TaxTMI 
TaxTMI 
2022 (6) TMI 396
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....The learned CIT(A) erred in confirming disallowance out of operating expenses of Rs.20.59 crores under section 14A read with Rule 8D. The learned CIT(A) has failed to appreciate that suo-moto disallowance made by the Bank under section 14A of the Act is made on a scientific basis by proportionately allocating operating expenses incurred towards earning tax-free income. Hence, there is no basis or reason for any further disallowance under Rule 8D of the Income-tax Rules. 1.2 The learned C1T(A) erred in not appreciating that Rule 8D is neither charging provision nor automatic and Rule 8D(2)(iii) cannot supersede favourable judgements of Hon. ITAT upto AY 2009-10 and Gujarat HC upto AY 2008-09 in the Bank's own case. 2. Bank guarantee commission {Tax effect- Rs. 61,67,61,673) 2.1 The CIT (A) erred in upholding the addition of Bank Guarantee commission income of Rs. 181.45 crores being the sum relatable to unexpired period of the guarantee contract. This sum represents the pro-rata income for the period beyond 1-4-2015 which shall be amortised by the Bank over the balance tenure of the guarantee contract. This addition represents timing difference which w....
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....s actual discount offered to the employees. 5.3 The learned CIT(A) also failed incorrectly applying the observations of the decision of Bangalore special bench of Hon'ble ITAT in case of Biocon Limited vs DCIT [2013] 144 ITD 21 (Bangalore)(SB) which states that ESOP cost in hands of the company has to be equivalent to amount taxable as perquisite in the hands of employees. Relying on the decision of Hon'ble Special Bench, the difference between market price as on the date of exercise of options and exercise price (i.e market price on grant date] is an allowable deduction for computing income under the head 'profit and gains from business and profession' in the year of exercise of options by the employee (such amount being equal to the amount taxable as perquisite in hands of employee). The appellant craves leave to add, to amend, alter, delete and/or modify the above grounds of appeal on or before the final date of hearing. 3. The assessee vide letter dated 14/08/2020 has filed additional grounds of appeal as detailed under: Additional ground in the application dated 14-08-2020 The Appellant has filed an appeal on 16lh May, 2019. In ....
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.... (ITA No. !586/Kol./20l6 order dated 3-01-2020) h. ACIT v. Persistent Systems Pvt. Ltd. [ITA No. 1232/PUN/2017 order dated 28-02- 2020) 1.6. Relying on CBDT circular and judicial precedents, it is submitted that Cess amounting to INR 1,14,92,44,906 is deductible expense under section 37 of the Act and hence the same be allowed as a deduction in computation at taxable income of the Bank for AY 2015-16. 2. The appellant craves leave to add, amend, alter, substitute, delete and/or modify in any manner whatsoever this ground on or before the hearing of appeal. 4. The first issue raised by the assessee is that the Ld.CIT(A) erred in confirming the order of the AO by sustaining the disallowance of Rs. 20,58,91,006/- under the provision of section 14A r.w. Rule 8D of Income Tax Rules. 5. The facts in brief are that the assessee in the present case is a Schedule Bank and engaged in the business of banking. The assessee in the year under consideration has earned exempt income of Rs. 3,51,18,11,112/- by way of dividend. The assessee against such income has made the disallowance of Rs. 1,16,45,009/- under the computation of income under protest in pursuance to....
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....th the parties and perused the material available on records. At the outset we note that the identical issue was before us in the own case of the assessee for AY 2010-11 bearing ITA No. 311/Ahd/2016 where it was observed as under: 8. We have heard the rival contention of both the parties and perused the materials available on record. At the outset, we note that the disallowance has been made by the AO under the provisions of section 14A r.w.Rule 8D of Income Tax Rules for Rs. 26,19,72,629/- which was subsequently confirmed by the Ld. CIT(A) after making the reference to the order of his predecessor for the Assessment Year 2008-09 as discussed above. 8.1 The order of the Ld. CIT(A) for the Assessment Year 2008-09 has been reversed by the order of this ITAT in ITA No. 251/Ahd/2012 vide order dated 24/06/2017 by observing as under: 15. After giving a thoughtful consideration to the facts in issue, we find that from the balance sheet of the assessee for the year under consideration, the capital balance is at Rs. 360 crores and the free reserves are at Rs. 8411 crores totaling to Rs. 8051 crores. Against this, we find that the tax free investment at Rs. 651 cr....
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.... 10. Indeed, the onus lies upon the assessee to justify the expenses incurred in relation to exempt income. If the assessee failed to discharge the onus, the only option available to Revenue is to make the disallowance by resorting the provisions of Rule 8D of Income Tax Rules. However, in the interest of justice, fair play and keeping in view to the fact that assessee has made suo moto disallowance of Rs. 1,06,38,000, we are inclined to extend one more opportunity to the assessee to provide the basis of such disallowance by furnishing the necessary details. Accordingly, the issue with respect to administrative expenses is set aside to the file of AO for fresh adjudication as per the provision of law. Hence, the ground of appeal of the assessee is partly allowed for statistical purposes. 11.1 Respectfully following the above finding in own case of the assessee we hereby hold that there would be no disallowances of interest expenses under section 14A read with rule 8D of Income Tax Rule as the assessee was having sufficient interest free own fund of Rs. 1,00,785 crores against the investment of Rs. 3,704 crores. However with respect to disallowances of administrative expense....
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....ng the commission income on upfront basis. Similarly, the assessee has not given any justification that the change in the method of accounting will show the better presentation and preparation of the financial statements. As such the assessee has adopted unrealistic approach by postponing its real profit for a liability which is contingent in nature. Furthermore, the assessee will defer its income whereas its customers will recognize the expenses in the year in which the bank guarantee was furnished by the bank. Thus, there will be a mismatch between the income shown by the assessee viz a viz the expenses to be shown by the customers. The assessee by issuing a bank guarantee is not rendering services on constant/ year to year basis. As such, once the bank guarantee issued even for a longer period but the services are assumed to be rendered in one time. 13.3 The AO further observed that there was no clause appearing in the guarantee agreement making the assessee liable to repay the guarantee commission in the event it comes to an end before the tenure provided therein. Thus, there was no liability on the assessee to repay the amount of bank guarantee commission received by it. ....
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....ferred payment guarantees. 7.3.1 The various types of Bank Guarantees are generally issued as below i) Financial Guarantee: Here, the bank guarantees that the beneficiary will meet the financial obligation and in case he fails, the bank as a guarantor is bound to pay. ii) Performance Guarantee. Here the guarantee issued is for honouring a particular task and completion of the same in the prescribed/agreed upon manner as stated in the guarantee document. iii) Advance Payment Guarantee: This guarantee assures that the advance amount would be returned, in case the agreement for which the advance is given does not get fulfilled. iv} Payment Guarantee/Loan Guarantee: The guarantee is for assuring the payment/loan repayment. In case, the party fails to do so, guarantor is bound to pay on behalf of the defaulting borrower. v) Bid Bond Guarantee: As a part of the bidding process, this guarantee assures that the bidder would undertake the contract he has bid for, on the terms the bidding is done. vi) Foreign Bank Guarantee: When a guarantee is issued for a foreign beneficiary, it is called foreign BG. vii) Deferred Paym....
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.... method is adopted for several years on the correct basis under which the commission income on normal type of financial guarantees is accounted for and taxed upfront, there is no justification to change the same in the year under consideration as that would disturb the very fundamental of accrual concept. 7.3.3 As far as the various case laws on which reliance Is placed by the appellant, it is to be stated that they are not relevant to the issues on hand. The decisions upholding spread over of income in later years are those in which there is some services to be provided in future and amount is received in advance but thai is not the case as far as the question issuance of bank guarantees is concerned where the commission is received and becomes the income of the appellant bank soon on the date when such guarantees are issued. No further service are pending for being rendered as far as the client is concerned and what remains is only the likely obligation under such guarantee in case such contingency happens on invocation of such guarantees by the beneficiary. However, such obligation cannot be terms as "service" provided by the appellant but it is only part of its underta....
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....wed and accepted in the past and there is no refund clause as noted above. 7.3.6 Regarding the contention that the guarantee transaction does not get concluded or completed upon the signing of guarantee deed and it may be involving risk where the guarantee is invoked by the beneficiary, as already discussed above, there is no services to be rendered to the client from whom commission is received by the appellant and in the eventuality of invocation of guarantee , such payment by the appellant bank may be the expenditure of loss but that does not entitle the appellant to reduce the commission on the ground of likely hood of such contingency. It is not the case of any product being sold with a warranty where in there may be scientific method of calculating risk based on past history and the provision thereof may be permitted as deduction when made based on such scientific analysis. In the case of a bank guarantee there may not be invocation for several years or might be such invocation in any particular year which is quite contingent and such risk cannot be calculated as can be done in case of a sale of manufactured product. Bank guarantee is a service and not sale of produc....
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....tant case. The moot question is that is there any justification which may permit the change in the accounting policy once the concept of accrual is considered and guarantee commission is held to have accrued when the guarantee is issued. 7.3 8 As regards the contention that change in method is merely a timing difference and reliance on the decisions in the case of Nagri Mills Limited 33 ITR 681 and Excel Industries Limited relied upon by the appellant, the decision of the Nagri Mills was pertaining to deduction of bonus and year of allowability. In the case of Excel Industries Limited again, the Supreme Court was concerned with question of value of benefit in respect of benefit of duty on advance license pass book and issue was whether there can be brought to tax any hypothetical income which has not accrued ? The Court on the contrary held that income "accrues" when the same is due and right to receive the same gets vested in the assessee. In the instant case, not only the right to receives the bank guarantee commission is due and gets vested in the appellant but the same is also received when the guarantee is issued .It is settled legal position that a decision in a case....
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.... duty is only to either return the security in the shape cf FDRs to its customer as such at the end of the guarantee period, if all goes well, or to appropriate the security in discharge of obligation of the customer to the third party, in case of default. Ordinarily the guarantee commission, once received, is not returnable even if the customer revokes the guarantee prior to the prescribed period. In such a case, the income accrues at the time when the guarantee is given irrespective of the duration of the guarantee period. The right to receive the commission arises in favour of the bank at the moment of giving guarantee. Not only the right to receive the income becomes absolute and gets vested into it at the time of giving guarantee, the amount of commission is also received there and then. It is beyond our comprehension as to how it can toe linked with the period for which the guarantee runs, it is just like a doctor charging fee for giving prescription to a chronic patient for six months and the period of three months falling in this year and the remaining three months in the next year. Can it be said that the fee of the doctor, for giving the prescription, has not entirely acc....
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....here was any clause in the agreement or there was some other material obliging the bank to refund the part of the guarantee commission in case it is earlier revoked." 7.3. Win view of the above, (he contentions of the appellant cannot be accepted. The plea that a right always remain with customer to recall the payment for the debt of unexpired period and that it can be enforced by the Ombudsman Office or regulatory authority is not supported by evidence on record and are merely empty arguments as no such eventuality has been brought on record to have happened in the year under consideration and even if it happens, the payment or expenditure ultimately borne by the appellant can be claimed as the expenditure. However, this is not the issue for consideration in this appeal. On totality of facts and the legal position discussed above, the ground raised by the appellant is_reiected. The addition_of Rs. 136.42 Croresjrtade by the AO is confirmed and appeal of the appellant on this ground_ is dismissed. However, if the appellant has shown the part of such commission in the later year, the relief can be claimed by the appellant as per legal remedy available to it as the same inco....
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.... on furnishing the bank guarantee on upfront basis. In other words whenever any bank guarantee is furnished by the bank, it has recognised the commission income qua such bank guarantee in the year in which it was furnished. However, the assessee from the year under consideration has changed its policy of recognising the commission income qua to such bank guarantee by recognising the same on a pro rata basis. For instance, if the assessee has issued bank guarantee for 2 years beginning from 1 April 2010 till 31 March 2012, then the assessee recognise the commission income in two financial years i.e. FY 2010-11 and 2011-12. The assessee for such change in the policy has justified by furnishing the note in the financial statements which is reproduced as under: Change in recognition of bank Guarantee commission income During the current financial year, the bank has changed its policy to recognize commission income on guarantees issue by it. Against the earlier practice of recognizing the commission income on guarantees upfront when due (except in the case of deferred payment guarantees), the Bank now recognizes the income on a pro-rata basis over the period of the gua....
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....ee is exposed to the risk in different financial years, therefore in our considered view the same should relate to the periods where the assessee has undertaken the risk. 20.3 As per the accounting standard 9 issued by the ICAI, the fees earned by the bank on furnishing the bank guarantee which is carrying continuing obligations over the guarantee period should be recognised over the period of bank guarantee. 20.4 In the given facts, we find that the assessee has issued a refund to the Reliance Power Ltd on account of cancellation of bank guarantee furnished by it. The details of the same is placed on page 274 of the paper book. Likewise it is also seen that the assessee has issued a bank guarantee to a company known as Farsight securities Ltd dated 24 January 2011 for a period of 12 months. The period of 12 months is falling in two different financial years. Accordingly, the exposure of the assessee to the risk on such guarantee is relating to different financial years i.e. Financial Year 2011-12 and 2012-13. This fact can be verified from the details available on pages 275 to 277 of the paper book. 20.5 We also draw support and guidance from the judgmen....
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.... principle in the case of Calcutta Co. Ltd. (supra), it could only be treated as advance, otherwise it would lead to an anomalous situation, highly derogatory to the assessee, which is not intended by law, viz., even when for the very amount received, expenses were to be deducted to arrive at the net income and those expenses were yet to be incurred (which would be incurred in the next financial year), the entire receipts would be income which would be exigible to much higher tax. [Para 15] 20.7 It is also important to note that the assessee is paying the taxes at the maximum marginal rate and there is no allegation by the Revenue that the income of the assessee by changing the accounting policy has not been offered to tax. In other words the income of 1 year has been postponed to the another year in the manner and for the reasons as discussed above. In view of the above and after considering the facts in totality, we set aside the finding of the ld. CIT-A and direct the AO to delete the addition made by the AO. Hence, the ground of appeal of the assessee is allowed. 18.1 At the time of hearing, the ld. DR has not brought anything contrary to the above finding of the IT....
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.... of section 43D of the income tax Act, 1981. The AO has held that there is difference between Rule 6EA prescribed under the authority of law and the Guidelines of the RBI. The RBI guidelines provides that if irregularities in the advances account is noticed for a period of three months then the interest income thereon need not be accounted for. However, the rule 6EA provides that in case of sticky advances, the period of such non recovery or irregularity shall be six months(180days). The AO observed that RBI guidelines may be binding as prudent norms of accounting but so far as the provisions of the Income tax Act are concerned, they must be preferred in preference to the accounting or prudency norms. 8.3.1 The appellant has reiterated the contentions raised during assessment proceedings It is also contended that section 43D is a beneficial provision and should be read so as to promote substantive provision of the Act. Arguments have been made regarding necessity of following RBI guidelines and AS-9. It is further contended that intention of section 43D is not to supersede expressly or impliedly applicability of RBI guidelines or mandatory AS-9. It is also contended that d....
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.... they are revised. The purpose of classification of debts as bad and doubtful by the NHB and the purpose of not recognising interest income for the purposes of the Act, are different. The considerations that weigh with the relevant authorities are also different Therefore it cannot be said that the rule making authority under the Act has to automatically follow the guidelines of NHB as they exist from time to time, in that views of the matter, we cannot agree with the submission of the learned counsel for the Assessee, that the guidelines issued by the NHB, has to be read as part of Sec.43D of the Act. Wo cannot also agree that the expression "Having regard to" used in Sec.43D of the Act, means that the rule making authority should amend the rules as and when the guidelines of NHB are revised or that we have to read the guidelines of NHB as part ofSec.43D of the Act." In view of above clear position and (he same being directly on the issue in the present case whether Rule 6EA will prevail over RBI guidelines which is not the issue considered in the cases relied upon by appellant, I am inclined to agree with the decision of the AO that the difference in income of Rs.11,16,7....
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....13 and if the deduction is not allowed, it would tantamount to double taxation, (Refer RP no. 52 of PBI). The AO's contention is that Bank has filed appeal against such disallowance and hence to protect revenue loss for possible double deduction, this claim can be considered only when the issue is settled in appeal. Tile AO is directed to examine the same issue and in case this is a case of income taxed twice, suitable relief to be given to assesses. Assessee will factor in the relief while claiming deduction on the issue when the same is decided." 5.4. Considering above factual position and the legal position directly dealt with after considering the various judgments and circulars relied upon by the appellant ad as the issue and facts remains same this year identical to the issue involved in AY 2013-14 & 2014-15 as decided by my predecessor for that year and following the above mentioned order, disallowance of Rs. 40,56,87,0467- made by the AO is confirmed. 22. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 23. The learned AR before us reiterated the submissions made before the authorities below. 24. On the other han....
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....wability of deduction towards 'Provision for NPA'. We find that the same decision clearly stated that the interest income on NPA accounts should not be recognized on accrual basis which is in line with RBI prudential norms for income recognition. This fine distinction has been duly considered in the decision of the Hon'ble Delhi High Court in the case of Vasisth Chay Vyapar Ltd. (supra). When the account becoming NPA is not disputed by the revenue, the recognition of income is to be done only on receipt basis which is in consonance with the real income theory. In these circumstances and respectfully following the decisions of Hon'ble Delhi High Court in and various other decisions referred to supra, we hold that the interest income on NPA accounts should not be assessed on mercantile basis and the same is to be taxed only on receipt basis. Accordingly, the grounds raised by the assessee are allowed." 36.2 We also find that Hon'ble Jurisdiction High Court in case of Pr. CIT vs. Shri Mahila Sewa Sahakari Bank Ltd reported in [2016] 72 taxmann.com 117 (Gujarat) in similar facts held as under: 20. Section 45Q finds place in Chapter IIIB of the RBI Act.....
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.... of Chartered Accountants of India. These deviations prevail over certain provisions of the Companies Act, 1956 to protect the depositors in the context of income recognition and presentation of the assets and provisions created against them. Thus, the P&L account prepared by NBFC in terms of the RBI Directions, 1998 does not recognise "income from NPA" and, therefore, directs a provision to be made in that regard and hence an "add back". It is important to note that "add back" is there only in the case of provisions." [Emphasis supplied] 22. Therefore, in terms of the above decision, where an assessee makes provision for NPA and seeks deduction of such amount under section 36(1)(vii) or section 37 of the Act, then in the computation of income, the RBI Guidelines would have no role to play, and hence, an add back. Insofar as income recognition is concerned, the Supreme Court has held thus: "Applicability of Section 145 57. At the outset, we may state that in essence the RBI Directions, 1998 are prudential/provisioning norms issued by RBI under Chapter III-B of the RBI Act, 1934. These norms deal essentially with income recognition. They force the....
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.... 24. The Delhi High Court in Vasisth Chay Vyapar Ltd., (supra), has in the context of a similar issue arising in the case of a non-banking financial company has held thus: "17. In this scenario, we have to examine the strength in the submission of learned counsel for the Revenue that whether it can still be held that income in the form of interest though not received had still accrued to the assessee under the provisions of Income-tax Act and was, therefore, exigible to tax. Our answer is in the negative and we give the following reasons in support:- (1) First of all we would discuss the matter in the light of the provisions of Income-tax Act and to examine as to whether in the given circumstances, interest income has accrued to the assessee. It is stated at the cost of repetition that admitted position is that the assessee had not received any interest on the said ICD placed with Shaw Wallace since the assessment year 1996-97 as it had become NPAs in accordance with the Prudential norms which was entered in the books of accounts as ITA 139/2008,ITA 466/2008, ITA 537/2008,ITA 408/2003 well. The assessee has further successfully demonstrated that even in the....
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.... the mercantile system of accounting). The dispute before the Apex court centered around deductibility of provision for NPA. After analyzing the provisions of the RBI Act, their Lordships of the Apex Court observed that insofar as the permissible deductions or exclusions under the Act are concerned, the same are admissible only if such deductions/exclusions satisfy the relevant conditions stipulated therefor under the Act. To that extent, it was observed that the Prudential Norms do not override the provisions of the Act. However, the Apex Court made a distinction with regard to "Income Recognition" and held that income had to be recognized in terms of the Prudential Norms, even though the same deviated from mercantile system of accounting and/or section 145 of the Income-tax Act. It can be said, therefore, that the Apex Court approved the 'real income' theory which is engrained in the Prudential Norms for recognition of revenue by NBFC." 25. The distinction drawn by the Delhi High Court is that while the accounting policies of adopted by the NBFC cannot determine the taxable income. However, insofar as income recognition is concerned, the Assessing Officer has to ....
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.... the same deduction will be reduced in the later years. In effect, there will not be any impact on the taxable income of the assessee over the lease period. 27.2 However, the AO disagreed with the contention of the assessee by observing that the expenses to the assessee has to be allowed on accrual basis. But the assessee is claiming the amount of lease expenses which has not been due for payment in the year under consideration by reviewing its method of accounting as per AS 19 issued by the ICAI. Furthermore, the expenses which will be claimed by the assessee in the profit and loss account will not match with the corresponding income to be shown by the lesser/recipient in his books of accounts which will certainly distort the principle of income recognition under the Act. The assessee by claiming the lease expenses on straight-line method is charging notional expenses which are contingent in nature and depends upon the continuation of lease agreement. In the event the lease agreement is cancelled, the assessee would have already claimed those expenses which have not been incurred. Simultaneously, the income in the hands of the recipient will never be brought to tax. 27.3 The....
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....sdictional Bombay HC (jurisdictional at the relevant time) in the case of CIT vs. Nagri Mills Co. Ltd (33 ITR 681) which has advocated a pragmatic approach in such matters. The appellant has also cited various decisions in support to his claim. 6.3.1 Having carefully considered the observations of the AO and the submissions made, identical issue was there in the appellant's own case for A.Y. 2013-14 & 2014-15. For that year the undersigned had decided the issue as mentioned hereunder- "I find that issue pertains to claim of additional expenditure on account of revision of lease operating expenses. The appellant revised the estimate of lease term in case of assets taken on operating lease to include secondary period of lease. A primary lease is generally non-cancellable while a secondary lease is normally cancellable. Under the provisions of the Income tax Act, in case of mercantile method adopted, the liability which is ascertained is deductible though it may have to be discharged in future. However, any liability which is not presently ascertained but contingent is not deductible as expenses of the current year. The appellant tried to explain the situation wi....
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....thout any change of facts or circumstances are unwarranted. The appellant itself violated the principle of consistency without any reason. Keeping in view the facts of the case, reasons given for making additions, appellant's submission and the discussion above, it is found that the additions made by the AO are justified. Hence, these are confirmed. This ground of appeal is dismissed." 6.3.2 As the issue and facts remains same this year identical to the issue involved in AY 2013-14 & 2014-15 as decided by the undersigned for those years and following the above mentioned order, disallowance of Rs.16,68,71,547/- made by the AO is confirmed. This ground of appeal is dismissed. 29. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 30. The AR before us reiterated the submission made before the authorities below whereas on the other learned DR relied on the order of lower authorities. 31. We have heard the rival contention of both the parties and perused the material available on records. At the outset we note identical issue was before us in own case of the assessee for A.Y. 2011-12 bearing ITA No. 2176/Ahd/2016 where....
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....extinct does not make it a contingent liability. (4) A trader computing his taxable income is entitled to deduct payments actually made to his employees as well as the present value of any payments to be made in a subsequent year, if it can be satisfactorily estimated. 41.3 From the above, it is transpired that the liabilities which have accrued, the assessee can claim the deduction thereof. Admittedly, the deduction claimed by the assessee in the year under consideration considering the increament clause in the lease deed over the lease period has not been accrued to the assessee. As per the lease agreement, the liability arises to the assessee for its payment with respect to the increase rent in the later years. Thus in our considered view. Such amount cannot be treated as accrued liability. 41.4 We are also conscious to the fact that there will not be any impact on the Revenue if the assessee claims the deduction of the lease rental on straight-line method. It is for the reason that the assessee in the initial years will claim the deduction at the higher value but at the same time it will claim the deduction of the lease rent at the lesser value in the....
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....f appeal for the AY 2013-14 are identical to the issues raised by the assessee in ITA No. 311/AHD/2016 for the assessment year 2010-11. Therefore, the findings given in ITA No. 311/AHD/2016 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the assessee for the assessment 2010-11 has been decided by us vide paragraph Nos. 25 to 25.2 of this order in favoure the assessee for statistical purposes. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2010-11 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the assessee is allowed for statistical purposes. 34. The learned DR at the time hearing did not object on the plea of the learned AR for setting aside the issue to the file of the AO. Thus after hearing both the parties we hereby set aside the issue to the file of the AO for fresh adjudication as per the provision of the law. Hence the ground of the assessee is hereby allowed for statistical purposes. 35. The assessee in the additional grounds of appeal has sought the deduction on account of education, secondary and higher education ce....
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.... be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 37.2 Since the claim of the assessee is purely legal claim and entire facts are available on record. Thus it is not justified in not admitting the purely legal ground raised by the assessee for the first time. As the assessee has not claimed deduction of education cess and secondary higher education cess before the lower authorities, they have not got opportunity to examine the same as per the provisions of Act, thus In the interest of justice, these grounds are restored back to the file of the Assessing Officer with a direction to examine assessee's eligibility to claim of deduction of the items raised in the additional grounds of appeal de novo/ afresh after providing an opportunity of being heard to the assessee. Thus the additional grounds of appeal raised by the assessee are allowed for statistical purposes. 38. In the result, the appe....
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....o not match with the income of the current year. II. There was no detail available suggesting that the expenses were crystallized in the year under consideration. III. The assessee is maintaining mercantile system of accounting which requires to claim the expenses in the year in which such expenses were accrued. 39.1 In view of the above the AO disallowed the same and added to the total income of the assessee. 40. Aggrieved assessee preferred an appeal to the learned CIT (A) who deleted the addition made by the AO by observing as under: I have carefully considered the submissions of the appellant and (he assessment order. The identical issue was them in the appellant's own case in AY ','() 13-14 and A. Y. 2014-15, which was decided by the undersigned as under: - "6.2. Identical issue came up in appellant's own case for A.Y. 2008-09. Vide order did.01-12-2011 in appeal No.CIT(A)/AdiJI.CIT./R-1/247/10-11, my predecessor hold as under "6 3 I have considered the facts of She case; assessment order and appellant's written submission. On the identical facts, this issue i>as been decided by me in appeal order for asses....
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....year 2009-10 in ITA No. 2196/AHD/2014 by observing as under: 10. We now advert to the Revenue's appeal ITA No.2395/Ahd/2014 raising solitary substantive ground seeking to revive prior period expenditure disallowance of Rs.45,49,315/- made by the Assessing Officer qua annual technical fees paid to Infosys as deleted in lower appellate proceedings. There is no dispute that the issessee incurred the impugned expenditure in preceding assessment, year between July 2007 to March 2008. It however claimed that the above expenditure stood crystallized only in relevant previous year as it received corresponding bills in said period only. The Assessing Officer termed the same as violation of matching concept and lack of evidence indicating crystallization of impugned expenditure in relevant previous year lo invoke the disallowance in question. The C1T(A) in turn follows his findings in assessment year 2007-08 on identical issue in assessee's favour. 11. We have given our thoughtful consideration to rival submissions. The Revenue fails to rebut the fact that the assessee has already succeeded on this prior period expenditure disallowance issue in preceding assessment ....
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....ets despite being specific quarries raised. Thus in absence of documentary evidences, the assessee's contention of assets acquired out own interest free fund is devoid of any merit. Therefore, the AO concluded that the proportionate amount of interest on the fund deployed in such capital work-in-progress should be capitalized under the provisions of section 36 (1) (iii) of the Act. Accordingly, the AO worked out the proportionate amount of interest for Rs. 1,16,47,871/- and added to the total income of the assessee. 46. Aggrieved assessee preferred an appeal to the learned CIT (A) who deleted the addition made by the AO by observing as under: 7.5. / have gone through the facts end the submission of the appellant carefully. The A.O. has observed that on verification of the details furnished by the assessee it is; found that the assessee company has It is seen that the assessee has shown capital work in progress (including capital advances) amounting to Rs.101.26 crores at Schedule-10 of Balance Sheet. The assessee has incurred gross interest expenses of Rs.21,254/- crores. The assessee had aggregate Capital WIP of Rs. 10126 crores against total assets size of Rs.4,61,932....
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....d the Tribunal. The interest was deductible". As per Ahmedabad ITA T in the case of Swagat Infrastructure Limited (2013) .17 tnxmanii.com 83 (Ahd - Till)), it has been held that where the assesses had sufficient interest-free funds, it would be presumed that advances were made out of the same and no disallowance can be made out of interest expenses for A. Y. 2009-10. The Hon. ITAT also held that since at one hand, the Assessing Officer as well as Commissioner (Appeals) had given a finding that advances wore given out of interest bearing fund and at other hand it was observed that the assessee could not prove nexus between interest-free funds and advances, reasoning for disallowance was self-contradictory. Since the assessee had sufficient interest-free funds available for such advances, disallowance made was not justified. In case of the Bank, the learned AO held entire Capital WIP of Rs. 101.26 crores (including advance payment towards contracting purchase of fixed asset) as covered by proviso to section 36(1)(iii) of the Act holding that the onus is on the Bank to produce supporting evidence to prove that such Capital WIP were acquired out of its own funds and n....