TaxTMI 
TaxTMI 
2020 (6) TMI 310
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.....02.2004, CIT(A)XXVII/DC 3(1)/IT-86/03-04 dated 24.03.2005, CIT(A)XXVIII/ACIT 3(1)/IT 32/07-08 dated 19.06.2008, CIT(A)-XIII/Addl. CIT 3(1)/418/08-09 dated 31.03.2009, CIT(A)-XIII/Addl. CIT 3(1)/415/08-09 dated 31.03.2009, CIT(A)-XIII/Addl.CIT-3(1)/414/08-09 dated 31.03.2009, CIT(A)-LTU/ACIT LTU/419/08-09 dated 05.01.2010, CIT(A)-LTU/ACIT-LTU/132/2009-10 dated 15.10.2010, CIT(A)-LTU/Addl. CIT-LTU/57/2010-11 dated 23.12.2011, CIT(A)-LTU/ACIT-LTU/209/2011-12 dated 02.01.2014, CIT(A)-LTU/Addl. CIT-LTU/58/12-13 dated 30.06.2014. The Assessments were framed by the Jt. Commissioner of Income Tax, Addl. CIT, LTU Range-19, Dy. Commissioner of Income Tax, Circle 3(1), Mumbai (in short ACIT/ DCIT/JCIT/ AO) for the A.Ys. 1997-98, 1999-00, 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 vide order dated 16.02.2001, 11.03.2002, 29.01.2003, 17.02.2004, 31.12.2004, 25.02.2005, 25.02.2005, 30.11.2007, 31.12.2008, 31.12.2009, 24.12.2010, 16.12.2011, 21.01.2013 under section 143(3) of the Income-tax Act, 1961 (hereinafter 'the Act'). 2. The first common issue in these cross appeals in ITA Nos. 3371, 3372, 3373/Mum/2004, 4744/Mum/2005, 5962/Mum/2008 ....
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....e facts and circumstances of the dispute stand on an identical footing as was considered by the Tribunal in the earlier years, notably in Assessment Years 1994-95 to 1996-97 by way of a combined order dated 29.10.2014 (supra). We have perused the said decision and find that the Tribunal referred to various decisions, inter-alia, the judgment of the Hon'ble Supreme Court in the case of I.C.D.S. Ltd.Vs CIT [2013] 350 ITR 527 (SC), wherein Hon'ble Court held that even in cases of "financial leases', the depreciation allowance contemplated under Section 32(1) of the Act is allowable to the lessor. It has not been shown by the Ld. CIT-DR that any of such precedents in assessee's own case has been altered by any higher authority. Therefore, so far as this aspect of the matter is concerned, we do not find any hesitation in directing the Assessing Officer to allow the claim of depreciation on lease of assets where it involves "financial lease'. 6. Further, a perusal of the order of Tribunal dated 29.10.2014 (supra) shows that certain transactions of lease though not classified by the Assessing Officer as "financial lease', yet the depreciation was denied on some other ground, namely,....
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.... 5962/Mum/2008 filed by the assessee for AYs 1998-99 to 2002-03 respectively and ITA Nos. 5591/Mum/2008, 3759 to 3761/Mum/2009, 2612/Mum/2010 and 29/Mum/2011 filed by the Revenue for AYs 2002-03 to 2007-08 respectively is against the order of CIT(A) partly disallowing the expenditure claimed under Section 36(1)(iii) of the Act. The assessee is in appeal against partly sustaining the disallowance whereas the revenue is in appeal for partly allowing the relief to the assessee. Both assessee as well as Revenue have raised identical grounds in their appeals except for the quantum. Hence, we will take the facts from Assessment year 2002-03 and will decide the issue. The Grounds raised by assessee and Revenue in Assessment year 2002-03 is as under: - Grounds raised by assessee :- "2. Disallowance of expenditure claimed u/s 36(1)(iii) 2.1 The CIT(A) erred in partly allowing the claim of the appellant in respect of the interest payable on borrowed capital u/s 36(1)(iii) of the Act. The Honorable Tribunal may hold that the interest expenditure claimed by the appellant, being interest payable on capital borrowed for the purposes of the appellant's business, is allowable in full under t....
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....the securities of Central and State Government as well as shares and securities of other financial institutions is an activity undertaken in the course of business, the Learned Representative pointed to the position taken by the Assessing Officer in different assessment years on this very aspect. It is pointed out by the Learned Representative that so far as past assessments are concerned, similar investments were made by the assessee and there has been no disallowance under Section 36(1)(iii) of the Act. Further, it is pointed out that so far as interest relatable to the investments in State Financial Corporation is concerned, from Assessment Year 2003- 04 upto Assessment Year 2008-09, the disallowance made by the Assessing Officer was deleted by the CIT(A) and the Department has not contested the same in further appeal before the Tribunal except for Assessment Year 2007-08. It is further pointed out that from Assessment Year 2009-10 onwards to Assessment Year 2012-13, there has been no disallowance under Section 36(1)(iii) of the Act meaning thereby that even with regard to investments made in State Financial Corporations, corresponding interest has not been disallowed under Sect....
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....ank or institution which are for the purpose of, or in connection with, the export of capital goods, commodities or merchandise from India or the execution of any turnkey project outside India by any industrial concern as aforesaid or by any person in India, and, in any case, are repayable- (i) within a period not exceeding twelve years in the case of persons outside India, and (ii) within a period not exceeding fifteen years in the other cases; (b) subject to such conditions as may be prescribed, accepting, discounting, or re-discounting bills of exchange and 7[promissory notes made, drawn, accepted or endorsed by industrial concerns or by any person selling capitals goods manufactured by one industrial concern]; 6[promissory notes made, drawn, accepted or endorsed by industrial concerns or by any person selling capitals goods manufactured by one industrial concern;" (c) subscribing to or purchasing stocks, shares, bonds or debentures of the Industrial Finance Corporation, any State Financial Corporation or any other financial institution whether within or outside India which may be approved by the Board in this behalf. (ca) granting letters of credit or loans and advanc....
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....orporation or any State Financial Corporation or any other financial institution which may be approved by the Board in this behalf arising out of, or in connection with, underwriting the issue of stocks, shares, bonds or debentures of any industrial concern; (ga) granting, opening, issuing, confirming or endorsing letters of credit and negotiating or collecting bills and other documents drawn thereunder; (gb) providing consultancy and merchant banking services in or outside India; (gc) acting as the trustee for the holders of debentures or other securities; (gd) acquiring, with the approval of the Central Government, the undertaking, including the business, assets and liabilities of any institution the principal object of which is the promotion or development of industry in India, or the grant of financial assistance for such promotion or development;] (h) undertaking research and surveys for evaluating or dealing with marketing or investments and undertaking and carrying on techno-economic studies in connection with the development of industry; (i) providing technical, legal, marketing] and administrative assistance to any industrial concern or any person for promotion....
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....4. The only other aspect which is left for determination is interest relatable to investments made in securities of Central and State Governments amounting to Rs. 170 crores. On this aspect, it has been emphasized that in the earlier years, no such disallowance was made by the Assessing Officer. The rival stands on this aspect remain the same as it pertained to the interest relatable to investments made in State Financial Corporations. It was a common point between the parties that the assessing authority has not differentiated between the two items and the disallowance has been made on a consolidated basis in all the years, therefore, the assessing authority has disallowed the expenditure for similar reasoning as advanced for disallowing interest pertaining to investments in State Financial Corporations. 15. On this aspect, a pertinent point which has been brought out by the Learned Representative is that the interest income earned by the assessee on such Central and State Government securities have all along been assessed as "business income' and, therefore, there was no justification for disallowing the corresponding interest expenditure on the plea that that the investments a....
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....ing opportunity to the appellant to explain its case as statutorily required under section 250(2) of the Act is illegal and bad in law. 3.3 The learned CIT(A) did not have jurisdiction to decide on this issue as it did not arise out of grounds of appeal before him and his action on this issue is without any authority under the law." 12. The ld Counsel of the assessee submitted that issue raised by the assessee is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee own case in ITA No. 3626/Mum/2001 in Assessment year 1997-98 vide order dated 21.6.2019 and, therefore, the ground raised by the assessee may kindly be allowed. The ld DR fairly agreed to the contentions of the assessee but relied on the orders of the authorities below. 13. After hearing the rival contentions, we note that the issue is fully covered in favour of the assessee by the decision of the coordinate bench in Assessment year 1997-98, the operative part whereof is extracted below: "23. We have considered the submission of the parties and perused the records. We have noted that the ld. A.R of the assessee vehemently submitted that the A.O taxed the income from sale of....
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....ted that in the return of income, the assessee claimed income exempt under section 10(23G) of Rs. 8,36,34,794/-. The assessee claimed exemption under section 10(23G) on gross basis. During the course of assessment, the assessee furnished revised working, thereby reduced the claim under section 10(23G) to Rs. 1,86,27,921/-. Before the ld. CIT(A), the assessee raised additional ground of appeal regarding restructuring the assessee's claim under section 10(23G) in respect of infrastructure business to Rs. 1,86,27,921/- as against Rs. 8,36,34,794/- claimed in the return of income. The ld. CIT(A) in para-114 of his order recorded that this ground was not pressed by assessee. Before us, ld. AR of the assessee vehemently submitted that the assessee has raised specific as well as additional ground of appeal and that the finding of ld. CIT(A) that the assessee has not pressed this ground, is factually incorrect. Before us, the ld. AR of the assessee submits that exemption under section 10(23G) is to be allowed on gross basis. The ld. AR strongly makes reliance on the decision of Tribunal in Reliance Industries vs. ACIT (supra). The co-ordinate bench of Tribunal in Reliance Industries vs. ....
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....rdingly. 17. The next common issue is with respect to staff welfare expenses under Section 40A(9) of the Act. The assessee is in appeal against the disallowance of the expenses in AYs 1998-99 to 2001-02 vide ITA Nos. 3371, 3372, 3373/Mum/2004 and 4744/M/2005 respectively and the Revenue is in appeal against the allowance of the expenses by the CIT(A) in AYs 2002-03 to 2007-08 vide ITA Nos. 5591/Mum/2008, 3759 to 3761/Mum/2009, 2612/Mum/2010 and 29/Mum/2011 respectively. Assessee and the Revenue have raised the following identical grounds in their appeals for assessment year 2001-02 and 2007-08 respectively except for the quantum. Grounds raised by assessee in assessment year 2001-02 :- "4. Disallowance of staff welfare expenses u/s. 40A(9) The learned CIT(A) erred in confirming the disallowance u/s 40A(9) of the Act, of expenses amounting to Rs. 2,90,00,285/- incurred by the appellant through various staff welfare schemes like voluntary health schemes, disability assistance fund, staff welfare fund and Dr. Ambedkar birth centenary fund which are allowable u/s 37 of the Income Tax Act. The Hon'ble Tribunal may hold that these expenses are business expenses, allowable u/s 37 ....
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....T(A) may kindly be reversed and the Assessing Officer be directed to allow the expenditure. 21. The ld. DR, on the other hand, relied on the orders of the authorities below by submitting that Section 40A(9) of the Act specifically provides for disallowance of an contribution made to funds which might promote staff welfare and thus prayed the Bench to dismiss the ground raised by the assessee. 22. After hearing both the parties and perusing the material on record, we find that undisputedly assessee has incurred the expenses to the tune of Rs. 1,78,72,827/- towards four funds as noted above. The Assessing Officer observed that the said expenses are now allowable under Section 40A(9) of the Act, which was confirmed by the ld. CIT(A) also following the order in assessment year 1995-96 in which similar expenses were held to be disallowable. In the present case, we find merit in the arguments of the ld. AR that these were written back in the computation of income and actual expenses were claimed under Section 37(1) of the Act. Even the case of assessee is supported by the decision of Jurisdictional High Court in the case of PCIT vs State Bank of India (supra) wherein the following was ....
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....id amount constituted contribution to the club and, therefore, under section 40A(9), the claim for deduction was disallowed. Being aggrieved, the assessee went in appeal to the Tribunal which took the view that the aforestated amount represented reimbursement of expenses incurred by a society and, therefore, it did not constitute contribution under section 40A(9). Being aggrieved by the decision of the Tribunal, the Department has come in appeal. Findings on question No. 2 Bharat Petroleum Corporation is a Central Government undertaking. It has incorporated a club, essentially to carry on staff welfare activities. Under clause 28, Bharat Petroleum Corporation Limited had a right to issue directives to the club which were binding on the club. At times, the members of the club, who were the employees of Bharat Petroleum Corporation, took part in tournaments held outside the club premises like Times shield in cricket. On such occasions, the assessee-Corporation used to reimburse expenses incurred by the club. This is the finding of fact recorded by the Tribunal. In the circumstances, section 40A(9) is not applicable. No substantial question of law arises. Hence, our answer to the af....
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....ot accepting the claim of appellant u/s 10(33) of the Act, in the manner in which it was claimed. The appellant submits that its claim u/s 10(33) should be accepted in totality. The learned CIT(A) committed a gross error of law and fact in directing the Assessing Officer to disallow the interest expenditure in relation to investment in shares. Moreover, the learned CIT(A)'s directions relating to section 36(1)(iii) are themselves contrary to law and unwarranted." 24. Facts in brief are that during the year, assessee received gross dividend of Rs. 143,12,37,003/- out of which Rs. 4,36,35,000/- was received from the Unit Trust of India which was offered to tax under the head 'income from other sources'. The remaining dividend of Rs. 138,76,02,003/- was claimed as exempt under Section 10(33) of the Act on gross basis. The Assessing Officer noted that the total borrowed funds at the end of the year stood at Rs. 45,520 crores on which interest of Rs. 4,733 crores was paid. The Assessing Officer attributed the interest of Rs. 300 crores to earning of exempt income and also attributed the management expenses equal to 1% of gross dividend, which works out to Rs. 301,38,76,020/- and thus....
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....ue and direct the Assessing Officer to delete the disallowance. Since we have allowed the relief to the assessee on the plea that own funds are more than amount of investments, therefore, the other pleas raised by the assessee need not be adjudicated. 27. The next common issue in these appeals of assessee in ITA Nos. 3373/M/2004, 4744/M/2005, 5962/M/2008, 3907/M/2009 and 3908/M/2009 for AYs 2000-01 to 2004-05 respectively is against the order of CIT(A) upholding the order of Assessing Officer taxing the interest on sticky loans as per Section 43D of the Act. Assessee has raised identical grounds in its appeals except for the quantum. Hence, we will take the facts from AY 2004-05 and will decide the issue. The Grounds raised by assessee in AY 2004-05 is as under: - " 3. Income prior to 01.04.1991 - Section 43D 3.1 The learned CIT(A) erred in holding that the interest on "sticky loans' credited to "interest suspense account" prior to 1.4.91 was liable to tax on receipt basis u/s 43D of the Income Tax Act. As per the facts and circumstances of the case he ought to have held that section 43D was not applicable and the Assessing Officer (AO) has wrongly invoked the said section. Th....
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....e appellant's income was made taxable under the I.T. Act. During the period before 1/4/1991 the appellant had some sticky loans on which the interest was worked out and credited in interest suspense account. During the period after 1/4/91, some of the interest amount on such sticky loans, which was earlier credited by appellant in interest suspense account, was received by the appellant in the period after 1/4/91. As per provisions of sec. 43-D inserted w.e.f. 1/4/91 the interest on sticky loans was taxable in the relevant period when such interest was credited to P&L account or actually received whichever was earlier. Appellant's claim was that interest on such sticky loans received during the year was already accounted for in the assessment years prior to 1/4/91 and therefore, the same interest amount could not be taxed in the year of receipt after 1/4/91. This issue was also there in earlier assessment years. In earlier assessment years the A.O had not accepted the appellant's claim and brought to tax the interest on sticky loans as per provisions of sec. 43-D of the Act. My predecessors have also confirmed the additions made by the A.O on this issue. In the immediately prec....
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....aside the order of CIT(A). 31. Ground no. 1 in appeal of assessee bearing ITA No. 3907/M/2009 for AY 2003-04 is against the order of CIT(A) upholding the disallowance of deduction by Assessing Officer in respect of dividend income under Section 80M of the Act. 32. At the outset, the ld. AR submitted that the issue is squarely covered in assessee's own case in ITA No. 3626/Mum/2001 for assessment year 1997-98 vide order dated 21.06.2019 and, therefore, the same may be decided in favour of assessee by following the decision of coordinate bench. The ld. DR, on the other hand, relied on the orders of the authorities below. 33. We have considered the contentions of both the parties and perused the orders of the authorities below. We note that similar ground of appeal was raised by the assessee in assessment year 1997-98 wherein the Tribunal has held as under :- "19. We have considered the rival submission of the parties and gone through the orders of Tribunal for earlier years. During the assessment, the Assessing Officer asked to furnish the details of deduction under section 80M and issued show-cause notice as to why the deduction under this section should not be recalculated aft....
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....ed to restrict the disallowance under Section 80M of the Act to 1% of the dividend income. Thus, assessee succeeds on this ground of appeal as stated above. 35. Ground no. 3 in appeal of Revenue bearing ITA No. 3761/M/2009 for AY 2005-06 is against the order of CIT(A) confirming the disallowance of claim of bad debt by Assessing Officer under Section 36(1)(vii) of the Act. The ground raised by the assessee reads as under :- "3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the claim of bad debts claimed by the assessee amounting to Rs. 2,01,48,33,112/- u/s 36(1)(vii) and disallowed by the A.O." 36. Facts in brief are that assessee has written off an amount of Rs. 201,48,33,112/- on account of bad and doubtful debts, the details whereof is given in para 8.1 of the assessment order. According to the Assessing Officer, said debt has not become bad and accordingly, he added the same to the income of assessee. 37. The ld. CIT(A) allowed the claim of assessee by holding as under :- 8.3(a) I have considered the facts of the case. The appellant claimed deduction of Rs. 201.48 crores as bad debts written off u/s. 36(1)(vii) of the ....
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....he unrecoverable amount should be a debt, the assessee has considered and decided to consider the same as bad debt and the bad debt is written off as irrecoverable in the accounts of assessee. Thus, every claim of bad debt is required to be looked into from these three parameters. During appellate proceedings, the appellant explained to the A.O that the parties have defaulted in making payment of loan amounts, the parties were registered with BIFR, BIFR has confirmed that the attempts for revival of the company has failed, official liquidator were appointed by courts, net worth of the company turned negative, the court appointed court receivers, suites have been filed with the Debt Recovery Tribunal, DRT has issued recovery certificates etc etc. In my considered view, all these reasons or any one of the reason were sufficient to classify a party as bad debt. The appellant also explained to the A.O that the bad debts were identified as per the guidelines of RBI and only after taking approval of the Board of Directors of the appellant company. Thus sufficient care was taken to classify the debt as bad debt. Though the appellant was not required to prove before the A.O, but still the ....
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....le is satisfied, no further obligation remains to be discharged by the assessee. The hon'ble Bombay High Court in case of Star Chemicals (2008) 11 DTR (Bom) 311 approved Mumbai Spl. Bench decision holding that once assessee has written off the debt as bad debt, requirement of Section 36(1)(vii) is satisfied. In my considered view, the appellant has fulfilled the condition of writing off bad debts in the books of accounts and concerned ledger accounts and therefore, the appellant's claim of bad debt was as per provisions of the Act. The A.O's holding, that it was unilateral decision of the appellant, was also not a correct holding because the decision is required to be made by the appellant only keeping in view the facts of each case. 8.3(d) In the facts and circumstances and taking into account the totality of facts, the appellant's claim of bad debt was as per provisions of the Act, since the appellant was in the business of money lending. The appellant explained the circumstances for which the debts became unrecoverable and the debts were actually written off in the books of accounts. Moreover, whenever such written off debts were realized in future, the same were o....
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....AT Mumbai [ITA No.4702 to 4706/Mum/2010] 5. Indusind Bank Ltd. vs. Addl. CIT, ITAT Mumbai [ITA No. 2921/Mum/2012] 6. In view of the above, we do not find any merit for the addition made u/s.115JB of the Act." 41. As the facts and circumstances during the assessment year under consideration are identical to those in assessment year 2004-05, we respectfully following the decision of our co-ordinate bench in the assessee's own case above, set aside the order of CIT(A) and assessee succeeds on this ground of appeal. 42. The next ground in the appeal of Revenue in ITA No. 29/Mum/2011 for assessment year 2007-08 is against the order of CIT(A) allowing the interest paid u/s 201(1A) on TDS on payment by assessee. 43. Facts in brief are that during the year, assessee has charged to the Profit & Loss Account interest on late deposit of TDS of Rs. 1,11,602/- which was disallowed by the Assessing Officer on the ground that the same is not allowable in light of the provisions of Section 40(a)(i) of the Act. 44. The ld. CIT(A) allowed the appeal of assessee by holding that the said expense does not fall under the provisions of Section 40(a)(i) of the Act by observing as under :- "11.1 ....
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..... The said deduction was computed on net long term income arrived at after disallowing expenses in this regard. The Assessing Officer enhanced the returned income by making disallowance of various expenses and consequently, the Assessing Officer has not excluded the expenses while calculating the net long term income and the deduction allowable under Section 36(1)(viii) of the Act. 48. The CIT(A) allowed the deduction to the assessee by observing as under :- "12.1 The assessee has claimed deduction of Rs. 9,78,49,676/- u/s 36(1)(viii) of the Income Tax Act though the special reserve created for this purpose was Rs. 50 Crore. The deduction is computed on the net long term income arrived at after disallowing the expenses in this regard. The AO has enhanced the returned income by making the disallowance of various expenses. He has not consequently excluded the expenses while calculating net long term income and the deduction allowable u/s 36(1)(viii). The appellant is therefore entitled to the higher amount of deduction u/s.36(1)(viii) which the AO ought to have allowed, taking into account the fact that the appellant had created reserve of Rs. 50 Crore u/s 36(1)(viii) in the relev....
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....f account, however, same was not claimed as deduction under Section 36(1)(vii) of the Act towards provision for bad and doubtful debts in respect of rural branches. The ld. AR submitted that after the above judgment was pronounced by the Hon'ble Supreme Court, assessee realized that it has not claimed deduction under Section 36(1)(viia) of the Act in respect of rural branches at 10% of the aggregate advances made by the rural branches. The ld. DR, on the other hand, strongly opposed admission of the additional ground filed by the assessee on the ground that it has never been filed before the Assessing Officer or CIT(A). 52. After hearing both the parties and perusing the material on record, we observe that the issue has cropped up following the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. (supra) that deduction under Section 36(1)(vii) and 36(1)(viia) of the Act are independent and assessee is entitled for both of them. Accordingly, we find merit in the legal contention of the assessee that assessee should be allowed deduction under Section 36(1)(viia) of the Act and are inclined to admit the additional ground raised by the assessee. Howev....