AI Drafter 
TaxTMI 
TaxTMI 
2020 (3) TMI 419
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....llowing grounds of appeal: Ground 1 The learned 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 i....
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....ative expenses when there is no such provision under the Act? ITA No. 7069/Mum/2016 for A.Y. 2007-08 by assessee 3. Brief facts of the case are that the assessee is 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 per....
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....e company. The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount. In all these cases, the expenses have been looked upon as having been made for the purpose 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 as....
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.... Disallowed 8,25,000 Accepted as Business Income 2006-07 Assessment u/s 143(3) 10,56,44,000 Accepted as allowable deduction (1,60,171,000) Allowed as Business Loss 2007-08 Assessment u/s 143(3) 2,65,54,000 Disallowed (7,96,94,000) 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 4....
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....lue and cost acquisition as provision for depreciation. This amount is purely notional and cannot be jugglery and disallowed the same. The ld. CIT(A) concur with the finding of Assessing Officer by taking view that assessee failed to explain as to whether it has credited the appreciated value of the investment in earlier years before claiming depreciation in 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 observ....
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....ess or profession'. The instant loss of Rs. 77,000, arising from the sale of stock-in-trade referred to as 'current investments', in our considered opinion has been rightly held by the ld. CIT(A) to be a business loss. Accordingly, this ground is not accepted. 15. The Hon'ble Bombay High Court in CIT vs. Bank of Baroda (supra) while considering the question of law whether 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 b....
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.... under section 263 of the Act, the assessee-bank preferred an appeal to the Tribunal which took the view that the assessee had claimed the loss by following the same method which it was following for last 30 years. Consequently, the order passed by the Commissioner under section 263 was set aside. Against the said order of the Tribunal, two questions were referred for opinion to the High Court. Answering the said questions, the High Court 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 ....
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....here on the date of valuation, the market value is less than the actual cost then the assessee was entitled to value the articles at market price and the assessee was entitled to claim the loss which the assessee would probably incur at the time of sale of shares and securities. That, whichever method the assessee adopts, it should disclose the true picture of profits and gains. That, for determining the real income, the entries in the balance 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....
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....idend income of Rs. 35.50 lakhs which was claimed exempt in the computation of income. The Assessing Officer invoked the provision of Rule 8D for calculating the disallowance under section 14A. The ld. AR of the assessee submits that Rule 8D is not applicable for the year under consideration and application from A.Y. 2008-09. The ld. AR of the assessee submits that assessee's own surplus fund were more than the investment, therefore, no interest expenses disallowance 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 unde....
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....2016 for A.Y. 2007-08 by revenue 30. Ground No.1 to 3 related to deleting the addition on account of interest income. At the outset of hearing, the ld. AR of the assessee submits that these grounds of appeal are covered in favour of assessee in assessee's own case for A.Y. 2006-07 in ITA No. 2972/Mum/2011. The ld. AR of the assessee further submits that Assessing Officer in order giving effect has allowed the relief to the assessee. The ld. AR of the assessee also furnished the copy 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 pape....
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....ugned AY. Further, the capital gains offered by assessee upon sale of preference shares has been accepted by the revenue in succeeding years in Section 143(3) proceedings and therefore, we find no reason to interfere with those assessments. 22. Certain additional evidences in the form of paper-book dated 24/10/2013 has been produced before us in support of calculations of accrual of income on preference shares/ maturity value etc., which require, appreciation at the level of Ld. AO since the Ld. AR has asserted that whatever 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 li....
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....ning tax free income. Therefore, we direct the Assessing Officer to verify the fact and allow relief to the assessee on account of interest expenses under Rule 8D(2)(ii). Needless to direct that before passing the order, the Assessing Officer shall grant opportunity to the assessee to substantiate its claim. In the result, this ground of appeal is allowed for statistical purpose. 42. Ground No.3 relates to non granting TDS credit. The ld. AR of the assessee submits that the Assessing Officer has already granted relief by passing order under section 154. Therefore, this ground 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 th....