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2017 (1) TMI 1676 - AT - Income TaxDeduction 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 wherein Tribunal in assessee’s own case for A. Y. 1982-83 allowed it as business loss. No distinction has been brought in facts or legal position by Ld. CIT-DR. Therefore, respectfully following the orders of earlier years, the A O 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. Thus, assessee gets part relief. This ground is partly allowed. AO to partly allow relief as above. This common issue of assessee’s appeal is dismissed and that of the Revenue is also dismissed. Deduction under section 10(23G) - interest expenses incurred for earning interest free income from bonds instead being only direct expenses thereby allowing only part expenses u/s 10(23G) - HELD THAT:- No interest expense was disallowed by the assessee by claiming that it was the gross income to be allowed as exempt u/s 10(23G). As in the earlier year, now, the assessee before us also filed alternative working of expenses, which was not before the lower authorities. 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 by way of interest expenses for earning of income u/s 10(23G) which has been offered for disallowance - 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 is allowed for statistical purposes and the issue of Revenue’s appeal is dismissed. Disallowance of depreciation claimed on assets leased - 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 - HELD THAT:- AO while examining the assessee’s own funds vis-à-vis investments in shares will follow the decision of the Hon’ble Bombay High Court in the case 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 of the assessee is allowed for statistical purposes and the issue in Revenue’s appeal is dismissed. Depreciation on fixed assets - HELD THAT:- Let the facts be examined by the AO because none of the authorities below have deliberated on these issues. Learned Counsel for the assessee has not objected to the proposal. In term of the above, we restore these two issues back to the file of the AO for deciding the issue in terms of decision of the Hon’ble Supreme Court in the case of Smiffs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] on the issue of depreciation and in term of Tata Chemicals [2002 (4) TMI 42 - BOMBAY HIGH COURT] on the issue of interest capitalization on building. Accordingly, these two issues are restored back to the file of the AO. Disallowance of VRS expenses be deferred and amortized expenses over a period of time - HELD THAT:- Revenue could not point out how the expenses are capital in nature and could not find fault with the findings of CIT(A). Even otherwise, the expenses on VRS are incurred wholly and exclusively for the purpose of business and hence revenue in nature and allowable entirely in the year in which these are incurred. Admittedly, these expenses are incurred in this very year, which is not in dispute. Accordingly, we confirm the order of CIT(A) and this issue of revenue’s appeal is dismissed. Discount on repurchase of foreign currency bonds - HELD THAT:- Claim of deduction represents discount on re-purchase of foreign currency borrowings, which is nothing but a capital receipt and it only represents an accounting entry. We find no infirmity in the order of CIT(A). Hence, this issue of revenue’s appeal is dismissed. Exclusion of 234 B levy in regard to the deemed tax payable under section 143 (4) - HELD THAT:- assessed tax for the purposes of Section 234 B is clearly defined under the Act. This definition does not include the deemed tax payable as per Section 143(4). Thus find that such interest has been deleted in appeal for A.Y. 1996-97. Following the same, while the charging of interest under section 234 B is upheld and is subject to consequent relief in view of my findings above on various grounds, the AO is directed to exclude 234 B levy in regard to the deemed tax payable under section 143 (4) of the Act. Addition on account special reserve withdrawal u/s 41 (4A) - HELD THAT:- Amendment introduced in the said section by the Finance Act 1997 is not clarificatory. It has been made effective from AY 1998-99 and therefore must be construed as prospective only. The condition of maintenance of special reserve was made applicable only from 1.4.1998 and did not affect a reserve created prior thereto and consequently withdrawal from special reserve created prior to AY 1998-99 would not attract the deeming provision of Section 41(4A) - in construing a fiscal statute and in determining the liability of a subject to tax, one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. The onus is on the Revenue to satisfy the court that the case falls strictly within the provisions of the law. If the case is not covered by the four corners of the provision of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intention of the Legislature and by considering what was the substance of the matter. If a section in a taxing statute is of doubtful and ambiguous meaning, it is not possible out of that ambiguity to extract a new and added obligation not formerly cast upon the taxpayer. The legal position is well settled that when a provision admits of two interpretations a view which is favourable to the assessee should be adopted. - Decided in favour of assessee.
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