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2016 (1) TMI 459 - AT - Income TaxBad debt disallowance while computing section 115JB book profits - CIT(A) deleted the addition - Held that:- It is to be seen that the lower appellate findings that assessee is already assessed under normal provision rather than MAT u/s. 115JB. The Revenue is unable to dispel this factual position in the course of hearing. We accordingly hold that the issue of bad debt in question vis-a-vis for computing book profits becomes mere academic in nature. - Decided against revenue Transfer pricing adjustment - Revenue seeks to rebut the narrated findings of fact the assessee has not tendered the impugned corporate guarantee in favour of its Singapore based associate enterprise (AE) - Held that:- Paper book contains assessee’s explanation in lower proceedings that it only intended to provide the impugned guarantee by pledging its shares for arranging a term loan of $ 239.82 millions from ICICI Bank Ltd. Page 225 is bank’s letter that acceptance of loan terms be not taken as a binding loan obligation. Then comes assessee’s AE’s request to RBI dated 15-01-2007 seeking approval of the MPSEZ’s shares pledging. The same stood declined on 21-02-2007 at page 229 of the paper book. There is no evidence to the contrary forthcoming from the case record. We conclude in these facts and circumstances that the CIT(A) has rightly held the assessee not to have furnished the impugned corporate guarantee in favour of its AE so as to be taken as an international transaction u/s. 92C of the Act. - Decided against revenue Section 14A disallowance restricted by CIT(A) - Held that:- There is no dispute that interest and administrative expenditure hereinabove form two components of the impugned disallowance. The assessee’s case claims availability of sufficient non-interest bearing funds much more than its tax free investment throughout. Its further case denies to have incurred any administrative expenditure as well. Its categorical case made out in lower proceedings is that its non-interest bearing funds in the nature of general reserves, debt redemption reserves and share premium amounts read ₹ 396.61 crores, ₹ 70 crores and ₹ 181.30 crores respectively. Its tax free investments are of ₹ 600.82 crores. These figures are as on the last day of the relevant account year 31- 03-2007. We observe in these facts and circumstances that a presumption can safely be drawn as per case law of CIT vs. Torrent Power Ltd [2014 (6) TMI 185 - GUJARAT HIGH COURT ] that the impugned tax free investments have been made out of such surplus funds not carrying any interest component. Hon’ble jurisdictional high court further concludes that a specific finding regarding involvement of actual administrative expenditure has also to be given while making such a disallowance. The above extracted portion of the relevant finding makes it clear that the same neither takes into account assessee’s non-interest bearing funds nor its plea of having incurred no administrative expenditure for making the impugned section 14A disallowance. The CIT(A) has indirectly been guided by rule 8D otherwise not applicable in the impugned assessment year. We hold in these facts and circumstances that the impugned section 14A r.w. Rule 8D disallowance in question is liable to be deleted in entirety. - Decided in favour of assessee Depreciation disallowance - CIT(A) allowed claim - Held that:- There is no dispute about the fact that the assessee has claimed deprecation in question on shares of the above stated assets. The Revenue fails in rebutting the crucial appellate finding that the same already forms part of the relevant bloc of assets since 1998 treated eligible for deprecation. We further find that a co-ordinate bench decision of the tribunal in Deepak Fertilizer case (2007 (9) TMI 290 - ITAT BOMBAY-G ) already allows identical depreciation claim on shares of the relevant assets. There is no distinction on facts or law pointed out in the courses of hearing. - Decided in favour of assessee Section 43B disallowance - Held that:- There is no dispute so far as factual position that the assessee has not paid the above stated sums on or before the due date of furnishing the return is concerned. We accordingly reject assessee’s contentions and confirm the impugned leave encashment disallowance.- Decided against assessee VAT component coupled with entry tax and custom duty sum disallowed u/s 43B - Held that:- The paper book contained assessee’s argument justifying its accounting treatment in not crediting the impugned heads in its profit and loss account by not taking damage as revenue receipt. It clarified in the lower appellate proceedings that neither it had passed the abovestated account through P & L account nor raised a deduction claim out of its taxable income. It further filed elaborate detailed involving custom procedure thereby praying for deleting the impugned disallowances. We deem it appropriate to refer to the above extracted lower appellate findings dealing with the leave encashment issue only and without even adverting to assessee’s detailed submission narrated hereinabove. The CIT(A) has simply brushed aside the same with sweeping observations qua applicability of section 43B. We are of the view in these peculiar facts and circumstances that larger interest of justice would be met in case this limited issue of VAT, entry tax and customs duty vis-ŕ-vis application of 43B is restored back to the assessing authority for a fresh adjudication.- Decided in favour of assessee for statistical purposes. Disallowance of exemption claim u/s. 10AA - Held that:- The assessee’s only argument is that the impugned disallowance has to be confined to allocation of expenditure and not its profits derived from the eligible undertaking. It states to have been maintaining complete books allocating all specific expenses. The Revenue’s submissions strongly support the CIT(A)’s action under challenge. However, it failed to justify the impugned course of action in invoking the impugned disallowance vis-ŕ-vis assessee’s eligible profit instead of specific expenditure allocated in books. We feel it more appropriate in these peculiar facts and circumstances that this issue also needs to be re-adjudicated at the level of Assessing Officer as per law after affording adequate opportunity to the assessee - Decided in favour of assessee for statistical purposes.
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