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2017 (8) TMI 1609 - AT - Income TaxNon-admissibility of the additional grounds - Procedure in Appeal u/s 250 - Disallowance u/s 14A r.w.r. 8D - whether the assessee can take an additional ground at appellate stage even when the same has not been raised before the lower authorities? - HELD THAT:- In light of the proposition of law laid down in case of “National Thermal Power Company Ltd. [1996 (12) TMI 7 - SUPREME COURT], “Ahmedabad Electricity Co. Ltd. [1992 (4) TMI 29 - BOMBAY HIGH COURT] and Pruthvi Brokers and Shareholders Pvt. Ltd.” [2012 (7) TMI 158 - BOMBAY HIGH COURT] the additional ground raised by the assessee is admitted and the issue is restored to the file of the AO with a direction to verify the claim of the assessee regarding strategic investments as to whether the same were related to the business activity of the assessee or as part of its business strategy to invest in the shares of its sister/subsidiary companies to have control over them and not for the purpose of deriving tax exempt income and whether the dividend/ tax exempt income was incidental to the above business activity of the assessee and decide the issue a fresh in accordance with law in the light of the available decisions of the higher/highest courts/court. It is also held that it will not be an impediment or reason to deny the claim to the assessee that the assessee itself offered the disallowance in its return of income, if the assessee otherwise is found legally entitled to such a claim. Disallowance u/s 14A - Non - recording of satisfaction - HELD THAT:- The satisfaction of the AO must be arrived at on an objective basis. In a situation where the accounts of the assessee furnish an objective basis for the AO to arrive at a satisfaction in regard to the correctness of the claim of the assessee, there would be no warrant for taking recourse to the method prescribed by the rules. An objective satisfaction contemplates a notice to the assessee, an opportunity to the assessee to place on record all the relevant facts including his accounts and in the event that he comes to the conclusion that he is not satisfied with the claim of the assessee. As observed above, in the case in hand, the AO has not followed the guidelines of objective satisfaction as laid down in the case of ‘Godrej & Boyce’ [2010 (8) TMI 77 - BOMBAY HIGH COURT] while making the disallowance. He without recording any reasoning for his dissatisfaction with regard to the working/claim of the assessee, straightway applied Rule 8D against the mandate of the provisions of section 14A - CIT(A) also ignored the mandate of the provisions of section 14A, while giving part relief to the assessee on a different footing. Since we have already restored the matter to the AO on this issue, we direct that the AO will also look into and consider the above aspects and adjudicate on all alternate contentions also of the assessee on this issue and will comply with the requirements of law, as discussed above, while deciding this issue a fresh. Bad debts written off - OCDs were part of the investment portfolio of the Predecessor Company - HELD THAT:- Claim of the assessee regarding the aforesaid OCDs claimed as ‘bad debts written off’ is hit by clause (i) of sub section (2) of section 36 of the Act. The aforesaid OCDs have not been taken into account in computing the income of the assessee in any previous year. The said OCDs were part of investment portfolio of JVSL, the status on merger of the said OCDs is required to be given the same treatment in the hands of the successor. Since the aforesaid OCDs were part of the investments of the predecessor holder and, hence, it cannot be said that the same were business assets of the predecessor holder or that the said OCDs has been taken into account in computing the income of the predecessor holder of any previous year. It cannot be said that the assessee has acquired any right of the predecessor company to claim deduction on account of bad debts written off in respect of such write off of OCDs, because such rights were not available even to predecessor holder of these OCDs. Nor the said OCDs represents money lent in the ordinary course of business of money lending carried on by the assessee. Admittedly, the assessee was not a NBFC at the time of acquiring the said OCDs, hence, it cannot be said that the OCDs were part of the money lent in the ordinary course of business, though later on the assessee company had offered interest on such OCDs as its business income. The said OCDs neither represent the debt or part thereof which has been taken into account in computing the income of the assessee in any earlier previous year nor the same represents the money lent in the ordinary course of business of money lending carried on by the assessee. In the case in hand the OCDs were part of the investment portfolio of the Predecessor Company and not business debt. The same, therefore, cannot be held to be debts due in the hands of the successor / assessee. This issue is accordingly decided against the assessee. Write off of irrecoverable principle amount of overdue debentures was allowable as deduction to the assessee in normal course of business of finance / investment activity - HELD THAT:- Restore this issue to the file of the Assessing officer to consider this contention of the assessee as to whether the amount of said OCDs can be treated as business loss to the assessee being loss of business asset. AO is directed to re-adjudicate this issue after giving proper opportunity to the assessee of hearing and furnish necessary evidence in this regard and then decide the same in accordance with law.
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