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2016 (8) TMI 1204 - AT - Income TaxDisallowance of amount transferred to Reserve Fund under Section 45-IC of Reserve Bank of India Act - Held that - Admittedly the assessee has transferred a sum of Rs. 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. Levy of penalty under Section 234D - Held that - As rightly submitted by the Ld. D.R. interest is charged under Section 234D of the Act on the excess amount refunded to the assessee while processing a return under Section 143(1) of the Act. Even though it is an interest levied on the amount refunded to the assessee in fact it is an interest for delayed payment of tax. In other words the amount refunded to the assessee while processing return under Section 143(1) of the Act was considered as non-payment of tax and interest was charged for the period in which the assessee was holding the amount. Therefore the interest paid by the assessee cannot be construed as expenditure for earning the income or for business purpose. Therefore this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the disallowance made by the Assessing Officer. Disallowance made under Section 14A read with Rule 8D - Held that - CIT(Appeals) found that unquoted investments with subordinated debts of Yes Bank Ltd. would not come within the purview of Section 14A of the Act and after the direction of the CIT(Appeals) what was disputed is in respect of the investment made by the assessee in shares and debentures of other companies. This Tribunal is of the considered opinion that the Assessing Officer has to mandatorily compute the expenditure incurred in earning income which does not form part of total income by applying Rule 8D(2) of the Income-tax Rules 1962.Therefore the borrowed funds direct and indirect expenditure incurred by the assessee which is not attributable to any particular income and 0.5% of the investment which yielded income which does not form part of total income also has to be taken into consideration. In view of the above this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. TDS credit - Held that - The tax deducted which was not given credit to the extent of Rs. 67, 16, 883/- is not in dispute. The assessee claims that it has to be given credit without any restriction. We have carefully gone through the provisions of Section 140A of the Act. When the self-assessment tax was to be paid the assessee has to take into account the tax already paid and also the tax deducted or collected at source. Therefore when a tax was collected in respect of the income which was accrued to the assessee during the year under consideration the same has to be given credit. This Tribunal is of the considered opinion that the credit found in Form 26AS and the certificate issued by the deductor under Form 16A need to be verified. The Assessing Officer shall give credit in accordance with law while computing the tax liability of the assessee. Therefore this Tribunal do not find any reason to interfere with the order of the CIT(Appeals) in which a direction was issued to give credit after verification if permissible under the Act. This Tribunal is of the considered opinion that such direction would not prejudice the interest of the assessee in any way. Therefore the order of the CIT(Appeals) is confirmed. Disallowance being the amount transferred to Statutory Reserve as per Reserve Bank of India guidelines while computing income under Section 115JB - Held that - For the purpose of Section 115JB of the Act the book profit has to be computed as per the provisions of the Companies Act and further addition or deduction has to be made as provided under Explanation to Section 115JB of the Act. It is not the case of the assessee that the amount transferred to Statutory Reserve is an item to be reduced from the book profit computed as per the provisions of Companies Act. In the absence of any provision in Explanation to Section 115JB of the Act to reduce the amount transferred to Statutory Reserve as per the guidelines of Reserve Bank of India this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the order of the Assessing Officer by placing his reliance on the order of this Tribunal in the assessee s own case for the assessment year 2009-10. Therefore this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Deletion of bad debts - Held that - This Tribunal is of the considered opinion that merely because an appeal is pending before the High Court that cannot be a reason to take a different view on the issue. A perusal of the order of this Tribunal shows that on verification of the computation of book profit the CIT(Appeals) found that the assessee has written off bad debt to the extent of Rs. 572, 36, 31, 000/- which includes a sum of Rs. 141, 94, 63, 000/-. On identical set of facts the CIT(Appeals) deleted the disallowance made by the Assessing Officer for earlier assessment years. This Tribunal in fact confirmed the similar order of the CIT(Appeals). Therefore this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Addition made on account of royalty - Held that - What was paid by the assessee is for the right to use the Logo belonging to Shriram Ownership Trust. When the assessee made payment for use of right this Tribunal is of the considered opinion that the same cannot be treated as capital expenditure. Therefore the CIT(Appeals) has rightly found that the payment made by the assessee is in the revenue field. In fact similar addition made by the Assessing Officer for the assessment year 2002-03 was deleted by this Tribunal. The CIT(Appeals) by placing reliance on the order of this Tribunal in Shriram Tamil Nadu Pvt. Ltd. allowed the claim of the assessee. Therefore this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. ESOP expenditure allowance - Held that - We have carefully gone through the orders of both the authorities below. The Assessing Officer found that in the assessee s own case for earlier assessment year on the basis of very same Employees Stock Option Scheme 2005 this Tribunal allowed the claim of the assessee for the assessment year 2009-10. The Assessing Officer found that the appeal is filed before the Madras High Court and the same is pending. The Assessing Officer also found that the Revenue has filed SLP against the judgment of Madras High Court in PVP Ventures Ltd. (2012 (7) TMI 696 - MADRAS HIGH COURT) before the Supreme Court and the same was dismissed. Pending finality through review or curative petition the Assessing Officer disallowed the claim of the assessee in order to protect the interest of the Revenue. This Tribunal is of the considered opinion that when the matter was finally decided by the jurisdictional High Court and the Revenue s SLP was dismissed by the Apex Court the Assessing Officer has to follow the judgment of Madras High Court. Moreover for assessment year 2009-10 this Tribunal allowed similar claim of the assessee on the basis of very same Employees Stock Option Scheme 2005. Therefore this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Issues Involved:
1. Disallowance of Rs. 375,10,96,984/- transferred to Reserve Fund under Section 45-IC of the Reserve Bank of India Act. 2. Levy of penalty under Section 234D of the Income-tax Act, 1961. 3. Disallowance under Section 14A of the Income-tax Act read with Rule 8D of the Income-tax Rules, 1962. 4. TDS credit of Rs. 67,16,883/-. 5. Disallowance of Rs. 252 Crores transferred to Statutory Reserve while computing income under Section 115JB of the Income-tax Act. 6. Deletion of bad debts to the extent of Rs. 141,94,63,000/-. 7. Addition made on account of royalty to the extent of Rs. 13,75,69,684/-. 8. ESOP expenditure to the extent of Rs. 57,42,000/-. Issue-wise Detailed Analysis: 1. Disallowance of Rs. 375,10,96,984/- Transferred to Reserve Fund: The assessee transferred Rs. 375,10,96,984/- to the Reserve Fund under Section 45-IC of the Reserve Bank of India Act, claiming it as an appropriation of funds by overriding title. The Assessing Officer disallowed this claim, treating it as an application of income. The CIT(Appeals) upheld this disallowance, referencing prior Tribunal decisions for assessment years 2003-04 to 2009-10. The Tribunal confirmed the lower authority's decision, reiterating that the transfer is an application of income and thus taxable. 2. Levy of Penalty under Section 234D: The assessee contested the penalty of Rs. 3,48,13,498/- levied under Section 234D for interest on refunded amounts. The Department argued that this interest is not akin to loan interest and is instead for delayed tax payment. The Tribunal agreed with the Department, stating that the interest charged under Section 234D is for the period the assessee held the amount, thus not an allowable expenditure for computing taxable income. 3. Disallowance under Section 14A Read with Rule 8D: The assessee argued against the disallowance of Rs. 1,43,40,000/- under Rule 8D, claiming prior self-disallowance and commercial expediency in investments. The Department maintained that disallowance under Rule 8D(2)(iii) was justified. The Tribunal upheld the CIT(Appeals) decision, directing the exclusion of investments in subsidiary companies and unquoted investments, while confirming the disallowance for other investments. 4. TDS Credit of Rs. 67,16,883/-: The assessee claimed a discrepancy in TDS credit, asserting entitlement to Rs. 67,16,883/-. The Department contended that TDS credit must align with income offered for taxation. The Tribunal upheld the CIT(Appeals) directive for the Assessing Officer to verify and allow TDS credit per legal provisions, ensuring no undue prejudice to the assessee. 5. Disallowance of Rs. 252 Crores Transferred to Statutory Reserve: The assessee transferred Rs. 252 Crores to Statutory Reserve as per RBI guidelines, which the Assessing Officer added to taxable income under Section 115JB. The Tribunal, referencing prior decisions, confirmed that such transfers are not deductible from book profits under Section 115JB, as they are not specified in the Explanation to the section. 6. Deletion of Bad Debts of Rs. 141,94,63,000/-: The Revenue challenged the deletion of bad debts, citing pending High Court appeals. The Tribunal noted consistent prior decisions allowing such claims and found no reason to deviate, confirming the CIT(Appeals) deletion of the disallowance. 7. Addition on Account of Royalty: The Assessing Officer treated Rs. 15,72,22,496/- paid to Shriram Ownership Trust for using its Logo as capital expenditure, allowing depreciation. The Tribunal, agreeing with the CIT(Appeals), held that the payment for the right to use the Logo is a revenue expenditure, not capital, thus confirming the deletion of the addition. 8. ESOP Expenditure of Rs. 57,42,000/-: The assessee claimed ESOP expenditure as revenue, while the Assessing Officer treated it as capital expenditure. The Tribunal, referencing the Madras High Court judgment in CIT v. PVP Ventures Ltd. and prior Tribunal decisions, upheld the CIT(Appeals) decision allowing the ESOP expenditure as revenue. Conclusion: The appeal of the assessee is partly allowed, and the appeal of the Revenue is dismissed.
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