TaxTMI 
TaxTMI 
2024 (11) TMI 1253
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....duly considered in light of Rule 18(6) of ITAT Rules, 1963. 5. Briefly stated the facts of the case are that the assessee is engaged in banking operations and related activities. During the year the assessee offered interest income from loans and advances, dividends, interest on debentures, leasing, securities, deposits and advances, commission and fee, profit on sales of investment, interest and commitment charges on loan funds including the rupee loans and foreign currency loans etc. 6. The assessee filed its original return of income on 30/11/2006, declaring total income of Rs. 19,20,02,74,940/-. The return was revised on 29/03/2008 at Rs. 16,99,85,16,660/- which included short term capital gain of Rs. 1,01,78,11,054/-. Income u/s 115JB of the Act was computed at Rs. 25,99,34,31,825/-. 6.1. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. The assessment order was framed u/s 143(3) of the Act vide order dated 26/12/2008 wherein income was assessed at Rs. 31,48,60,89,143/- and book profit u/s 115JB of the Act was computed at Rs. 2,60,62,38,140/-. 6.2. The assessment was challenged before the ld.....
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.... given in AY 2004-05. 9. Before us, the ld. Counsel for the assessee reiterated what has been stated before the lower authorities. The ld. D/R strongly supported the findings of the AO. 10. We have given a thoughtful consideration to the orders of the authorities below. We have carefully perused the orders of the Coordinate Bench for AY 2004-05 and 2005-06 in ITA No. 5276/Mum/2013, ITA No. 3841/Mum/2013, ITA No. 6217/Mum/2013 & ITA No. 6137/Mum/2008. We find that on identical set of facts, the Co-ordinate Bench has allowed the exemption claimed u/s 10(23G) of the Act along with the disallowance u/s 14A of the Act. The relevant findings read as under:- "66. The first issue, as raised in ground no.1 by the Revenue corresponding to ground no.2 raised by the assessee relates to computation of income claimed as exempt under section 10(23G) of the Act. 67. Brief facts are, during the assessment proceedings, the Assessing Officer while examining the assessee's claim of exemption under section 10(23G) of the Act in respect of income derived from investment in infrastructure capital fund was of the view that the assessee being engaged in the business of banking i....
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....siness of infrastructure development. Accordingly, assessee fulfills the condition for claiming exemption under section 10(23G) of the Act. In this context, he also relied upon the decision of the Tribunal, Amritsar Bench, in Jammu & Kashmir Bank v/s ACIT, 114 TTJ 728. As far as disallowance of expenditure under section 14A of the Act for computing net exempt income under section 10(23G) of the Act, the learned Commissioner (Appeals) followed his orders in assessee's own case for preceding assessment years and directed the Assessing Officer to re-compute the disallowance under section 14A of the Act. 69. The learned Authorised Representative submitted before us, the assessee having fulfilled the conditions of infrastructure capital company is eligible for exemption under section 10(23G) of the Act. As far as the disallowance of expenditure under section 14A of the Act, the learned Authorised Representative relied upon the decisions of the Tribunal in assessee's own case for preceding assessment years. 70. Learned Departmental Representative supporting the observations of the Assessing Officer submitted that the provisions contained under section 10(23G) of....
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....fference in fact, a departure cannot be made in the impugned assessment year for disallowing assessee's claim under section 10(23G) of the Act by questioning its eligibility. Therefore, we uphold the order of the learned Commissioner (Appeals) on the first issue. 72. Insofar as the second issue regarding quantum of disallowance under section 14A of the Act is concerned, following our decision while deciding similar issue raised in the cross appeals for assessment year 2004-05 in the earlier part of the order vide Para-6 & 7, we restore the issue to the Assessing Officer for deciding afresh in terms of our directions given therein." 11. Proceeding further, the AO noticed that the assessee has claimed exempt income u/s 10(15) of the Act amounting to Rs. 1,90,40,373/- and u/s 10(34) and 10(35) aggregating to Rs. 3,18,29,95,827/-. The AO found that the assessee has not apportioned any expenses and administrative expenses @ 1% of the gross dividend and interest as according to the assessee the investments have been made out of cost free funds. 11.1. The contention of the assessee did not find favour with the AO who was of the opinion that the exemption available u/s 1....
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....rest free own funds, the disallowance made by the AO should be upheld. 13. We have given a thoughtful consideration to the orders of the authorities below. The contention of the assessee that it has more than sufficient interest free funds available for making the investments, can be understood from the following chart:- Particulars Mar - 06 (Amt in Rs. ) A Own funds i) Share Capital 12,39,83,45,323 ii) Reserves & Surplus 2,13,16,15,71,726 iii) Current Account Deposits 1,65,73,48,12,887 Total 3,91,29,47,29,936 B Investment earning tax free income i) Shares (equity and preference) 20,57,85,21,723 ii) Subsidiaries and/or Joint ventures 16,69,16,97,742 iii) Others (venture cap units & mutual funds) 59,69,40,99,282 Total 96,96,43,18,747 13.1. It can be seen from the above chart that the assessee has sufficient interest free funds available with it for making the impugned investment. Therefore, the ratio laid down by the Hon'ble Jurisdictional High Court of Bombay in the case of....
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.... where there is finding of fact that interest free funds available to assessee were sufficient to meet its investment it will be presumed that investments were made from such interest free funds. 19. In HDFC Bank Ltd. Vs. Deputy Commissioner of Income Tax4, the assessee was a Scheduled Bank and the issue therein also pertained to disallowance under Section 14A. In this case, the Bombay High Court even while remanding the case back to Tribunal for adjudicating afresh observed (relying on its own previous judgment in same assessee's case for a different Assessment Year) that, if assessee possesses sufficient interest free funds as against investment in tax free securities then, there is a presumption that investment which has been made in tax free securities, has come out of interest free funds available with assessee. In such situation Section 14A of the Act would not be applicable. Similar views have been expressed by other High Courts in CIT Vs. Suzlon Energy Ltd.5, CIT Vs. Microlabs Ltd.6 and CIT Vs. Max India Ltd.7 Mr. S Ganesh the learned Senior Counsel while citing these cases from the High Courts have further pointed out that those judgments have attained finality. O....
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....laim of depreciation. After considering the facts and submissions, the ld. CIT(A) observed that the AO has disallowed depreciation on leased assets relying upon the view taken in earlier AYs. The ld. CIT(A) found that the Tribunal in assessee's own case has allowed the claim of depreciation for AY 1995-96 in 115 ITD 25 for A.Y. 1995-96. Following the precedents and also drawing support from the decisions of the Hon'ble Delhi High Court in the case of Cosmos Films (338 ITR 266) and further following the order of his predecessor for AY 2005-06, directed the AO to allow the depreciation on leased assets. 17. Before us, the ld. D/R strongly supported the findings of the AO but could not bring any distinguishing decisions in favour of the revenue. Per contra, the ld. Counsel for the assessee reiterated the claim and placed strong reliance on the decision of the Tribunal in assessee's own case for AY 2004-05 and 2005-06 in ITA No. 5276/Mum/2013, ITA No. 3841/Mum/2013, ITA No. 6217/Mum/2013 & ITA No. 6137/Mum/2008. 18. We have carefully considered the orders of the authorities below. We find force in the claim of the assessee. The Co-ordinate Bench in AY 2004-05 has considered a ....
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..... United Provinces Electric Co. {110 Taxman 134}. The assessee further pointed out that the ld. CIT(A) in AY 1995-96, 1998-99 and 1999-2000, has also held that only actual recoveries have to be taxed. 21.1.1. The reply of the assessee did not find any favour with the AO, who was of the opinion that u/s 41(4) of the Act, the amount of bad debts allowed in earlier years and recovered during the year are taxed and accordingly added Rs. 48,06,63,927/-. 22. The assessee challenged the addition before the ld. CIT(A) and strongly contended that the assessee has claimed that the amount of Rs. 48,06,63,927/- being amounts written back and credited to the profit and loss account but for which no cash recovery is made, should not be taxed as per the provisions of Section 41(4) of the Act. 22.1. After considering the facts and submissions, the ld. CIT(A) found that identical issue was decided by the Tribunal in assessee's own case in ITA No. 8958/Bom/90 for AY 1987-88 and also by the ld. First Appellate Authority in AYs 1995-96, 1998-99 to 2004-05. Following the precedents, the ld. CIT(A) deleted the addition. 23. Before us, the ld. D/R strongly supported the findings of the AO. The l....
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....nsidering afresh with similar direction and only after reasonable opportunity of being heard to the assessee. Ground no.4, raised by the Revenue is allowed for statistical purposes." In light of above order of Tribunal, we restore this issue back to the file of Assessing Officer with similar directions. In the result, ground No.3 of appeal is allowed for statistical purposes." 25. Respectfully following the decision of the Co-ordinate Bench (supra), we direct accordingly. Ground No. 7 is allowed for statistical purposes. 26. Ground Nos. 8 & 9 relate to the claim of bad debts. 27. While scrutinising the return of income, the AO found that the assessee has written off and claimed an amount of Rs. 10,10,60,00,277/- as bad and doubtful debts. This claim was revised vide letter dated 12/11/2008 to Rs. 8,79,08,01,208/- and after adjusting the credit balance of Rs. 81,16,87,940/- in the provision for bad and doubtful debts account for AY 2005-06, the assessee claimed Rs. 7,97,91,13,268/- as bad debts u/s 36(1)(vii) of the Act. The assessee was asked to file various details relevant to and in support of the claims on this account. A detailed questionnaire was served upon ....
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....ded that the bad debts written off by the assessee during the year under consideration, fulfil all the conditions laid down u/s 36(2) of the Act. It was explained that these debts represent money lent in the ordinary course of business of the assessee which have turned bad and hence written off. It was once again reiterated that deduction on account of bad debts has undergone substantial change after the amendment made in 1987 and have been explained by the CBDT in Circular No. 551 dated 23/01/1990 and the assessee has only to write off the debts in its books and need not establish that the debt has become bad in the said year of write off. Strong reliance was placed on the decision of the Hon'ble Bombay High Court in the case of DIT vs. Oman International bank reported in 313 ITR 128 which has confirmed the decision of the Special Bench of the Mumbai Tribunal which has held that after amendment of Section 36(1)(vii) w.e.f. 01/04/1989, it is not obligatory on part of the assessee to prove that the debt written off is bad and if the same is written off as irrecoverable in the accounts of the assessee, it will suffice for claiming it as bad debts. 30. Before us, the ld. D/R strong....
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....sessee could not recover the said amount, it wrote off the same as bad debt. The AO disallowed the claim on the ground that there was nothing on record to suggest that requirement of law, that bad debt was written off as irrecoverable in assessee's account for previous years have been satisfied. It was noted by the Hon'ble High Court that accounts of the assessee nowhere showed that the alleged advance was made in its ordinary course of business and since the assessee's claim was that amount so advanced was given to a developer for acquiring an immovable property and it was in the nature of capital expenditure and not business expenditure and, therefore, the claim was denied, whereas the facts of the case in hand show that being in the business of banking, the assessee had advanced/loaned/lent money in its ordinary course of business and this is not in dispute. Therefore, the write off in the books of accounts is sufficient for the claim. 32.1. Moreover, Section 36(2) of the Act provides as under:- (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply- (i) [no such deduction shall be allowed unless such debt or part th....
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.... above clearly shows that the claim of the assessee falls under Clause (i), wherein it has been specifically mentioned that debt represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee. In our considered opinion, the contention of the ld. D/R that the ratio laid down by the Hon'ble Supreme Court in the case of TRF Limited (supra) has been diluted by the Hon'ble Supreme Court in the case of Khyati Realtors Pvt. Ltd. (supra), is not a proper way of interpreting the judgment of the Hon'ble Supreme Court and since the ld. CIT(A) has rightly followed the decision of the Hon'ble Supreme Court (supra), we do not find any error or infirmity in the findings of the ld. CIT(A) which calls for any interference. Accordingly, Ground Nos. 8 & 9 are dismissed. 33. The next grievance relates to the claim of business loss and sales promotion expenses of Rs. 43,69,07,087/-. 33.1. The AO observed that the assessee vide revised return has claimed a business loss of Rs. 43,69,07,087/-. The assessee explained that the said loss was on account of disposal of non-banking assets, loss towards write off of discrepant notes and cash ba....
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....o. 11 relates to club membership fees which was disallowed by the AO amounting to Rs. 31,43,756/-. 37. The addition was challenged before the ld. CIT(A) and it was explained that the club membership fees expenses are incurred by the assessee so that its executives can establish and maintain business contacts which is in the long-term interest of the assessee's business. The ld. CIT(A) found that in the earlier AYs, the additions were deleted by the ld. CIT(A) following the decision of the Hon'ble Jurisdictional High Court of Bombay in the case of Otis Elevator Co. vs. CIT reported in 195 ITR 682 (Bom.) and CIT vs. Mercantile Bank reported in 237 ITR 676. Following the same, the ld. CIT(A) deleted the addition. 37.1. Before us, the ld. D/R could not bring any distinguishing decision in favour of the revenue. 38. We have carefully perused the orders of the authorities below. We find that a similar issue was considered by the Co-ordinate Bench in AY 2005-06 and 2004-05 (supra). The relevant finding read as under:- "56. We have heard rival contentions and perused the material available on record. The Hon'ble Supreme Court in United Glass Manufacturing Co. Ltd., Civil ....
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....ts and circumstances of the case and in law, the CIT(A) erred in confirming the Assessing Officer's view in not allowing the loss in investments made in South Asian Regional Apex Fund made vide revised computation filed during the course of assessment proceedings as the same was not made vide a revised return as held by the Hon'ble Supreme Court in the case of Goetze India Pvt Limited (284 ITR 323). [5] Without prejudice, the CIT(A) ought to have directed the Assessing Officer not to have taxed the short-term capital gain from investments made in the said fund. Charging of interest under section 234B and 234D of the Act [Para 16, page 28 of the CIT(A) order] [6] The CIT(A) erred on facts and in circumstances of the case and in law in not deleting the interest levied under section 234B and 234D of the Act and treating the same as consequential in nature. GENERAL [7] The Appellant craves leave and reserves its right to vary, amend, alter and/or add to the grounds of appeal and to produce such oral and documentary evidence and file such compilation of documents as may be necessary at the time of hearing of the appeal." 44. Ground No. 1, i....