AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (5) TMI 1538
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....ed unless the conjunctive conditions, that assessment order passed is erroneous in law and prejudicial to the interests of the revenue, are satisfied. The Appellant prays that the impugned revision order dated March 21, 2025 be quashed for non-satisfaction of preconditions for invoking provisions of section 263 of the Act. 2. The Ld. PCIT, erred in revising the order and directing the Assessing officer ("Ld. AO") to make an addition of Rs. 27.90 crores on account of provision for doubtful debts. The Appellant prays that the Ld. AO be directed to allow deduction of provision of doubtful debts amounting to Rs. 27.90 crores 3. The Ld. PCIT, erred in revising the order and directing the Ld. AO to make an addition of Rs. 8.64 crores on account of tax on dividend received from specified foreign company u/s 115BBD of the Act without appreciating the fact that the Company has rightly claimed such amount as deduction under section 80M of the Act. The Appellant prays that the Ld. AO be directed to allow the deduction under section 80M of the Act of dividend received from specified foreign company. 4. The Ld. PCIT, erred in revising the order and directing the Ld. A....
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....tion conducted by him. Considering the submissions of the assessee, assessment was concluded accepting the returned income for the year. 3.1. Subsequently, ld. PCIT perused the records of the said assessment and noted that certain issues were not examined thoroughly by the ld. AO while passing the said assessment order. From the examinations of the records, ld. PCIT drew his consideration that the assessment order passed by the ld. AO is erroneous in so far as it is prejudicial to the interest of revenue on the following issues: i) Deduction of Provision for doubtful debts ii) Tax on dividend received from specified foreign company under section 115BBD iii) Deduction of festival and pooja expenses iv) Deduction of GST paid under protest under section 43B v) Claim of loss on account of GST credit reversal due to fire vi) Claim of exemption under section 54EC against Capital gains under section 50 3.2. By recording the observations on each of the above stated issues, ld. PCIT issued a show cause notice dated 24.01.2025, invoking the impugned revisionary proceedings. Assessee replied to the said show cause notice exhaustively....
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....ya Bank vs. CIT [2010] 323 ITR 166 (SC). Assessee also made disclosure in the notes to the statement of income. Relevant part of the said note is reproduced whereby it was stated that this claim was made from A.Y. 2010-11 in view of the decision in the case of Vijaya Bank (supra). Since A.Y. 2010-11, assessee has been continuously claiming deduction in this respect: "Until AY 2009-10, the company was not claiming deduction in respect of provision for doubtful debts debited to the profit and loss account. Subsequent to the Hon'ble Supreme Court decision in the case of Vijaya Bank Vs CIT [(2010) 323 ITR 166 SC] the company has started claiming deduction in respect of provision for doubtful debts from AY 2010-11. This practice is consistently followed from AY 2010-11" 4.2. Assessee also submitted that this claim has been allowed by the Coordinate Bench in assessee's own case for A.Y. 2016-17 to 2018-19 in ITA nos. 2700, 2697 and 2696/Mum/2023, dated 26.07.2024. 4.3. On the second issue, assessee had received dividend of Rs. 7.81 crore from domestic companies and an amount of Rs. 8.64 crores from its subsidiary i.e. Asian Paints (Nepal) Pvt Ltd. Assessee had distribu....
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....ch was not reimbursed by the insurance company in respect asset loss. For the loss of Rs. 1.86 crores in respect of GST, assessee submitted that it had reversed the GST credit claimed in its GST return. According to ld. PCIT, since documents submitted by the assessee could not substantiate the claim which led to an apprehension that whether right treatment was given by assessee or not. Ld. AO was directed to disallow the amount of Rs. 1.86 crores in this regard. 4.7. The last and 6th issue is in respect of claim of exemption u/s 54EC against capital gain u/s 50C which had arisen on account of sale of flats owned by the assessee on which depreciation had been claimed, year-on- year basis. The gain on sale of flat is deemed to be short term capital gain under the provisions of Sec. 50. Assessee claimed exemption of Rs. 50 lakhs u/s 50EC against the said gain by making investments in IRFC bonds. Facts relating to making of this investment are not in dispute. According to ld. PCIT, gain on sale of flats on which depreciation has been claimed, is classified as short term capital gain u/s 50. According to him, since Sec. 50EC applies only to long term capital gain, exemption claimed b....
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....nd hearing the assessee by directing the Assessing Officer for a fresh assessment or to make such enquiries as he/she deems necessary. 6.1. At this stage, before considering the multi-fold contentions of the ld. Counsel for the assessee, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the ld. PCIT taken u/s 263 of the Act. The coordinate bench of ITAT Mumbai in the case of Khatiza S. Oomerbhoy v. ITO, Mumbai reported in [2006] 101 TTJ 1095 (Mum) analysed in detail, various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) and has propounded the following broad principles to judge the action of CIT taken under section 263 - (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An inco....
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....ect application of law, or (iii) Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; [because AO has to discharge dual role of an investigator as well as that of an adjudicator) then in aforesaid any of the events, the order passed by the AO can be termed as erroneous order. 6.4. Looking at the second limb as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue, one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue" has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Off....
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....credit to the current liabilities and provisions' on the liabilities side of the balance-sheet, then it would constitute a provision for doubtful debt. In the latter case, the assessee would not be entitled to deduction after April 1, 1989.' Further, it has been held that coming to the second question, we may reiterate that it is not in dispute that Section 36(1)(vii) of 1961 Act applies both to Banking and Non-Banking businesses. The manner in which the write off is to be carried out has been explained hereinabove." (b) From the above, it is noted that Hon'ble Supreme Court mentions that Sec. 36(1)(vii) applied both to banking and non-banking businesses. It is pertinent to note that this issue is no longer res integra as already dealt by the Coordinate Bench in assessee's own case (supra). In this judicial pronouncement in assessee's own case, reliance was placed on the decision of Hon'ble Jurisdictional High Court of Bombay in the case of CIT v. Tainwala Chemicals & Plastics India Ltd. [2013] 215 Taxman 153. Relevant extracts from the decision of the Coordinate Bench (supra) are as under: "38. In ground Nos. IX & X, assessee has challenged the d....
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.... made provision for doubtful debt given to its group concern and had debited same to profit and loss account and correspondingly reduced assets by reducing amount of unsecured loans, doubtful debt qualified for deduction under section 36(1)(vii) following Vijaya Bank (supra). This judgment was not considered in the earlier AY 2015-16 ITAT order 41. Further, the Hon'ble Supreme Court in Vijaya Bank (supra) itself observed at Pg. 383 and Para 8 of LPB that 'it is not in dispute that section 36(1)(vii) of the Act applies both to the Banking and Non- Banking business'. Accordingly, it appears that the Tribunal in earlier year in assessee's own case inadvertently did not consider this observation. Further, decision of Tainwala (supra) rendered by Jurisdictional High Court was not cited and therefore not considered. 42. Further, decision of Vijaya Bank (supra) is in the context of section 11 5JB qua provision for doubtful debts also followed by Karnataka High Court in CIT v. Kirloskar Systems Ltd 220 Taxman I and Hon'ble Gujarat High Court in the case of CIT v. Vodafone Essar Gujarat Ltd [2017] 397 ITR 55 for doubtful debt while computing book profit....
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....part from that in sister concern, this Tribunal has decided this issue in favour of the assessee. 46. The ld. AO has added provision for doubtful debts to the book profit u/s. 115JB. However, under earlier provisions of u/s. 115JB any amount set aside for meeting liabilities, other were to be added back. The than ascertained liabilities Department used to add back provision of doubtful debt in said category. However, the Supreme Court in CIT v. HCL Comnet Systems & Services [2008] 174 Taxman 118 decided matter in favour of Assessee. Thereafter, the Act was amended and a provision for diminution in the value of the asset was categorically inserted vide Finance Act 2009 (i.e. under clause (i) However, even after such amendment, Jurisdictional HC in 8. "Whether, on Tainwala Chemicals above observed that the facts and circumstances of the case, the Tribunal was justified in upholding the decision of the CIT (A), in deleting the addition on account of provision for doubtful debts to the book profit under Section 115JB of the Act without appreciating that the disallowance / addition on account of diminution in the value of assets is mandatory in view of Explanation (I) to Sectio....
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....et) 9,811,988 9,811,988 AY 2014-15 Amount Reversed (net) (5,379,337) (5,379,337) AY 2015-16 Amount Provided (net) 15,937,353 15,937,353 AY 2016-17 Amount Reversed (net) (3,34,00,000) (3,34,00,000) AY 2017-18 Amount Provided (net) 2,50,33,341 2,50,33,341 AY 2018-19 Amount Provided (net) 4,84,42,460 4,84,42,460 AY 2019-20 Amount Provided (net) 4,42,74,892 4,42,74,892 (e) The reasoning given by the ld. PCIT on this issue is that department has filed appeal before the Hon'ble High Court against the said issue. It was submitted before us that there is no stay granted by the Hon'ble High Court on the decision of the Coordinate Bench. Respectively following, we find that this issue is squarely covered by the decision of Coordinate Bench and therefore, no adverse view is drawn against the assessee. ii. Tax on dividend u/s 115BBD, received from specified foreign company (a) According to ld. PCIT, dividend of Rs. 8.64 crores received by assessee from its foreign subsidiary i.e. Asian Paints (Nepal) Pvt Ltd should have b....
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....is given to "dividend" in clause (22) of section 2 but shall not include sub-clause (e) thereof; (ii) "specified foreign company" means a foreign company in which the Indian company holds twenty-six per cent or more in nominal value of the equity share capital of the company. (4) The provisions of this section shall not apply to any assessment year beginning on or after the 1st day of April, 2023.]" (d) From the reading of the above section, we note that in subsection (1), it mentions that where the total income of the assessee "includes" another income by way of dividend from a specified foreign company. In the present case before us, total income of the assessee does not include dividend received by it from Asian Paints (Nepal) Pvt Ltd as it already got deducted u/s 80M at gross total income level. Thus, dividend received by the assessee from its foreign subsidiary does not form part of its total income. Further, we not from sub-section (2), that it does not allow deduction in respect of any expenditure or allowance in computing in its income by way of dividend referred to in sub-section (1). Also, the non-obstante clause does not operate so as to deny ....
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....t 4,05,24,430 2 GST Payment made under protest 3,67,931 3 Rohtak Maintenance charges paid under protest 1,93,80,255 TOTAL (A) 6,02,72,616 4 Excise refund received (other than amnesty) (B) (4,04,756) Net Allowance (A-B) 5,98,67,860 (b) For items at serial no. 1 and 2, they relate to disputed sales tax and excise duty liability paid under protest which has been treated as balance sheet item and not debited to the profit and loss account by the assessee. Since these falls within the provisions of Sec. 43B being statutory payments, the same have been claimed as deduction while computing the total income. According to the assessee, for similar transactions when refund is received, the same is credited to the balance sheet and offered to tax, fact of which is evident from item at serial no. 4 towards excise refund. Thus, assessee has claimed deduction u/s 43B for statutory payments and at the same time, has offered it to tax when it received refunds. Item at serial no. 3 pertains to property maintenance charges paid under protest against land purchased from Haryana State I....
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....ed the liability of sale tax under dispute. The Hon'ble Apex Court held that merely because the assessee was disputing the liability would not mean that the liability had not accrued. 8. From the plain reading of the above, it is evident that deduction claimed by the assessee in respect of any sum paid by way of tax, duty, cess, or fee, shall be allowed only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him, irrespective of the previous year in which the liability to pay was incurred on the payment of such sum as per method of accounting regularly employed by the assessee as per section145. For the claim of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant which is to be taken into account. The year in which the assessee incurred the liability to pay such tax, duty etc., has no relevance and cannot be linked in the matter of giving benefit of deduction under Section 43B. The case laws as have been relied by the learned AR also supports this proposition of law specifically judgment of the Hon'ble Allahabad High Court in the case of C.L. Gupta ....
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....f capital gain arising on sale of flat on which depreciation has been claimed (a) According to the ld. PCIT, exemption u/s 54EC applies only when long term capital gain accrued to an assessee. In the present case, according to him, the capital gain has arisen u/s 50 whereby it is deemed to be short term capital gain and therefore, exemption claimed by the assessee is not valid. On the decision of Hon'ble Supreme Court in the case of CIT vs. Dempo Company Ltd. [2016] 242 taxman 434 (SC), ld. PCIT distinguished it by mentioning that it refers to Sec. 54EC and therefore, does not apply in the case of the assessee. (b) In this regard, we note that Sec. 50 is for the computation of capital gains arising from the transfer of depreciable assets and is a deeming provision. It creates a fiction which ought to be confined to the computation of capital gains and cannot extend beyond that. In the case of Dempo Company Ltd., (supra), Hon'ble Supreme Court agreed with the decision of Hon'ble High Court of Bombay in the case of CIT vs. ACE Builders P. Ltd. [2006] 281 ITR 210 (Bom), whereby it was held that Sec. 54E does not make any distinction between depreciable asset and non-....
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....27 (Mum) held that the said Explaination cannot be said to have overridden the law as interpreted by the Hon'ble Delhi High Court in the case of DG Housing Projects Ltd [2012] 343 ITR 329 (Del) according to which ld. PCIT has to conduct an enquiry and verification to establish and show that the assessment order is unsustainable in law. Coordinate Bench held that intention of the legislature could not have been to enable the ld. PCIT to find fault with each and every assessment order, without conducting any enquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The opinion of the ld. PCIT referred to in section 263 has to be understood as legal and judicious opinion and not arbitrary opinion. 8.2. From the perusal of records, we note that ld. AO elaborately dealt with four issues out of the six, raised by ld. PCIT for which ld. Assessing Officer had issued notices u/s 142(1) running into several pages, detailing the queries and mentioning specific requirements for compliance by the assessee. These notices ....