2018 (5) TMI 417 - AT - Income Tax

Reopening of assessment - deduction u/s 36(1)(viii) allowed in the original assessment was in excess of the amount permissible in law - Interplay between the provisions of Sec. 36(1)(viia)(c) of the Act vis-a-vis Sec. 36(1)(viii) - Held that - The history of the dispute clearly bring out that the stand of the assessee has been accepted by the Revenue inasmuch as the decisions of the CIT(A) for Assessment Years 2010-11 and 2011-12 have been accepted and for the two assessment years of 2014-15 and 2015-16 even the assessing authority has accepted the position. Though the principle of res judicata is not applicable to income-tax proceedings yet it is a trite law that consistency and uniformity in approach on an issue which permeates in more than one assessment year deserves to be ensured by the income-tax authorities. In this context one may gainfully refer to the parity of reasoning laid down in the case of Radhasoami Satsang Saomi vs CIT 1991 (11) TMI 2 - SUPREME Court . Thus without dilating further on the rival stands and with a view to ensuring consistency and uniformity in approach on the same issue for different assessment years we deem it fit and proper to uphold the stand of the assessee on this aspect. Thus Ground of appeal no. 2 is hereby allowed. Manner of computing the deduction u/s 36(1)(viii) - whether AO erred in allowing the deduction by grossing-up the profit derived from long term financing operations i.e. after making deduction under the said clause - Held that - It was a common point between the parties that similar issue was in the case of CIT vs Kerala State Ind. Development Corporation, (1998 (2) TMI 6 - SUPREME Court) wherein the issue has been decided in favour of the assessee. In terms of the said decision the Assessing Officer is directed to calculate the deduction allowed u/s 36(1)(viii) of the Act on the total income before deduction of the amount allowable under the section. Thus on this aspect assessee succeeds. Deduction on account of amortisation of amount of lease premium paid to MMRDA in respect of leasehold land rejected - Held that - Ostensibly having regard to the precedents in assessee s own case the lease premium paid by assessee to MMRDA in respect of leasehold land cannot be allowed as a revenue expenditure and accordingly the issue is decided against the assessee. Disallowance u/s 14A - Addition sustained primarily on the ground that the same was suo moto made by the assessee-bank - Held that - The plea of the assessee to examine the efficacy of the disallowance has been wrongly rejected by both the authorities below. This is especially so if we consider the assessment position of AY 2004-05 wherein under similar circumstances the decision of CIT(A) in restricting the disallowance to 5% of the exempt income has been accepted by the Assessing Officer as no appeal is stated to have been filed against such a decision. Therefore considering all these aspects we deem it fit and proper to set-aside the order of CIT(A) and direct the Assessing Officer to evaluate the plea of assessee afresh and in any case the disallowance if any retained by him shall not exceed 5% of the exempt income as was the position in Assessment Year 2004-05. Claim for deduction representing contribution to Credit Guarantee Fund Trust for Micro and Small Enterprises disallowed - Held that - Lower authorities have erred in not entertaining the claim of the assessee under a misconception. Before us assessee has referred to the position in Assessment Year 2004-05 where similar claim stands accepted by the Assessing Officer himself in the order passed u/s 250 of the Act dated 01.06.2012 (supra). Therefore we find enough justification to accept the plea of the assessee for allowing deduction of Rs. 50 crores representing contribution made to Credit Guarantee Fund Trust for Micro and Small Enterprises. Accordingly order of the CIT(A) is set-aside and the Assessing Officer is directed to allow the claim Claim for calculating the deduction eligible u/s 36(1)(viii) without reducing the profits derived from the business of long term financing operations by the amount of Provision for bad and doubtful debts allowable u/s 36(1)(viia)(c) is upheld. Interest levied u/s 234C - Held that - A mistake has occurred on account of the fact that the levy of interest has been calculated by taking into consideration assessed tax instead of tax due on the returned income . On this aspect we deem it fit and proper to restore the matter back to the file of the Assessing Officer who shall verify the factual aspects and thereafter charge interest u/s 234C of the Act if so permissible as per law and pass a speaking order in this regard. Thus on this aspect assessee succeeds for statistical purposes. Disallowance u/s 14A - Held that - AO could not have straightaway resorted to Rule 8D(2)(iii) of the Rules in order to compute the disallowance u/s 14A of the Act. Moreover we find that the assessee has explained the basis of computing the disallowance of Rs. 21, 69, 490/- before the Assessing Officer as well as the CIT(A) and we do not find any reasons advanced by them to doubt its veracity. Therefore considered in this light in our view resort to Rule 8D of the Rules made by the Assessing Officer to enhance the disallowance u/s 14A of the Act is not merited in the instant case. Thus the enhancement of disallowance made u/s 14A of the Act by the Assessing Officer by a sum of Rs. 1, 80, 96, 335/- is not tenable and is hereby directed to be deleted.

Summary

Issues Involved:
1. Legality of reopening of assessment under Section 147 of the Income Tax Act, 1961.
2. Deduction under Section 36(1)(viii) of the Income Tax Act, 1961.
3. Disallowance under Section 14A of the Income Tax Act, 1961.
4. Deduction for contribution to Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
5. Amortization of lease premium paid to MMRDA.
6. Levy of interest under Section 234D and 234C of the Income Tax Act, 1961.
7. Write-off of bad debts.

Detailed Analysis:

1. Legality of Reopening of Assessment under Section 147:
The tribunal did not specifically adjudicate on the issue of the legality of the proceedings initiated under Section 147/148 of the Income Tax Act, 1961, due to the assessee's success on the substantive issues. The matter was rendered academic and not addressed in the present judgment.

2. Deduction under Section 36(1)(viii):
The primary issue was the reduction of the assessee's claim for deduction under Section 36(1)(viii) by the amount allowable under Section 36(1)(viia)(c). The tribunal upheld the assessee's claim that the deduction under Section 36(1)(viii) should be calculated on the eligible business income before reducing the amount allowable under Section 36(1)(viia)(c). The tribunal emphasized consistency in the approach, referencing previous assessments where the Revenue accepted the assessee's stand. Thus, the assessee's claim on this aspect was allowed.

3. Disallowance under Section 14A:
The dispute revolved around the quantum of disallowance under Section 14A. The tribunal noted that the Assessing Officer did not record the necessary satisfaction as required under Section 14A(2) before applying Rule 8D. The tribunal directed the Assessing Officer to re-evaluate the disallowance, ensuring it does not exceed 5% of the exempt income, aligning with the approach in the earlier assessment year. The tribunal allowed the assessee's appeal for statistical purposes.

4. Deduction for Contribution to CGTMSE:
The tribunal allowed the assessee's claim for deduction of contributions to CGTMSE, noting that similar claims were accepted in previous years. The tribunal found that the lower authorities erred in not entertaining the claim due to procedural technicalities. The tribunal directed the Assessing Officer to allow the deduction of Rs. 50 crores for the contribution to CGTMSE.

5. Amortization of Lease Premium Paid to MMRDA:
The tribunal upheld the disallowance of the assessee's claim for amortization of lease premium paid to MMRDA, referencing precedents in the assessee’s own case. However, the tribunal directed the Assessing Officer to apply the final decision on the question of law pending before the Bombay High Court for the assessment year 2004-05 once it reaches finality.

6. Levy of Interest under Section 234D and 234C:
For Section 234D, the tribunal did not specifically address the issue due to the assessee's success on substantive grounds. For Section 234C, the tribunal remitted the matter back to the Assessing Officer to verify the factual aspects and charge interest if permissible by law, directing a speaking order on the issue.

7. Write-off of Bad Debts:
The tribunal affirmed the CIT(A)'s decision allowing the assessee's claim for write-off of bad debts, noting that the issue was covered against the Revenue by the Bombay High Court's judgment in the assessee's own case for the assessment year 2003-04.

Conclusion:
The appeals of the assessee were allowed in part, with significant relief granted on the issues of deduction under Section 36(1)(viii), disallowance under Section 14A, and deduction for contribution to CGTMSE. The appeals of the Revenue were dismissed. The tribunal emphasized consistency in tax treatment across different assessment years and directed the application of the final decision from the High Court on the amortization of lease premium issue.