TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 490
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....to donation of Rs. 2 lakhs was wrongly allowed by the AO without examining the deduction u/s. Rule 7A(2). There was nothing in the assessment records to show that the prior period expenses of Rs. 74,702 crystallised during the year as claimed by the assessee. In respect of expenses written off to the extent of Rs. 28,97,408, this issue was also not examined by the AO. Out of this amount interest of Rs. 12,94,130 has been voluntarily waived off by the assessee out of interest of Rs. 51,76,521 receivable from Karnataka Cashew Development Corporation. A voluntary waiver of interest prima facie cannot be claimed as deduction by the assessee and interest to this extent was wrongly allowed by the AO. Similarly, an amount spent on Bamboo planation of Rs. 3,52,144 was prima facie in the nature of capital expenditure and the same has been wrongly allowed as a deduction by the AO without examining the issue. An amount of Rs. 4,49,194 written off as interest on loan to Mysore Paper Mills Ltd. and write off of agricultural income tax recoverable from Govt. of Karnataka amounting to Rs. 2,53,586 and write off of sundry balances amounting to Rs. 609 was not properly examined by the AO. The PCIT ....
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....rroneous and prejudicial to the interest of the Revenue; GROUNDS ON MERITS: A] In Regard Deduction claimed under rule 7A (2) excess claim of Rs. 1,51,81,556/- 8. The learned PCIT erred in facts and in law in holding that the deduction of Rs. 6,46,03,000/- allowed by the AO under Rule 7(2) of the Income-tax Rules, 1962 ("Rules") is erroneous and the same ought to have been restricted to Rs. 4,94,21,444/-, without providing any reasons for such restriction; 9. The learned PCIT failed to appreciate the submission of the Appellant that it was entitled to deduction of Rs. 7,09,58,595/- but only Rs. 6,46,03,000/- was claimed in the return of income hence there was no prejudice to the Revenue; 10. The learned PCIT erred on facts in ignoring the working sheet and the supporting documents filed by the Appellant to demonstrate that it was eligible for deduction of Rs. 7,09,58,595/- under Rule 7(2) and hence there was no loss of revenue. The assessment order was not prejudicial to the interest of the Revenue and hence the same was outside the purview of revision under section 263 of the Act; 11. The learned PCIT erred in setting aside the issue of Rule 7A(2) to the file of the AO ....
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....Nos.1 to 7 are with regard to legality of assuming jurisdiction by the PCIT u/s. 263 of the Act. The ld. AR submitted that during the course of assessment proceedings, the assessee produced all books of account and vouchers and the AO examined the books of account voluntarily and sought various explanation from the assessee and after being satisfied with the explanations of the assessee, he allowed the various claims of the assessee. There is no error in the order of the AO insofar as it is prejudicial to the interests of the revenue. According to the ld. AR, the AO completed the assessment after due application of mind and taken a conscious decision on various issued raised by the PCIT. Therefore, the assessment order cannot be termed as erroneous and prejudicial to the interests of revenue. According to the ld. AR, the PCIT cannot substitute his own conditions on the issues where the AO has taken a conscious decision after due verification of the books of account, as such exercise of jurisdiction u/s. 263 of the Act is bad in law. For this purpose, he relied don the judgment of the Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT , 243 ITR 83 (SC). 6. The ld. AR f....
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....tion 263 of the Act where such enquiry was prima facie warranted. In view of the above, we are of the opinion that the ld. PCIT was justified in invoking the provisions of section 263 of the Act. 10. Ground Nos. 8 to 20 are on merits. The ld. AR submitted that in regard to Rule 7A(2), the assessee actually made an addition of Rs. 7,09,58,595/- and the analysis of Capital work in progress of Rubber Replanting project for the FY 2014-15 for claiming under rule 7A(2), but claimed an amount of Rs. 6,46,03,000/- only in the revised statement of income. The analysis of capital work in progress of Rubber replanting project for the above year and amount which is capitalized during the year is reflected in the capital work in progress as per note 9. Thus claim of Rs. 6,46,03,000/- is less and thus there is no prejudice caused to the revenue and in fact prejudice is caused only to the assessee corporation and hence it is outside the preview of section 263 of the Act. 11. Further, regarding the actual capital work in progress of replanting project for assessment year, the closing balance of capital work in progress of Rubber Replanting project is Rs. 30,09,26,057/- is reflected on Note-09 a....
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....s submitted that the expenses got crystalized only in this year and hence it is claimed in this year. Even otherwise also if it is not allowable in this year it is allowable in the earlier year and the tax rates remains same for both the years and thus there is no prejudice caused. 15. In regard to a sum of Rs. 2,00,000/-paid as donation in the P & L account, since the donation paid is in the FY 2014-15 and assessee is not able to get the donation receipts, the assessee is agreeing for the addition of the same. 16. In regard to a sum of Rs. 28,97,408/- expenses written off, it is stated that it is made up of the following components:- (a) Interest receivable from Karnataka Cashew Development Corporation Rs. 18,41,875/- (Rs. 5,47,745 + Rs. 12,94,130/-) The total interest receivable as per books as on 01/04/2014 was Rs. 53,00,246/- and Rs. 4,24,020/- provision was made for the year 20141-5 FY and the total receivable was Rs. 57,24,266/ which is reflected in books. Out of total interest receivable Rs. 5,47,745/- was written off since the interest rate was calculated on compounding basis and rate of interest percentage was also more than it was decided in the board meeting to red....