower. That, the assessee was valuing the stock-in-trade at cost for the purposes of statutory balance sheet but, for the purposes of income-tax return, the assessee was valuing the stock-in-trade at cost or market value whichever was lower and that practice was accepted by the Department for 30 years. Consequently, the Supreme Court allowed the appeal filed by UCO Bank. In our view, the judgment of the Supreme Court in UCO Bank's case (supra) squarely applies to the facts of this case. In fact, the present case before us is on a stronger footing because in the case of UCO Bank (supra), the loss was not debited to the profit and loss account whereas in this case, as can be seen from the working at pages 25 and 26 of the paper-book, the loss of Rs. 11,82,35,007 has been debited to the profit and loss....
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....owance under section 14A is to be made. For indirect expenses, the ld. AR of the assessee submits that disallowance under section 14A may be restricted to 2% of the exempt income as held by Hon'ble Bombay High Court in CIT vs. Godrej Agrovet Ltd. in ITA No. 934 of 2011. 22. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 23. We have considered the submission of both the parties and perused the material available on record. During the relevant period, the assessee has sown dividend income of Rs. 35.50 lakhs. The assessee has not allocated any expenses for earning the said dividend income. The Assessing Officer invoked the provision of Rule 8D and calculated the disallowance under section 14A of Rs. 7,81,083/-. Admittedly, the provisions of Rule 8D is not applicable for the year under consideration. The ld. AR of the assessee prayed that disallowance under section 14A should be restricted to 2% of the total exempt income and strongly relied upon the decision of Hon'ble jurisdictional High Court in Godrej Agrovet Ltd. (supra). 24. We have noted that Hon'ble jurisdictional High Court in Godrej Agrovet Ltd. (supra), while considering the disall....
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....y of order giving effect for A.Y. 2006-07 dated 16.08.2018 passed under section 143(3) r.w.s. 244. 31. On the other hand, the ld. DR for the revenue supported the order of Assessing Officer. 32. We have considered the rival submission of the parties and gone through the orders of authorities below. We have noted that on similar ground of appeal in assessee's own case for A.Y. 2006-07, the issue was restored to the file of Assessing Officer by Tribunal in ITA No. 2792/Mum/2011 passed the following order: "17. We have heard the rival contentions and perused relevant material on record. First of all, a perusal of assessee's Balance Sheet as on 31/03/2006 placed at Page-26 of the paper-book, reveals that the preference shares has been shown under the head Long Term investments, the detailed break-up of which has been provided on Page- 32 of the paper-book according to which the assessee is holding preference shares of four companies namely (i) Idea Cellular Ltd. (ii)A.V. Digital Networks Pvt. Ltd. (iii) Deccan Digital Networks Pvt. Ltd. &(iv) Metro Digital Networks Pvt. Ltd. 18. A perusal of terms of preference shares of Idea Cellular Ltd. as contained in amendment agreement ....
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....r dividend / income has been accrued / received on these instruments, the same has been inbuilt into the maturity value and there is no revenue leakage. Therefore, in principal, while upholding the claim of the assessee that the income on these shares was assessable under the head 'capital gains' upon their maturity, we remit the matter back to the file of AO for the purpose of verifying the fact whether all income accrued / received on these shares was inbuilt into the maturity / redemption / sale value and there was no revenue leakage. The assessee, in turn, is directed to substantiate the same forthwith, failing which the Ld. AO shall be at liberty to dispose-off the issue on the basis of material available on record. The assessee's ground of appeal stands allowed for statistical purposes." 33. We have further noted that in order giving effect, the Assessing Officer has granted relief to the assessee vide its order dated 16.08.2016. Considering the decision of Tribunal in assessee's own case for A.Y. 2007-08 wherein no material difference in fact is brought to our notice, therefore, respectfully following the decision of Tribunal, the Assessing Officer is directed ....
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.... of appeal has become infructuous. Considering the contention of ld. AR of assessee, this ground of appeal is dismissed. 43. In the result, appeal of the assessee is partly allowed. ITA No. 7088/Mum/2016 by revenue for AY 2008-09 44. The revenue has raised the following grounds of appeal: 1. "Whether on the facts and circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs. 5,54,38,356/- by deviating from his predecessor order for AY 2006-07, wherein similar addition has been upheld on similar facts? 2. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) has erred in treating the interest credited in the books and not offered to tax, as part of the capital receipts, without going into the merit as to how it is a capital Receipt and not Revenue Receipt? 3. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) has erred in not holding the amount of these receipts as interest income when admittedly such receipts are part of fixed returns agreed between the assessee company and the party from whom preference shares were purchased, as assessee itself, admitted it as Revenue receipt and such receipt....