TMI Blog2016 (3) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee Denial of set off of brought forward capital loss against short term capital gain u/s. 74 - Held that:- Similar issue had arisen in the case of one of the group entities i.e. Kotak Mahindra Capital Co.Ltd [2012 (8) TMI 339 - ITAT MUMBAI] as held that the provisions of sec.74 which deal with carry forward and set off of losses under the head “capital gains” as amended by Finance Act, 2002, will apply only to the unabsorbed capital loss for the assessment year 2003-04 and onwards and will not apply to the unabsorbed capital losses relating to the assessment years prior to the assessment year 2003-04. Accordingly, we answer the question referred to this Special Bench in favour of the assessee holding that the assessee is entitled to set off the longterm capital loss incurred in AY 2001-02 against the short-term capital gain made by it in AY 2003-04 - Decided in favour of assessee Administrative expenses disallowed u/s. 14A - Held that:- We find that a lumpsum disallowance of 1%/2% of the dividend income has been upheld in Tata Consulting Engineers Ltd [2015 (3) TMI 1184 - ITAT MUMBAI], M/s HDFC Bank Ltd [2011 (6) TMI 774 - ITAT MUMBAI ] .Therefore,upholding the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 118,23,84,780/- 18.3.2008 2005-06 31.10.2005 96,38,60,130/- 23.3.2007 99,10,60,035/- 18.3.2008 2006-07 29.11.2006 177,01,69,230/- 28.11.2007 192,12,96,090/- 18.3.2008 8523 /Mum/2011(A.Y.2003-04): 3.First Ground of Appeal deals with disallowance of bad debts.While completing the assessment u/s. 143(3) r.w.s.147/263 of the Act,the AO reduced the bad debts, amounting to ₹ 2. 84 crores from the provision of bad debts of ₹ 7.12 crores and accordingly allowed no bad debts.He held that bad debts were allowable to the extent they were in excess of provision for bad debts,that provisions had already been allowed,that the provisions of sec.36(ii), 36(1)(vii)(a) and 36(1)(viii) of the Act were clear in that regard. The assessee had claimed that it had no opening balance or provision for bad and doubtful debts, that the bad debts were to be reduced from opening balance of provisions of bad and doubtful debts, that it was entitled to make claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such deduction to a maximum of a specified percentage of total income of the assessee computed before making any deduction under this clause and not exceeding prescribed percentage of aggregate average advance made by the rural branches of such bank. From the decision of the Apex Court in the case of Catholic Syrian Bank Ltd. (supra), it can be gathered that under clause (vii) of sub-section (1) of section 36, deduction is made available in computation of taxable profits of all scheduled commercial banks in respect of provisions made by them for bad and doubtful debts relating to advances made by them in the rural branches. Such deduction is limited to a specified percentage of the aggregate average advances made by the rural branches. The Apex Court held that the deduction on the account of provision for bad and doubtful debts is distinct and independent of the provisions of section 36(1)(vii) relating to allowance of the bad debts. Contention of the Revenue that the Banks covered by clause (viia) were not entitled to deduction under section 36(1)(vii) was rejected. The Court held that proviso to section 36(1)(vii) would ensure that there would be no double benefit of deduction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. (ii) While considering the claim for bad debts u/s 36(1)(vii), the assessing officer should allow only such amount of bad debts written off as exceeds the credit balance available in the provision for bad doubtful debt account created u/s 36(1)(viia) of the Act. The credit balance for this purpose will be the opening credit balance i.e., the balance brought forward as on 1st April of the relevant accounting year. 17. As already noted, in absence of such clarification byCBDT, we would have been inclined to admit the appeals. However, when such circular issued under section 119(2) of the Act clarifies the position beyond any doubt, we have no reason to entertain the revenue's appeals. As already noted, the statutory provision is silent on the precise method of working out the deduction. It is by now well-settled that such circulars issued by the Board in exercise of its statutory powers under section 119(2) of the Act, may have the effect of relaxing the rigours of a statutory provision. In the case of Catholic Syrian Bank Ltd. (supra) itself, the Apex Court touched on the effect of the circular issued by the Board. It was observed as under:- Now, we shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above judgment and the other judgments referred to by the AR,we hold that there is no legal or actual infirmity in the order of the FAA.Therefore, confirming his order,we decide Ground No.1 against the AO.As far as ,request made under Rule 27 is concerned ,we want to mention that we have already decided the issue in favour of the assessee therefore request made by it would not survive. ITA No.3114/M/2008(A.Y.04-05): 4.The first Ground of Appeal deals with disallowance of proportionate depreciation on premises given on rent/lease. During the course of hearing before us the AR did not press the ground.Hence, same stands dismissed as not pressed. 4.1.Next Ground of Appeal is about denial of set off of brought forward capital loss against short term capital gain u/s. 74 of the Act amounting to ₹ 2.16 crores.During the assessment proceedings the AO found that the assessee had earned short term capital gain amount of ₹ 2,16,760,177/- and had offered it for tax ,that vide its note No.15 it had claimed a set off of long term capital loss, that in the note to the return of income the assessee had mentioned that it had a capital loss of ₹ 8.11 crores broug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2003- 04 and onwards and the carry forward and set off of such loss relating to the period prior to 2003-04 continued to govern by sec.74(1) as it stood prior to the amendment made w.e.f. 1.4.2003. In our opinion, this issue involved in the present case is more similar to the issue involved in the case of Govind Das and Others vs. ITO (supra) decided by the Hon ble Supreme Court and relied upon by the Ld. Counsel for the assessee in support of the assessee s case. It is pertinent to note here that the said decision was rendered by the bench of three judges of Supreme Court and that too on 18th December, 1975 that is well before the decision rendered by the Bench of two judges of Hon ble apex Court in the case of Reliance Jute and Industries Ltd on October 10, 1979. 37. In the case of Govinddas Ors. (supra), the HUF was a partner in the export firm and in the mining firm. During the course of assessment proceedings for the AY 1957-58, the claim was made on behalf of the members of the HUF that they had effected the partial partition of their immovable property on 15th November, 1955. This claim was accepted by the AO after due enquiry and finding was recorded by him in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment years 1950-51 to 1956-57 having been completed in accordance with the provisions of the Old Act which included sec.25A, the AO was not entitled to avail the provisions enacted in sub-sec. (6) and sub-sec.(7) of sec.121 of the New Act for the purpose of recovery of the tax or any part thereof personally form any members of the joint family including the petitioner. 38. At the time of hearing before us, the Ld. DR has contended that the decision of Hon ble Supreme Court in the case of Govinddas (supra) was rendered on the interpretation of the provisions of sec.297(2)(d)(ii) of 1961 Act and relying on these specific provisions, the Hon ble Supreme Court held that the right vested in the assessee as per 1922 Act had been saved. He has contended that in the situation as obtained in the case of Govind Das, the rights were accrued under 1922 Act and they were held to have been saved because of repeal of old Legislature keeping in view the specific provisions contained in sec.297(2)(d)(ii). 39. After having perused carefully the entire text of the judgment of the Hon ble Supreme Court in the case of Govinddas Ors. (supra), we are unable to agree with this contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corresponding provisions of the old Act. It was held that such a case would be governed by sec.25 of the old Act which did not impose any personal liability on the Members in case of partial partition and to construe sec.171(6) as applicable in such case with consequential effect of casting on the members personal liability which did not exist under sec.25A, would be to give retrospective operation to the said provision which is not warranted either by the express language of that provision or by necessary implication. 40. In the present case, the provisions of sec.74(1) as amended w.e.f. 1.4.2003 have been relied upon by the revenue authorities to disallow the assessee s claim for set off of long-term capital loss relating to AY 2001-02 against short-term capital gain of the year under consideration and as already noted by us, the plain grammatical construction of the language of sec.74(1) as amended w.e.f. 1.4.2003 makes it clear that the same are applicable and deal with carry forward and set off of loss under the head capital gain incurred in AY 2003-04 and subsequent years. The right accrued to the assessee by virtue of sec.74(1) as it stood prior to the amendment mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t off and carry forward for set off u/s.70,71, 72,73, 74 74A. (ii) nothing contained in sub-section (1) of sec.72, sub-sec.(2) of sec.73, sub-sec.(1) of sec.74 and sub-sec.(3) of sec.74A shall entitled any assessee, being a registered firm, to have its loss carried forward and set off under the provisions of the aforesaid sections. The matter was carried by the assessee in an appeal before the Tribunal which held that the assessee was entitled to set off the speculation losses suffered in the assessment years 1960-61 and 1961-62 against the speculation profits of the previous year 1962-63. The Hon ble Allahabad High Court upheld the decision of the Tribunal and while disposing off the appeal filed by the revenue against the order of the Hon ble Allahabad High Court, the Hon ble Supreme Court held that under the Income-tax Act, 1922, the assessee was entitled to carry forward the losses of the speculation business and set off such losses against the profit made from that business in future years. It was held that the fact that right created by operation of sec.24(2) was a vested right could not be disputed and such a right which had accrued and had become vested contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed in the next financial year and shall be deemed to be a part of the deduction admissible to the assessee under the said provision for that year. Sec.80VV(a) further provided that the deduction not be allowed shall be added to the deduction for the succeeding assessment years. Sec.80VVA was deleted by the Finance Act, 1987 w.e.f. April 1, 1988 and as a result of the said deletion, the AO held that the assessee was not entitled to carry forward and set off the deduction u/s.80HHC relating to AY 1987-88 and 1988-89 in the assessment year 1989-90. The Ld. CIT (A) confirmed the view taken by the AO. The Tribunal however took a different view that a vested right had accrued to the assessee to carry forward and set off the unabsorbed deduction u/s.80HHC to which it was entitled to during the subsequent years. The Hon ble Madras High Court upheld the decision of the Tribunal holding that a vested right u/s.80VVA(4) of the Act had accrued in favour of the assessee and that right was not taken away either expressly or by necessary implication by deletion of sec.80VVA of the Act. For this conclusion, the Hon ble Madras High Court relied on the decision of Hon ble Supreme Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und no.2 of the assessee s appeal is accordingly allowed. Respectfully following above mentioned decisions of the Special Bench,Ground No.2 is decided in favour of the assessee. 5.Next Ground of Appeal deals with depreciation on assets given on lease.Before us,the AR stated that it was consequential in nature, that it should be restored back to the file of the AO to follow the directions of the Tribunal given in the earlier years orders. DR stated that matter could be decided on merits.After considering the rival submissions,we direct the AO to follow the directions of the Tribunal given while adjudicating the issue under consideration in the earlier years. ITA3506/M/08 (04-05): 6.The first Ground of Appeal is about administrative expenses disallowed u/s. 14A of the Act.During the assessment proceedings,the AO found that the assessee had earned dividend income of ₹ 5.57 crores and had claimed it exempt u/s.10(33) of the Act. He directed the assessee to explain as to why some expenses should not be attributed to earning of the exempt income invoking the provisions of section 14A of the Act.After considering the submission of the assessee made vide its lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional ground, raised by the assessee is decided in its favour. ITA No.3507/Mum/2008(05-06): 11.First two Grounds,raised by AO,are about administrative expenses disallowed u/s.14A and disallowance of club entrance and subscription fee respectively.Following our order for the earlier year,both the grounds are decided against the AO. 12.Last ground of appeal is about disallowance of bad debts.While deciding the appeal for AY.2003-04,we have upheld the order of the FAA.Following the same, Ground No.3 is decided against the AO. ITA No.3116/Mum/2008-AY.06-07: 13.The assessee did not press first Ground of Appeal, hence same stands dismissed. Ground No.2 is restored back to the file of AO to follow the directions of the Tribunal given for the earlier years. The assessee has filed an additional ground for the year under consideration also and it deals with the set off of brought forward losses.Following our orders for the earlier years, additional ground raised by the assessee,is admitted and is decided in its favour. ITA No.3508/Mum/2008 -AY.07-08: 14.Ground No.1, 2 and 3,filed by the AO,are about administrative expenses to be disallowed u/s. 14A of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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