TaxTMI 
TaxTMI 
2016 (1) TMI 1458
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....224/- was granted to the assessee. 2.1. The case was selected for scrutiny, by issuance of a notice, under Section 143 (2) of the Act, on 28.04.1998. The assessment came to be made under Section 143 (3) of the Act and by the order, dated 27.03.2000, the total income was determined at Rs. 8,98,52,050/-. 2.2. Deductions were claimed by the assessee invoking Sections 35D, 36, 37 (4) and 80 HHC of the Act and they were disallowed by the Assessing Officer. As against the order passed, the Assessee filed an appeal before the Commissioner of Income Tax (Appeals) and the Commissioner, by the order, dated 28.02.2001, partly allowed the appeal. Challenging the same, the Assessee filed the Appeal before the Income Tax Appellate Tribunal and the Tribunal, in I.T.A.No.703/Mds/2001, allowed the appeal partly, by the order, dated 27.07.2006. 2.3. As against the order passed by the Income Tax Appellate Tribunal, Chennai 'B' Bench, in I.T.A.No.703/Mds/2001, this appeal has been filed before this Court by the assessee, raising the following substantial questions of law: (i) Is not the order of the Tribunal vitiated on the soul ground that the evidences relating to factual matter have not....
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....fter the commencement of his business, in connection with the extension of his undertaking or in connection with his setting up a new unit, the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount equal to one-tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or, as the case may be, the previous year in which the extension of the undertaking is completed or the new unit commences production or operation : [Provided that where an assessee incurs after the 31st day of March, 1998, any expenditure specified in sub-section (2), the provisions of this sub-section shall have effect as if for the words "an amount equal to one-tenth of such expenditure for each of the ten successive previous years", the words "an amount equal to one-fifth of such expenditure for each of the five successive previous years" had been substituted.] (2) The expenditure referred to in sub-section (1) shall be the expenditure specified in any one or more of the following clauses, namely :- (a) expenditure in connection with- (i) preparation of feasibilit....
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....niture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the business of the assessee commences; (ii) in a case referred to in clause (ii) of sub-section (1), the actual cost of the fixed assets, being land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the extension of the undertaking is completed or, as the case may be, the new unit commences production or operation, in so far as such fixed assets have been acquired or developed in connection with the extension of the undertaking or the setting up of the new unit of the assessee; (b) "capital employed in the business of the company" means- (i) in a case referred to in clause (i) of sub-section (1), the aggregate of the issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the business of the company commences; (ii) in a case referred to in clause (....
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....he amalgamation had not taken place. 1[(5A) Where the undertaking of an Indian company which is entitled to the deduction under sub-section (1) is transferred, before the expiry of the period specified in sub-section (1), to another company in a scheme of demerger, - (i) no deduction shall be admissible under sub-section (1) in the case of the demerged company for the previous year in which the demerger takes place; and (ii) the provisions of this section shall, as far as may be, apply to the resulting company, as they would have applied to the demerged company, if the demerger had not taken place.] (6) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure specified in sub-section (2), the expenditure in respect of which deduction is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other assessment year.] 6. Section 35D has been inserted by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, i.e. for and from assessment year 1971-72. The provisions are new in the sense that there were no corresponding provisions in the 1922 Act. Even under t....
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....n claimed for the consecutive year in respect of the same unit. 9. From the discussions, it is evident that the assessee had claimed deduction in respect of successive units over a period of time; one unit during 1995-96, another unit during 1996-97 and yet another unit during 1997-98. There is also a finding that there is no proof to show that Euro Issue had been used for the capital expansion over a period of so many years. On these findings, the assessing officer has chosen to grant deduction only in respect of one unit, namely, for the unit established in 1995-96 to the extent of Rs. 10,39,812/- and disallowed the deduction in respect of other units. Therefore, we find no reason to differ the findings of the Tribunal. Deduction disallowed as claimed under Section 36 of the Act:- 10. The assessee had advanced a sum of Rs. 100 lakhs to M/s.Sccals Ltd., out of its business surplus on 24.11.1995 on interest, at the rate of 25%, for a period of 120 days. As the cheque issued by the debtor M/s.Sccals Ltd. got dishonoured, the assessee had filed a suit for recovery of money. Interest accrued on the principal of Rs. 1 crore was waived from 01.04.1996. 50% of the principal amount was....
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....apital loss, which is not correct in law. 15. A perusal of the order passed by the Income Tax Appellate Tribunal would go to show that rightly, the Tribunal has relied upon the Judgment of this Court in CIT vs. Micromax Systems (P) Ltd., reported in (2005) 277 ITR 409 and chosen to confirm the disallowance. In the reported decision, it has been held as under: "In the present case, it can be seen that the assessee did not write off the debt in question as irrecoverable in his accounts for the previous year. Hence, on the plain language of Section 6(1)(vii) of the Act, the debt cannot be allowed as a "bad debt". It may be that the assessee committed an inadvertent mistake, but, we cannot go by notions of equity in tax matters. Making a provision is not the same thing as writing off a debt as irrecoverable." 16. Relying upon the decision reported in CIT vs. Abudullabhai Abdul Kadar, [(1961) 41 ITR 545 SC], the Assessing Officer held that as the debt due was not an incident to the business, it cannot be termed as a debt and no deduction can be made on account of bad debt and that it should be construed as a capital loss. It would be appropriate to quote the relevant portion of the ....
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.... our view, the intention of the Legislature appears to be clear and unambiguous and was intended to exclude the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purposes of a guest house of the nature indicated in Sub-section (4) of Section 37. When the language of a statue is clear and unambiguous, the courts are to interpret the same in its literal sense and not to give it a meaning which would cause violence to the provisions of the statute. If the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodations used for the purposes of business or profession, then it would not have felt the need to amend the provisions of Section 37 so as to make a definite distinction with regard to buildings used as guest houses as defined in Sub-section (5) of Section 37 and the provisions of Sections 31 and 32 would have been sufficient for the said purpose. The decisions cited by Dr. Pal contemplate situations where specific provision had been made in Sections 30 to 36 of the Act and it was felt that what had been specifically provided therein could not be excluded under Section 37. The clarification i....