AI Drafter 
TaxTMI 
TaxTMI 
2019 (12) TMI 1499
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....e Learned Commr. of Income Tax (Appeals) has erred in confirming the disallowance of the claim of the depreciation of Rs. 13,70,093/- in respect of residential properties. On the facts and circumstances of the case the appellant prays that the disallowance of depreciation of Rs. 13,70,093/- is not justified and the said disallowance may be deleted. 2. The Learned Commr. of Income Tax (Appeals) has erred in disallowing the sum of Rs. 22,32,084/- being the amortization of the premium paid on leasehold land on which the commercial complex has been constructed by the appellant. On the facts & circumstances of the case the appellant prays that the disallowance of the claim of amortization of land premium amounting to Rs. 22,32,084/- is not justified. 3. The Learned Commr. of Income Tax (Appeals) has erred in confirming the disallowance of depreciation of Rs. 2,28,820/- on toll road. Based on the facts & circumstances of the case the appellant prays that the claim of depreciation of Rs. 2,28,820/- be allowed. 4. On the facts and circumstances of the case the appellant submits that they have not received any income in respect of the Toll Road and the matter is i....
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....ial properties was held in 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. It is also submitted that identical issue which arose for the A.Ys. 2008-09 and 2009-10 and the appeals were heard by the Tribunal on 19.11.2019. 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 los....
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.... Therefore, consistent with view taken by the Co-ordinate Bench for earlier years, we direct the AO to allow depreciation as claimed by the assessee on residential premises, but verify 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 was 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. Similar view has been taken by the Tribunal in ITA.No. 3785 & 3786/Mum/2013 for the A.Y. 2008-09 and A.Y. 2009-10 by order dated 28.11.2019. 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 dated 30.04.2019 passed for the A.Y.2005-06 to A.Y.2007-08 and decide accordingly. This ground is partly allowed. 9. Comi....
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....e estimated income from the toll road, as a logical consequence, the assessee becomes entitled to claim the depreciation on the on the toll road. After considering the cited decisions relied upon by respective representative, we find that since the assessee is not the owner of the toll road, depreciation thereupon could not be allowed to him in terms of decision of Hon'ble Bombay High Court in North Karnataka Expressway Ltd. Vs. CIT [supra]. However, depreciation on the same as intangible assets being 'any other business or commercial rights of similar nature' as per Section 32 would be available to the assessee in terms of decision of Special Bench of the Tribunal, Hyderabad rendered in Progressive Constructions Ltd. Vs. ACIT [ITA No. 1845/Hyd/2014 order dated 14/02/2017]. Respectfully following the cited decision, we direct so. The Ld. AO is directed to re-compute the same and grant depreciation thereupon as intangible assets. The assessee is also directed to substantiate his claim in this regard. The grounds of assessee's appeal stands allowed for statistical purposes." 12. The Tribunal for the A.Y. 2005-06 to A.Y. 2007-08 in ITA.Nos. 3339/Mu....
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.... the same on the basis of material available on record. 11.12 Since, we have already directed the Ld. AO to tax the estimated income from the toll road, as a logical consequence, the assessee becomes entitled to claim the depreciation on the toll road. After considering the cited decisions relied upon by respective representative, we find that since the assessee is not the owner of the toll road, depreciation thereupon could not be allowed to him in terms of decision of Hon'ble Bombay High Court in North Karnataka Expressway Ltd. Vs. CIT [supra]. However, depreciation on the same as intangible assets being 'any other business or commercial rights of similar nature' as per Section 32 would be available to the assessee in terms of decision of Special Bench of the Tribunal, Hyderabad rendered in Progressive Constructions Ltd. Vs. ACIT [ITA No. 1845/Hyd/2014 order dated 14/02/2017]. Respectfully following the cited decision, we direct so. The Ld. AO is directed to re-compute the same and grant depreciation thereupon as intangible assets. The assessee is also directed to substantiate his claim in this regard. The grounds of assessee's appeal stands allowed for statisti....
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....unds of appeal is relating to disallowance U/s. 14A r.w.s 8D(2)(iii) of I.T. Rules in respect of interest and the Tribunal for the A.Y. 2004-05 in ITA No. 3203/Mum/2008 and ITA.No. 3156/Mum/2008 dated 28.06.2017 set-aside the matter to the file of the Assessing Officer. It is also submitted that for the A.Y. 2005-06 to A.Y. 2007-08 the Tribunal restored this matter to the file of the Assessing Officer. 18. On a perusal of the order of the Tribunal for the A.Y. 2008-09 and A.Y. 2009-10 we observe that the Tribunal restored this issue to the file of the Assessing Officer following its earlier order for the A.Y. 2004-05 and A.Y. 2005-06 to 2007-08 observing as under: - "11. Ld. Counsel for the assessee submitted that Ground No.3 of grounds of appeal is relating to disallowance U/s. 14A r.w.s 8D(2)(iii) of I.T. Rules in respect of interest and the Tribunal for the A.Y. 2004-05 in ITA No. 3203/Mum/2008 and ITA.No. 3156/Mum/2008 dated 28.06.2017 set-aside the matter to the file of the Assessing Officer. It is also submitted that for the A.Y. 2005-06 to A.Y. 2007-08 the Tribunal restored this matter to the file of the Assessing Officer. 12 On the other hand, Ld. DR st....
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.....2019 at Para No. 19 held as under: - "19. We have heard both the parties, perused materials available on record and gone through the orders of authorities below. The facts with regard to applicability of provisions of section 14A was not disputed by the assessee. The only dispute is with regard to quantification of average value of investment considering the investment made in group/associate concerns for strategic investment purpose and also the element of commercial expediency in making investment. We find that the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. vs CIT (supra) had considered the issue of disallowance of expenses incurred in relation to exempt income including interest in light of arguments of the assessees that strategic investments made in group/associate concerns for the purpose of holding controlling interest cannot be considered for determination of average value of investments and held that even though investment are made in group/associate concerns for the purpose of holding strategic investment disallowances contemplated u/s 14A of the Act triggers the moment the assessee earned exempt income. However, the Hon'ble Court has not touche....
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.... i.e., borrowed as well as own funds, proportionate interest of Rs..30.01 Crores @ 5.63% was disallowed while computing the income of the assessee. 42. Before the Ld. CIT(A) the assessee has contended that the loan was given for IL & FS Employees Welfare Trust and it is for the welfare of the employees and for the business purpose only. Alternatively, it was submitted that there is error in calculation of the Assessing Officer and if the correct method of calculation is applied the proportionate interest works out to only Rs..11 Crores and not Rs..30.01 Crores and requested the Ld. CIT(A) that if entire addition is not deleted Assessing Officer may be directed to rectify and compute the disallowance at Rs..11 Crores as calculated by the assessee. 43. Before us, Ld. Counsel for the assessee submitted that the loan was given to employee's welfare trust for the benefit of employees and therefore the said loan is for the purpose of business of the assessee and hence no disallowance is warranted. 44. On the other hand, Ld. DR strongly supported the orders of the authorities below. 45. We have heard the rival submissions and perused the orders of the a....
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....ncome of previous years (amounting Rs. 9.38 cr) are also being inadvertently offered for Tax instead of Income for FY 2010 only. (b) Income of IL&FS Investment Trust V: Interest income was accounted in IL&FS books as Interest from investment (Trade) (Rs. 4.37 cr) and the same income was again offered for tax based on Audited accounts of IIT-V on the basis of income earned by the Trust. 24. Ld. Counsel for the assessee further referring to page no. 84 of the Paper Book submitted that Income of IL&FS Investment Trust-I in F.Y.2010, had earned a Net Surplus of Rs..10.19 Crores. Further, it had an accumulated retained earning brought forward of earlier years of Rs..9.38 Crores, which pertains to income earned in earlier years. The accumulation of previous years' earnings and current year's net surplus was shown as "Earning available for Appropriation. (Rs..19.56 Crores). Referring to Page 80 of the Paper book, Ld. Counsel for the assessee submitted that while computing taxable income of the Trust, earning available for Appropriation amounting Rs..19.56 Crores was inadvertently considered as Income for FY 2010 instead of Net Surplus of Rs..10.19 Crores. Hence ther....
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..... We make it clear that if it is proved that assessee has offered excess income as claimed by the assessee the same shall not be brought to tax as it would amount double addition, though it is an inadvertent mistake of the assessee. 29. Ground No. 8 of grounds of appeal of the assessee is relating to rejection of claim for deduction u/s. 36(1)(vii) of Rs..2.09 Crores. At the outset, Learned Counsel for the assessee submitted that this ground has been dismissed by the Ld.CIT(A) observing that assessee has not pressed this issue in the course of the appellate proceedings. Ld. Counsel for assessee submitted that the instructions from the assessee are that assessee never made any submissions before the Ld.CIT(A) withdrawing its claim for deduction u/s. 36(1)(vii) of the Act. 30. Considering the submissions of the Ld. Counsel for assessee, we restore this issue to the file of the Ld.CIT(A) to examine the submissions of the assessee as to whether this ground was not pressed or not. If the assessee has not given in writing withdrawing this claim before the Ld.CIT(A), the Ld.CIT(A) may decide this issue on merits after providing adequate opportunity of being heard to the assessee. Th....
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....appellant denies the liability of payment of interest u/s 234B. On the facts & circumstances of the case the appellant submit that levy of interest u/s 234B is not justified and may be deleted." 34. Ground No. 1 of Grounds of appeal for the A.Y. 2011-12 is relating to disallowance of depreciation on residential properties. This ground is similar to Ground No.1 in the appeal for the A.Y. 2010-11 which 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. 2011-12. We order accordingly. 35. Ground No. 2 of Grounds of appeal for the A.Y. 2011-12 is relating to depreciation on toll road. This ground is similar to Ground No.3 in the appeal for the A.Y. 2010-11 which 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. 2011-12. We order accordingly. 36. Ground No. 3 of Grounds of appeal for the A.Y. 2011-12 is relating to notional interest income in respect of toll road from Madhya Pradesh State Industrial Development corporation. This ground is similar to Ground No.4 in the appeal for the A.Y. 2010-11 which has bee....
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....14A. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating the capital expenditure on the computer software development expenses of Rs. 49,02,820/- as revenue expenditure without appreciating the fact that this expenditure was incurred for acquisition of right to use software and upgradation bringing enduring benefit to the assessee and it is a depreciable asset. 4. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the accrued income of Rs..1,50,00,000/-from Toll Road without appreciating the fact that assessee having followed the mercantile system of accounting continues to hold the right to receive income from toll road. 5. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the club expenses of Rs. 18,48,238/-without appreciating the fact that the assessee has failed to prove that the expenses are incurred wholly and exclusively for the purpose of business." 6. "On the facts and in the circumstances of the case and in law, the LD. CIT(A) erred in deleting the disallowance of Rs. 6,60,80,000/-claimed u/s 36(l)(vi....
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....dered an identical issue for AY 2004-05 where it was held that Software Development Expenses is debited under the head miscellaneous expenses are in the nature of AMC Charges, internet access charges, lease line expenses, anti-virus expenses and other software expenses for accounting package, therefore, being revenue in nature and allowable as deduction. The relevant findings of the Tribunal are as under: - "20. Facts qua Ground No. 1 are that the assessee claimed certain software development expenses of Rs. 1.16 crores, the details of which were not filed before the AO which led the AO to believe that the same expenditure, being capital in nature, was not allowable to the Assessee. The assessee provided the details thereof before Ld. CIT(A) who noted that the impugned expenses were in the nature of AMC Charges, internet access charges, lease line expenses, anti-virus expenses, charges for link facility, software charges for accounting package and therefore, being revenue in nature and hence allowable to the assessee. 20.1 The Ld. DR has contended that no details were filed by the assessee before Ld. AO and therefore, the assessee has rightly been saddled with imp....
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....that this issue has been decided in favour of the assessee for the A.Y.2005-06 to A.Y.2007-08 at Para No. 70 of the Tribunal order. 49. On the other hand, Ld. DR strongly supported the orders of the authorities below. 50. We have heard the rival submissions and perused the orders of the authorities below. We find that the Tribunal while disposing off the appeal filed by the Revenue in ITA.No. 3165/Mum/2017 for the A.Y. 2007-08 held as under: - "69. The next issue that came up for our consideration from ground. 6 of Revenue's appeal is expenditure on club facilities. The Ld. AR for the assessee, at the time of hearing, submitted that this issue is covered in favour of the assessee by the decision of Hon'ble Bombay High Court in asessee's own case for AY 1997-98 in Income Tax Appeal No.2402 of 2013 where under identical set of facts, the Hon'ble High Court by following its earlier decision in the case of Otis Elevator Co. (India) Ltd. vs CIT (1992) 195 ITR 682 (Bom.) held that Club membership fee paid to the club is in the nature of revenue expenditure, which is allowable as deduction. 70. Having heard both sides and considered the material available on record....
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....ts in group entities and effects loans and advances to its subsidiaries and affiliate. It also owns and manages reality assets. As per sec.36(l)(viii) of the Act, the deduction is available only on the profits derived from eligible business and eligible business is defined as a business of providing long term finance for industrial or agricultural development or development of infrastructural facility in India or construction or purchase of houses in India for residential purposes. 17.2 After the reorganization of the business the assessee is only engaged in managing its investments in group entities. Assessee company became a non-financial and non-banking company, and thus is nowhere engaged in directly providing long term finance as specified for the- eligible business in section 36(l)(viii). Therefore, the deduction claimed by the assessee of Rs. 63000000/- is disallowed and added to the income of the assessee. Penalty proceedings initiated separately for furnishing inaccurate particulars of income / concealment of income. (Addition: Rs. 63000000/-)" 69. On appeal the Ld. CIT(A) allowed the claim for deduction U/s.36(1)(vii) of the Act holding that the....
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....erm financing. As such the income from the long term loans given to the group companies are eligible for deduction u/s.36(l)(viii). It is submitted that the disallowance ofRs. 6.3 crores made by the A.O. may be deleted." ....... (A) Industrial or agricultural development; (c) ''banking company" means a company to which the Banking Regulation Act, 1949 applies and includes any bank or banking institution referred to in section 51 of that Act; (h) "long term finance" means any loan or advance where the terms under which moneys are loaned or advanced provide for re-payment alongwith interest thereof during a period of not less than five years." As per sec.36(l)(viii) the appellant is eligible if it fulfills two conditions i.e. one is appellant should be specified entity and 2nd condition is extend loans for infrastructural facilities for a long term basis i.e. above 5 years. I had examined appellant's detailed submissions produced before me alongwith the loans extended by the appellant. The appellant had advanced loans for infrastructural facilities to group entities which are developing the infrastructural facilities i....
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....r, the Assessing Officer shall provide complete details to the assessee to rebut the confirmations which the Assessing Officer receives from the parties. Adequate opportunity shall be given to the assessee to make its submissions; in case the Assessing Officer wants to treat any amount as income of the assessee due to the mis-match in AIR. 60. Ground No. 8 of grounds of appeal of the revenue relates to allowance of depreciation of computer software and peripherals @60% as against 15% / 25% allowed by the Assessing Officer. 61. Briefly stated the facts are that, the Assessing Officer while completing the assessment noticed that assessee claimed depreciation of computer software and peripherals @60%. However, the Assessing Officer restricted the depreciation on computer software to 25% and peripherals to 15%. On appeal the Ld.CIT(A) allowed the claim of the assessee. 62. Ld. DR vehemently supported the orders of the Assessing Officer. Ld. Counsel for the assessee placed reliance on the order of the Ld.CIT(A). 63. We have heard the rival submissions, perused the orders of the authorities below. On a perusal of the order of the Ld.CIT(A) we find that depreciation on compute....
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....pital expenditure. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that the income estimated by the Assessing Officer of Rs. 1,50,00,000/- is accrued to the assessee & the same should be taxed as the assessee is following mercantile system of accounting. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that the computer software on which the assessee has claimed depreciation @ 60% is in actuality an intangible asset & is eligible for depreciation @ 25% as per the decision of Hon'ble ITAT Mumbai in the case of Sony India Pvt Ltd Vs Addl. CIT. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that the printers, scanner readers etc. on which the assessee has claimed depreciation @ 60% are in actuality an electrical equipment & are eligible for depreciation @ 25% as per the decision of Hon'ble ITAT Mumbai in the case of Sony India Pvt Ltd Vs Addl. CIT. 6. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the assessing officer be restored. ....