TaxTMI 
TaxTMI 
2022 (7) TMI 1476
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....overnment undertakings. In this regard our attention was drawn to Assessing Officer to the following effect:- "during the year, the assessee had written of the bad debts in respect of the following sundry debtors, to the extent of Rs.31,41,61,877/-. S.No. Name of the party Amount (in Rs.) 1 AP Central Power distribution, Hyderabad 142489526 2 Tamilnadu Electricity Board, Chennai 129684161 3 Viswanath Projects Ltd. 2193868 4 Karnataka Power Transmission Corp Ltd, Bengaluru 13226192 5 Assam Power distribution Co. Ltd. 9256124 6 Eastern Power Distribution co Ltd., Visakapatnam 17312006 Total 31461877 3. The ld. AR had submitted that these are the six Government undertakings, and the assessee has furnished all the details before the lower authorities, which are required in accordance with section 36(1)(vii) of the Act, Our attention was drawn to reply given by the assessee, more particularly at page No.53 & 54 to the following effect "In continuation of the statement of facts, the appellant may be permitted to submit the following explanation: There are three effective grounds i....
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....he amount is accounted as part of the turnover in any year, the assessee cannot write off the same in a later year to claim the deduction of bad debt. Thus in accordance of provisions of sec. 32(2) I hold that addition of Rs.31,41,61,877/- is justified. Hence, ground No.4 is dismissed. 5. We have heard the rival contention of the parties and perused the material available on record. Section 36(1)(vii) of the Act provides as under :- (vii) subject to the provisions of sub-section (2), the amount of [any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year]: [Provided that in the case of [an assessee] to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause:] [Provided further that where the amount of such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof becomes irrecoverable or of an earl....
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.... assessee. Needless to say that the assessee shall produce all the documents in support of the claim at the first hearing and shall not take any undue adjournment in the matter. 6. The second issue raised before us pertains to 14A, in this regard, the ld. AR for the assessee had drawn our attention to paragraph 6.6 to 6.9 of the ld.CIT(A) order. "6.6 Thus, there may not be any exempted income this year, yet the expenditure incurred in pursuit of earning such income is deductible. I am of the view that similar proposition will apply while interpreting the aforesaid provision Contained in section 14A(1). Therefore, r am not in agreement with the ld. AR in respect this argument. Thus, where investment has been made in shares, which did not yield any dividend in the year under consideration, the expenditure incurred for earning the income is deductible notwithstanding the fact that no such income has been earned. Thus I am of the view that ratio of these cases will apply mutatis mutandis under sec. 14A of the Act also while ascertaining the expenditure incurred for earning tax-free income from investment [Technopak Advisors (P.) Ltd [2012) 50 SOT 31 (Delhi) para 3, Relaxo f....
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.... of the Act was introduced by the Finance Act, 200 1 with retrospective effect from 01.04. J 962. The purpose for introduction of section 14A with retrospective effect since inception of the Act was clarified vide Circular No. 14 of 200 1 as under: "Certain incomes are not includible while computing the total income, as these are exempt under various provisions of the Act. There have been cases where deductions have been claimed in respect of such exempt income. This in effect means that the tax incentive given by way of exemptions to certain categories of income is being used to reduce also the tax payable on the non-exempt income by debiting the expenses incurred to earn the exempt income against taxable income. This is against the basic principles of taxation whereby only the net income, i.e., gross income minus the expenditure, is taxed. On the same analogy, the exemption is also in respect of the net income. Expenses incurred can be allowed only to the extent they are relatable to the earning of taxable income". Thus, legislative intent is to allow only that expenditure which is relatable to earning of income and it therefore follows that the expenses which a....
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....n of Rule 8D, the language of the Rule is so clear that the disallowance is statutory as per the method and working given in the said Rule and the AO has no option but to follow the Rule. The third component of Rule 8D is an artificial figure - one half per cent of the average value of the investment, income from which does not or shall not form part of the total income, as appearing in the balance sheets of the assessee, on the first day and the last day of the previous year. I hold that the indirect expenses in the form of efforts made by the staff and management for managing such huge investments, which does not yield any taxable income, are to be disallowed. Accordingly, the provisions of Section 14A r. w.r. 8D(iii) correctly invoked. Thus I confirm the addition of Rs. 16,31,331/ - made by the AO. In the result, the appeal is dismissed." 7. It was submitted that he lower authorities have disallowed the expenditure to the extent of Rs. 16,31,331/- relying upon Rule 8D of the I.T.Act. 8. On the other hand the ld. DR for the revenue had drawn our attention to the recent decision of the Guwahati Bench in ITA No. 154 to 156/Gau/2019 & 159/Gau/2019 in the case Williamson Financ....
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....ction 14A reads as under:- [Expenditure incurred in relation to income not includible in total income. 14A. [(1)] [Notwithstanding anything to the contrary contained in this Act, for the purposes of] computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.] [(2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act :] [Provided that nothing contained ....