TaxTMI 
TaxTMI 
2026 (5) TMI 1202
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..... 16,00,00,000/-. 3. The facts in brief are that, the assessee company had provided for diminution in value of investment held in wholly owned subsidiary company, M/s Ganges Valley Foods Pvt. Ltd. [in short 'GVFPL'] amounting to Rs. 16,00,00,000/- in the Profit & Loss Account. While filing the return of income, the assessee had disallowed and added back the said amount to the total income, which is verifiable from the computation of total income placed at Pages 1 to 5 of paper book. Later on, in the course of assessment, the assessee vide letter dated 09.12.2021 raised a fresh claim that the write-off of Rs. 16,00,00,000/- in relation to investment made in GVFPL was an allowable business loss, by relying on the decisions of the Hon'ble Bombay High Court in the case of CIT Vs Colgate Palmolive India Ltd (370 ITR 728) and Hon'ble Madras High Court in the case of CIT vs TIIC Ltd. (88 taxmann.com 528). The assessee also furnished a revised computation of income incorporating this additional claim vide rejoinder dated 30.03.2023. However, the ld. AO while dealing with this claim mistakenly observed that, the assessee had claimed the amount of Rs. 16,00,00,000/- in the return of incom....
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....se decisions establish that business loss need not necessarily arise from sale of asset; even write-off of irrecoverable business asset is allowable. In the present case, the appellant has provided detailed submissions showing that the subsidiary was set up exclusively to support its business operations. The investment was not made for earning capital appreciation but for business growth. Once the subsidiary's operations became unsustainable, the investment became commercially worthless. The erosion of net worth and closure of business operations are documented. The write-off thus represents a genuine commercial loss, incidental to business. The AO's view that a loss can arise only upon sale of shares is inconsistent with established legal principles. Business loss under section 28 is not confined to realized losses; it includes losses incidental to business such as write-off of irrecoverable business advances, investments made out of business expediency and assets that become commercially worthless. The judicial precedents cited by the appellant fully support this proposition. There is no allegation by the AO that the investment was bogus or unrelated to business. The onl....
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....in the return of income was computed after disallowing and adding back the impugned amount of Rs. 16,00,00,000/-. It is observed that, the ld. AO had started the computation of assessable income from the figure of total income of Rs. 18,30,80,75,012/- returned by the assessee (which included disallowance of Rs. 16,00,00,000/-) and thereafter again disallowed the impugned sum of Rs. 16,00,00,000/- taking the assessable income to Rs. 18,46,80,75,012/-. By doing so, the AO has disallowed the impugned sum once again, despite the same having already been added back by the assessee. In other word ordinarily speaking, when the ld. AO did not find merit in the additional claim raised by the assessee and had rejected the same, no variance was required to the total income. It is noted that, though the ld. CIT(A) had allowed this additional claim raised by the assessee but he failed to adjudicate the ground raised by the assessee separately objecting to the double addition made by the ld. AO. Having regard to the material placed before us, we are inclined to accept this claim of the assessee and direct the ld. AO to delete the impugned addition of Rs. 16,00,00,000/- made to the returned incom....
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....64,00,503 9. The assessee thus submitted that, the notional accrued broken period interest upto 31.03.2020 formed part of the capital gains on sale of debentures offered to tax in subsequent AY 2021-22 and therefore, if such sum is not excluded from the computation of business income for relevant AY 2020-21, then it would amount to taxing the same item of income twice viz., firstly by way of notional interest income in AY 2020-21 and secondly by way of realized capital gains in AY 2021-22. We note that that though the ld. AO acknowledged the impugned claim that the assessee had sold these debentures before the interest fell due in the subsequent year, according to him, the assessee ought to have been vigilant enough to exclude the broken period interest by revising the return of income. Relying upon the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd (284 ITR 323), the ld. AO rejected the claim as it was not made in the return of income. In the appellate proceedings, the ld. CIT(A) has simply directed the ld. AO to consider the impugned issue in accordance with law. 10. Heard both the parties. The first question for our consideration is, whether the ad....
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.... period 01.04.2020 upto the date of sale (before interest fell due) was similarly credited in P&L A/c in FY 2020-21. Since the assessee had sold the debentures in the same year before interest fell due, the assessee had excluded the same in the computation of income for AY 2021-22. It is seen that, the ld. AO vide show cause notice dated 15.12.2022 had required the assessee to explain as to why the broken period interest of Rs. 4,87,01,802/- relating to the debentures of Tata Capital Ltd sold during FY 2020-21 should not be taxed as income in AY 2021-22 which was vide reply dated 19.12.2022 explaining that, the broken period interest was notional in nature and therefore not taxable as income. It was also explained to the ld. AO that, the said broken period interest inter alia formed part of the sale consideration and the consequent capital gains offered to tax on account of these debentures as is seen in table above and therefore taxing the broken period interest would result in double addition. We find that, the assessment for AY 2021-22 was concluded u/s 143(3) of the Act vide order dated 27.12.2022 wherein the foregoing explanation regarding the exclusion of broken period intere....
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....ts in relation to the non-resident shareholders before any of the lower authorities and therefore unless all the facts were brought on record, the impugned claim cannot be entertained. 17. We have heard the rival submissions and perused the material placed before us. It is by now settled in law that, the assessee is permitted to raise fresh claim before the lower authorities, provided the relevant facts and details are already available on record. In the present case, we find that, though the assessee has raised the impugned claim that the dividend distribution of non-residents is to be charged as per rates provided in the agreement for avoidance of double taxation with the respective countries, but we find that, no specific details of the non-resident shareholders viz., their TRCs, no PE declarations, financials, details of income-tax filings in the respective foreign countries etc. have been placed on record. In absence of these factual details, whether at all the provisions of DTAA would apply in the instant case or not, is not verifiable. It is also required to be seen as to what accounting and tax treatment was meted out by the non-resident shareholders in their respective ....
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....ny other provisions of this Act and subject to the provisions of this section", stipulates that "in addition to the income-tax chargeable" in respect of the total income of a domestic company, for any assessment year, "any amount declared, distributed or paid" by such company by way of dividend (whether interim or otherwise), whether out of current or accumulated profits shall be charged to additional income-tax (referred to as tax on distributed profits) in the manner a provided in the said provision and more particularly Section 115-O(3), providing for "The principal officer of the domestic company and the company" shall be liable to pay the tax on distributed profits, to the credit of the Central Government within fourteen days from the date of declaration of any dividend, distribution of any dividend, payment of any dividend, whichever is earliest. Further, in our opinion the Division Bench of this Court in Godrej & Boyce Mfg. Co. Ltd. (supra), has categorically held that payment of tax by domestic company under Section 115-O(1) was an additional income-tax on profits declared, distributed or paid being, is a charge on a component of the profits of the company. Thus, it is the ....
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....vision Bench. Even in such case, the Division Bench of this Court has held that the tax under subsection (1) of Section 115-O of the IT Act is on the company's profits and more specifically on that part of the profits which is declared, distributed or paid by way of dividend. It was held that such charge is not on income by way of dividend in the shareholder's hands and hence the additional income-tax payable on profits of a domestic company under Section 115-O of the Act is not a tax on dividend. It was also held that thus the amount distributed or paid by way of dividend falls in the category of income, profits or gains derived. The following observations as made by the Division Bench are required to be noted, which read thus: .... 38. Thus, another Division Bench has given similar meaning and interpretation to Section 115-O, which has been completely overlooked by the Division Bench in deciding M/s. Colorcon Asia Pvt. Ltd. (supra) is Mr. Venkataraman's submission. We find much substance in the contentions as urged by Mr. Venkataraman. 39. In the aforesaid circumstances, we are of the clear view that there is a cleavage of opinion considering the view t....
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....re also partly allowed for statistical purposes. 23. In the result, the appeal in ITA No. 301/KOL/2026 is partly allowed for statistical purpose. ITA No. 303/KOL/2026 - AY 2021-22 24. The sole effective issue raised in this appeal relates to the initiation of penalty proceedings u/s 270A of the Act. 25. The ld. AR submitted that, there was no variation made by the AO to the total income earlier assessed u/s 143(1) of the Act and the total income assessed in the impugned order passed u/s 143(3) of the Act dated 27.12.2022 and therefore according to him, the purported quantum of under-reported income, as defined in Section 270A(10) stood at NIL. He brought to our notice that, the only variation made by the ld. AO was to the computation of long-term capital gains which was fully offset by the losses brought forward from the earlier years and thus there was no change in the final assessable income. According to him, the quantification of under-reporting of income did not envisage such a situation involving reduction of brought forward losses. According to him therefore, in absence of any under-reported income, as defined in Section 270A(10), the initiation of penalty procee....