Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (9) TMI 1521 - AT - Income TaxAllowability of business loss - Claim of deduction of write off of investments - profit on sale of investments was arrived at after providing for write off of investments and this was claimed as deduction in the computation of filed along with the return of income on account of diminution in the value consequent to write off of investments - AO disallowed the claim of business loss on the basis that the same can be allowed as instrument in the nature of investments but not as loan - HELD THAT:- CIT (A) confirmed the disallowance following earlier years decision of the Tribunal in assessee’s own case for assessment year 1981-82 and 1982-83. She admitted that write off of investment claimed as capital loss is covered against the assessee in earlier assessment year , but business loss as allowed by the CIT (A) on account of investment on conversion of loan arrears is allowable i.e. assessment year 1997-98 - AO is directed to follow the orders of the earlier years and allow a sum as business loss and the balance amount on account of write-off of investment as capital loss should be disallowed, as held above also - Decided partly in favour of assessee. Exemption u/s 10(23G) - disallowance on account of receipts of financing to infrastructure sector and not the gross receipt - assessee filed revised computation during assessment claiming exemption of entire amount of gross receipt - AO allowed the claim of exemption relating to income computed on account of infrastructure sector eligible for claim of deduction u/s 10(23G) - CIT (A) further allowed relief partly modifying the order of the AO - HELD THAT:- Before us now, as per the working of the expenses, the same was not analyzed by the lower authorities. Hence, we remit the mater back to the file of the AO for fresh consideration. The only differential fact in the present case is that the assessee itself has disallowed direct expenses of ₹ 504,68,381/- by way of interest expenses for earning of income u/s 10(23G) which has been offered for disallowance. We also agree that only those expenses which are relatable to earning of exempt income can be claimed as deduction for computing net income u/s 10(23G). In term of the above and in term of the direction of the Coordinate Bench of the Tribunal in assessment year 1997-98 in assessee’s own case the AO will decide the issue. Accordingly, this issue of assessee’s appeal in both the years is allowed for statistical purposes Disallowance of depreciation claimed on assets leased during the year - asset's used for business purposes - HELD THAT:- Tribunal in assessee’s own case for assessment year 1995-96 i. e. in ICICI Bank Ltd. Vs JCIT, SR-28, Mumbai [2007 (2) TMI 238 - ITAT BOMBAY-I] has directed the AO to allow depreciation on all items claimed by the assessee. Respectfully following the said decision of the Tribunal in earlier year in assessee’s own case, we direct the AO to allow the claim of the assessee after verifying the facts and figures. This issue of the assessee’s appeal is thus allowed in both the years. Disallowance of interest expenses and 1% of managerial and administrative expenses - interest expenses allocated to the interest income - HELD THAT:- AO while examining the assessee’s own funds vis-à-vis investments in shares will follow the decision of of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] and Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] . In case, the investment is made out of assessee’s funds, then, no interest expenses is to be allocated to the interest income. Accordingly, we set aside this issue to the file of the AO to verify the facts. This issue in both the appeals of the assessee is allowed for statistical purposes. The issue in Revenue’s appeals is dismissed. Calculation for deduction u/s 36(1)(viii) - CIT (A) directed the A O to take into account interest costs attributable to non-fiancé income in addition to administrative costs estimated at 10% while working out the computation u/s 36 (1) (viii) - HELD THAT:- This issue was in assessment year 2000-01 and the A O himself allowed the claim of the assessee - assessee incurred administrative cost, 10% of the non-fund-based income is treated as the expenditure incurred to earn such income. Certain income like interest on Government securities, as well as hire purchase operation do involves fund cost but they are not in the nature of finance business. For income from securities loans and advances, stock of hire, etc., the interest cost is allowed at 71% of such income. The assessee’s arguments mentioned in its submissions are not of any relevance to the matter of computation of the eligible deduction. In case of the assessee, the major cost is the interest cost which works out to about 80% of its total cost of operations Disallowance of prior period expenditure - year of assessment - HELD THAT:- Assessee has claimed these expenses incurred in the extra ordinary event such as merger of ITC with the assessee and according to the assessee, these expenses cannot be classified as prior period expenses quo the assessee. The assessee explained that as a result of merger of books of accounts, these prior period expenses, which in fact, was the result of recast of accounts for achieving uniformity and these are not exactly prior period expenses, because they arose in current year on account of the event of the merger. We find that Revenue has not contested that any objection was raised before Hon’ble High Court before approving the scheme of merger of ITC with the assessee. Accordingly, we are of the view that the character of expenses became the expenses of the current year and are allowable. We allow this issue of assessee’s appeal. Charging of interest u/s 234B in the present case is consequential in nature, hence, needs no adjudication.
|