TaxTMI 
TaxTMI 
2025 (3) TMI 32
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.... 2. That the learned CIT (Appeals) has further failed to appreciate the fact that the investments were made in past and that too out of surplus funds and internal accruals and as such there was no requirement or occasion to have computed disallowance on account of interest paid on borrowings as no investment was made out of borrowed funds and thus the disallowance so made should be deleted on this ground alone. 3. That further the said disallowance made by learned CIT (Appeals) is against the statutory provisions and various judicial pronouncements of Honble high Court of Delhi ie. jurisdictional high court, since there is no satisfaction recorded by learned AO and as such, disallowance so made is misconceived and misplaced in law and should be deleted. 4. That the learned CIT (Appeals) has erred in law and on facts in sustaining a disallowance of a sum of Rs. 87,71,616/- towards exemption u/s 10B and Rs. 1,96,985/- towards exemption u/s 10AA by not treating the other incomes [Misc Income, Compensation, Profit on Exchange Gain] earned from export activities as export turnover but treating the same as total turnover; 5. That the learned CIT (Appea....
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....rned CIT (Appeals) has grossly erred in sustaining the said disallowance of proportionate interest by ignoring the replies and evidences furnished by the assessee appellant and the learned CIT (Appeals) has sustained the said disallowance on irrelevant and extraneous considerations without there being any adverse material and evidence and purely on surmises and conjectures as such disallowance made is wholly untenable on facts and in law. 14. That the Assessee company reserves the right to add, alter, amend any / all grounds of appeal either before or at the time of hearing of the appeal." 3. Brief facts of the case are that the assessee company is engaged in the business of commercial printing and phototy presetting. The return of income for the year under appeal was filed on 30.09.2009 at a loss of Rs. 24,85,16,205/-. The case was taken up for scrutiny and assessment was completed u/s 143(3) on 26.12.2011 by making disallowance/ addition of Rs. 4,06,68,196/- and loss declared by the assessee was reduced to Rs. 20,78,48,010/-. Against this the assessee preferred an appeal before the ld CIT(A) who vide impugned order dated 31.01.2019 partly allowed the appeal of the ass....
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....t income yielding investment. Therefore, the dispute before the Tribunal is only in respect of disallowance u/s 14A on account of interest expenditure of Rs. 7,11,740/- On perusal of the balance sheet of the assessee, it is evident that the assessee was having more than Rs. 160 Crores of reserve and surplus as on 31.03.2010, which is many times more than the total investment made by the assessee in the shares. The Hon'ble Supreme Court in the latest judgment in the case of South Indian Bank vs CIT (supra) has reiterated the proposition that if the assessee is having mixed fund comprising of interest bearing and interest free funds then the investment in the shares and securities yielding tax free income will be considered out of interest free funds if the same are sufficient for making such investment. Even otherwise, the assessee has given the details of the secured and unsecured loan which were taken for the specific purpose and acquiring assets as well as business purposes of the assessee and therefore, the expenditure on account of interest cannot be held to be attributable for earning the dividend income. Accordingly, in the facts and circumstances of the case when the ass....
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....t and Rs. 1,96,985/- towards exemption u/s 10AA of the Act by not treating the other income (misc income, compensation, profit on exchange gain) earned from export activities. Besides the assessee has certain foreign exchange included in export sale which was not received by the assessee upto the stipulated date and the same was included in the turnover for claiming exempt income by the assessee. The AO has reduced the deductions claimed u/s 10B on such amount received later. 10. Before us the ld AR submits that this issues are squarely covered by the judgment of this Tribunal in the case of assessee for AY 2007-08 in ITA No. 5793/Del/2010 and such order was followed by the Tribunal further in Assessee's won case for AY 2010-11 to 2012-13 in ITA No. 4306 to 4308/Del/2017 wherein, vide order dated 14.10.2021 the bench has observed as under:- "15. We have considered the rival submissions as well a material available on record. At the outset, we noted that this Tribunal in assessee's own case for the AY 2007-08 in ITA No.5793/Del/2010 vide order dated 20.11.2018 considered an identical issue in paras 3 to 6 as under:- "3.0 At the outset, the Ld. Authorised Rep....
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....ion to deny such claim in the instant year where it is not in dispute that nature of income was same as was in the preceding years. 4.0 In response, the Ld. Sr. DR placed reliance on the orders of the authorities below, but could not rebut the fact that the department had accepted that miscellaneous income and compensation was part of income for the purpose of computation of eligible profit u/s 10B of the Act. 5.0 On a query from the Bench, both the parties had no objection if the issue was restored to the file of the AO for allowing the claim of the assessee after due verification. 6.0 Having heard both the parties and in view of the undisputed fact that the Revenue had accepted miscellaneous income and compensation as part of the eligible profits for the purpose of computation of claim u/s 10B of the Act coupled with the concurrence of both the parties for the issue being restored to the file of the AO for verification, we restore the issue to the file of the AO with a direction to allow the claim of the assessee after due verification and also after duly appreciating the fact that similar income/s had been held to be includible in eligible profits in t....
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....efore, by respectfully following the decision of the Tribunal, we direct the ld AO accordingly. As a result, this ground of appeal are allowed for statistical purposes as per the direction given herein above. 13. Ground Nos. 7 and 8 are in respect of bad debts of Rs. 1,23,11,728/- disallowed by the AO and such disallowance was confirmed by the ld CIT(A). 14. In this regard the ld AR submit that during the year under appeal the assessee in its Profit and Loss Account had claimed bad debts written off of Rs. 12,27,174/- and further claim for provision for doubtful debts of Rs. 3,05,74,218/-. The necessary reconciliation of provision for bad debts wherein, the current year's provision is added back to the opening provision and thereafter a sum of Rs. 1,23,11,728/- written off during the year were claimed against the gross value of provisions made. This working is available at pages 85 to 93 of the Paper Book filed by the assessee before us. The ld AR submits that provision made towards bad and doubtful debts for the year under appeal was claimed in Profit and Loss Account and written off amount of Rs. 1,23,11,728/- was claimed out of such provisions. However, an amount of provis....
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....nt observation of the Tribunal is as under:- "23. We have considered the rival submissions as well a material available on record. At the outset, we note that the Assessing Officer has the made disallowance Rs. 1,15,64,807/- u/s 40(a)(i) of the Act for want of TDS as well as the explanation of the assessee. The Ld. CIT(A) has granted part relief to the assessee in respect of expenditure incurred for bank charges, spares parts and general charges. The rest of the disallowance to the extent of Rs. 62,71,694/- was confirmed by the Ld. CIT(A) on the ground that the assessee has not able to substantiate its claim of non- taxability of these amounts in the hands of the recipient by producing supporting relevant details as to the residential status of the payee and the relevant provisions of DTAA. We find even before the Tribunal, the assessee has not produced the relevant details of the residential status as well as the respective DTAA between India-UK and India-USA. Though, it is contended by the assessee that in view of the Article-7 of the DTAA, the income is not taxable in India in the hands of the recipient however, nothing has been brought on record to point out how the in....
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....e the issue to the record of the Assessing Officer for verification of the facts regarding purpose of taking secured and unsecured loans and also to verify the details whether any part of the loans was utilized by the assessee in respect of the expenditure forming part of the capital work in progress. The Assessing Officer then decide the issue after giving an opportunity of hearing to the assessee." 21. Accordingly, by respectfully following the direction given by the Tribunal in earlier years, we set aside this issue to the file of the AO for necessary verification as directed hereinabove. 22. As a result, ground Nos. 12 to 13 are allowed for statistical purposes. 23. In the result, the appeal of the assessee is partly allowed. ITA No. 2737/Del/2019 for AY 2014-15 24. In appeal for AY 2014-15, there are three effective grounds taken by the assessee. 25. Ground Nos. 1 and 2 raised by the assessee are in relation to disallowance u/s 14A and disallowance of exemption u/s 10AA which are similar to the grounds taken for AY 2009-10 decided herein above in assessee's appeal. By following the same observation made the ground Nos. 1 and 2 are partly allowed for statistic....