TMI Blog2017 (5) TMI 1702X X X X Extracts X X X X X X X X Extracts X X X X ..... be added while computing book profit u/s.115JB of the Act that the disallowance is only disallowance for the purpose of computing taxable income of the assessee in the normal course. There is no provision in the Act to add these kind of disallowance while computing book profit u/s.115JB and it cannot change the book profit on this count. Therefore even if there is an addition in view of provision u/s.14A r.w.Rule 8D, that cannot be added back to compute the book profit u/s.115JB. This ground is allowed. Transfer to Reserve Fund as required under Section 45-IC of the Reserve Bank of India Act and claimed the same as appropriation of funds by overriding title - HELD THAT:- As decided in ow case [ 2016 (8) TMI 1204 - ITAT CHENNAI] assessee claims that it is only an appropriation of funds by overriding title. This Tribunal examined the very same issue for assessment years 2003-04 to 2009-10 and found that the transfer of funds, as required under Section 45-IC of the Reserve Bank of India Act, is only an application of income, therefore, liable for taxation. In view of the decision of this Tribunal in the assessee's own case, for assessment years 2003-04 to 2009-10, this Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate accounts thus does not, in any way, impact the claim of bad debt u/s 36(1)(vii) of the Act in the regular computation of income. This submission of the department stands rejected. (Para 7) Thus, it is clear that the claim of bad debts relates to debts actually written off and not a provision made in this regard and therefore, in accordance with the provisions of Section 36 (1)(vii), written off the bad debt and the claim is allowable As per the judgement of the Hon ble Supreme Court in the case of TRF Ltd. v. CIT [ 2010 (2) TMI 211 - SUPREME COURT] as held that after 01.04.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Hence, it is appropriate on our part to remit the entire issue as done by the Tribunal in the earlier occasion to the file of AO for his due examination of the books of accounts maintained by the assessee under the Income Tax Act, 1961and the ld. Assessing Officer decides thereupon. - ITA No. 2407/Mds/2016, 2502/Mds/2016, 2406/Mds/2016, 2503/Mds/2016, 2370/Mds/2016, 2504/Mds/2016, 2505/Mds/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegic partners to contribute to the equity capital of the company or in intermediate/holding companies. It may also resort to temporary borrowings to raise money as the fund raising from the equity partners may take six months to one year. The temporary borrowings are repaid with the capital raised from the strategic equity partners. The primary objective of the investment in the group companies is to contribute to the capital, having controlling stake and guide them to grow in their respective businesses. The company made investment in these companies on the ground of commercial expediency with a view to strengthen the capital base of the investing companies. The investment cannot be construed as made for the purpose of earning exempted dividend income. Income from dividend is incidental to the main activity of investment promotion. The company keeps the surplus money raised from the strategic investors in mutual funds till such time deployment in business ventures is identified by the Board of Directors. The expenses incurred by the company was for the purpose of its business of investment promotion and not for warning exempted income and the expenditure is business expenditure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance of disallowance at ₹ 15 lakhs for this assessment year. 3.3 We have heard both the parties and perused the material on record. The ld.A.R submitted that Tribunal in assessee s own case in ITA Nos. 512 513/Mds/2015 dated 26.6.2015 wherein held that: 10. Considering totality of the facts of the present case, in our opinion it cannot be said that the assessee made investment in the shares of Shriram Retail Holdings Pvt. Ltd, Shriram Credit company Limited, Shriram Holdings (Madras) Pvt. Ltd and Shriram Life Insurance company limited, for the purpose of earning tax free dividend income. On the other hand, the assessee invested to have a controlling internal in these companies and strengthen the capital base and liquidity base of these companies. Thus in the group companies, the assessee company have controlling interest in Shriram City Union Finance Ltd, a public limited company whose equity shares are listed in stock exchange. Shriram Credit Company Ltd has controlling interest in M/s.Shriram Insight Share Brokers Ltd. These facts were not contradicted by the Department and finally these facts will definitely enhance the profitability of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Castle Breweries. This factual exercise has to be carried out by the Assessing Officer after giving due opportunity to the assess of being heard. The Assessing Officer may make the disallowance of interest uJs. 1 4A only if it is found that interest bearing borrowed funds were used to acquire shares in the companies or for making advances to Castle Breweries. We, therefore, restore this issue to the file of the Assessing Officer with the above directions. The ground is treated as partly allowed. 9. The aforesaid shows that the Tribunal after holding in principle the applicability of Sec. 1 4A, has further directed the Assessing Officer to ascertain from the facts of the case as to how much interest bearing borrowings was utilized to acquire shares in the companies and the matter is relegated to the Assessing Officer. As per the language in Sec. 1 4A, the enquiry has to be undertaken by the Assessing Officer which has been so ordered by the Tribunal. Hence, it can be said that the Tribunal has exercised the discretion where rights of both sides are kept open for admissible deduction under Sec. 1 4A. When such a discretion is exercised and the rights of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377;. 11,96,281/- allowed as depreciation. The facts of this issue are that the assessee had paid Royalty of ₹. 47,85,125/- to Shriram Chits Investments Pvt. Ltd for using the logo owned by the latter. The Assessing Officer has found that this payment relates to payment of Royalty for acquiring an intangible asset. He has ignored the mode and method of payment, and duration of payment, holding them to be irrelevant for the purpose. On the contrary, he has allowed depreciation @ 25% on the entire payment by holding it a capital expenditure. Accordingly, he has added back ₹. 47,85,125/- and has allowed depreciation of ₹. 11,96,281/-. In first appeal, the ld. CIT(A) has allowed the entire amount of ₹. 47,85,125/- holding it to be a revenue expenditure. Revenue is aggrieved. 17. After hearing both sides carefully in the light of the aforesaid material available on record, we find that the impugned payment was made to Shriram Chits Investments Pvt. Ltd for the non-exclusive user of the logo based on turnover and was not a lump sum payment. The assessee had no other rights including the right to transfer the use of the logo. Shriram Chits Investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 512 513/Mds/2015 dated 26.6.2015 wherein held that: 22. We have heard both the parties. This issue of disallowance made by the Assessing Officer for these two assessment years by invoking provision u/s.14A r.w. Rule 8D, was already adjudicated by us in our earlier para of this order. In our opinion, disallowance made u/s.14A r.w. Rule 8D cannot be added while computing book profit u/s.115JB of the Act that the disallowance is only disallowance for the purpose of computing taxable income of the assessee in the normal course. There is no provision in the Act to add these kind of disallowance while computing book profit u/s.115JB and it cannot change the book profit on this count. Therefore even if there is an addition in view of provision u/s.14A r.w.Rule 8D, that cannot be added back to compute the book profit u/s.115JB. This ground is allowed. 4.4 In view of the above order of Tribunal, this ground raised by the Revenue stands dismissed. 4.5 In the result, both the appeals filed by the Assessee in No.2407/Mds/2016 is partly allowed for statistical purposes and the Revenue in ITA No.2502/Mds/2016 is partly allowed. 5. The first ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has transferred a sum of₹ 375,10,96,984/- to Reserve Fund as required under Section 45-IC of the Reserve Bank of India Act. The assessee claims that it is only an appropriation of funds by overriding title. This Tribunal examined the very same issue for assessment years 2003-04 to 2009-10 and found that the transfer of funds, as required under Section 45-IC of the Reserve Bank of India Act, is only an application of income, therefore, liable for taxation. In view of the decision of this Tribunal in the assessee's own case, for assessment years 2003-04 to 2009-10, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 7.1 Respectfully following the order of the Tribunal in assessee s own case, we dismiss this ground of appeal raised in both the appeals of assessee. 8. The next ground in ITA Nos. 2370/Mds/2016 2406/Mds/16 is as follows: i) The CIT(A) erred in confirming the addition of interest u/s.234D claimed of ₹ 7,31,78,234/- ii) The CIT(A) erred in not appreciating the fact that the refund amount takes the character of loan, as the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of our findings in earlier paras 3.2 to 3.5 of this order, this ground raised by the assessee stands partly allowed for statistical purposes. 12.The next ground in ITA Nos.2370/Mds/2016 2406/Mds/2016 is as follows : i) The learned CIT(A) has erred in confirming the disallowance made by the Assessing Officer of ₹280,00,00,000/- being amount transferred to Statutory Reserve as per Reserve Bank of India guidelines in computing income u/s.115JB of the Act. ii) The learned CIT(A) has failed to appreciate that the amount transferred to statutory reserve does not form part of the real income of the appellant on the same grounds as mentioned in the grounds of appeal against the confirmation of disallowance in computation of regular income. 13. We have heard both the parties and perused the material on record. The AO disallowed the amount transferred to statutory reserve fund stating that it is not an ascertained liability. On appeal, the CIT(Appeals) relying on the order of the Tribunal in ITA No.235/Mds/2009 dated 16.7.2009 dismissed the appeal of the assessee. We also find that this issue also was decided against the assessee by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial on record. We find that the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports v. Addl. CIT [2012] 16 ITR (Trib) 1 (Visakhapatnam) [SB] and judgment of the Allahabad High Court in the case of CIT v. Vector Shipping Services (P.) Ltd. in [2013] 357 ITR 642 (All) held that section 40(a)(ia) of the Act is not applicable when there is no outstanding balance at the end of the close of the year relevant to the assessment year in respect of these payments. However, the assessee has not brought on record, the details of outstanding expenses or schedule of sundry creditors showing whether the impugned amount is outstanding at the end of the close of the previous year relevant to the assessment year either in the name of the party or outstanding expenses. Hence, in the interest of justice, we are remitting the issue back to the file of the Assessing Officer with direction to verify the claim of the assessee and the assessee shall place necessary evidence in support of his claim. 5. Further, we make it clear that if the impugned amount is not outstanding at the end of the close of the assessment year in respect of the expenses either as outstanding e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 513/Mds/2015 dated 26.06.2015 for the AYs 2010-11. We find that this issue is already decided in assessee s group case in ITA No.2502/Mds./2016 in earlier para 4.3 of this order. Accordingly, this ground is dismissed. 22. The last common issue in ITA Nos. 2503 2504/Mds/2016 is with regard to deletion of addition made towards provision of bad debts. 23. The AO disallowed the portion of bad debts, which was shown as provision in statutory books by relying on case laws. However, the CIT(Appeals) relying on the order of the Tribunal for the AYs 2006-07 to 2009-2010 and preceding assessment year 2012-13 deleted the addition of portion of bad debts. 24. After hearing both the sides, we are of the opinion that similar issue came for consideration before this Tribunal in assessee s group case in M/s. Shriram Chits Tamilnadu Pvt. Ltd., in I.T.A.Nos.716 and 717/Mds/2015 for assessment years: 2010-11 and 2011-12 dated 29.01.2016 wherein held that:- 14. We have heard both sides. The main contention of the assessee is that the issue has already been decided by the Tribunal by order cited (supra) and it has to be followed. However, we observed from the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee does not want to pursue the Miscellaneous Petitions and not pressed before this Tribunal. 24.2 However, ld.A.R placed strong reliance on the order of jurisdictional High Court in the case of CIT Vs. Shriram Transport Finance Co. Ltd., vide order dated 23.12.2016 in [2017] 78 Taxmann.com(Madras) wherein Madras High Court observed that:- We have heard the learned Counsel and applied our mind to the facts and legal position involved. We are of the view that the maintenance of two separate sets of books, one for purposes of the Companies Act and the other for Income Tax, is perfectly in order and there is no embargo against the same. The books maintained for the purposes of the Companies Act duly approved by the Board of Directors and placed before the shareholders at the Annual General Body Meeting of the Company being contain inter alia the profit and loss account for the relevant previous year prepared in accordance with the provisions of Part II-III of Schedule VI to the Companies Act 1956 will form the basis of an assessment in terms of Chapter XII-B, Special Provisions relating to certain companies, that provide for an assessment of Minimum Alternate Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Vs Excel Industries (358 ITR 295) reiterates the proposition that an issue consistently decided in the assesse's favour for several years should not be disturbed unless there are very convincing reasons for doing so. (Para 12) 24.3 We are fully in agreement with the decision of jurisdictional High Court cited supra. However, in the present case as observed by the Tribunal in earlier occasion in ITA Nos.716 717/Mds./2015 dated 29.01.2016, AO rejected the claim of bad debts of the assessee at the threshold on the reason that it was not written off in its books of accounts maintained by the assessee under Companies Act, 1956 and the A.O has not examined whether it was written off in its books of accounts maintained for income-tax purposes as per the judgement of the Hon ble Supreme Court in the case of TRF Ltd. v. CIT 323 ITR 397, wherein, the Hon ble Supreme Court has held that after 01.04.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Hence, it is appropriate on our part to remit the entire issue as done by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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