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2019 (6) TMI 1123 - AT - Income TaxClaim of depreciation on assets given on lease - HELD THAT:- even in cases of “financial leases’, the depreciation allowance contemplated under Section 32(1) of the Act is allowable to the lessor. It has not been shown by the Ld. CIT-DR that any of such precedents in assessee’s own case has been altered by any higher authority. Therefore, so far as this aspect of the matter is concerned, we do not find any hesitation in directing the Assessing Officer to allow the claim of depreciation on lease of assets where it involves “financial lease’. Subsequent to the setting aside of the matter by the Tribunal on this aspect for Assessment Yea₹ 1994-95 to 1996-97, no further order has been passed by the AO till date. Considering the aforesaid, we deem it fit and proper to direct the AO to decide about the admissibility of depreciation of ₹ 2,09,04,638/- pertaining to the aforesaid seven lease arrangements in the light of decision in the earlier years following the order of Tribunal dated 29.10.2014 [2015 (1) TMI 516 - ITAT MUMBAI] . AO shall allow the assessee a reasonable opportunity of being heard and thereafter recompute the depreciation allowable to the assessee keeping in mind the directions of the Tribunal in the earlier years, and as per law. Disallowance of interest expenditure by invoking Sec. 36(1)(iii) - HELD THAT:- A pertinent point which has been brought out by LR is that the interest income earned by the assessee on such Central and State Government securities have all along been assessed as ‘business income’ and, therefore, there was no justification for disallowing the corresponding interest expenditure on the plea that that the investments are for non- business purpose. Even in the instant assessment year, a reference has been made to the assessment order to point out that the interest income from such securities is lying assessed as ‘business income’. Considering the aforesaid aspect, as also the fact that IDBI General Regulations, 1994 prescribe for making investments in securities of Central and State Governments, we do not find any reason to uphold the stand of the income-tax authorities that such investments are not in the course of assessee’s business. In fact, there is an apparent contradiction in the stand of the assessing authority inasmuch as the interest yielded by such investments is assessed as ‘business income’ whereas the interest expenditure attributable to such investments has been sought to be treated as a non-business expenditure. Considering the aforesaid, we deem it fit and proper to set-aside the order of CIT(A) on this aspect and direct the Assessing Officer to allow the claim made by the assessee. Thus, on this aspect, assessee succeeds. In the result this ground of appeal is allowed. Disallowance of deduction under section 80M - HELD THAT:- As relying on assessee's own case [2015 (1) TMI 516 - ITAT MUMBAI] we direct the Assessing Officer to restrict the disallowance under section 80M to 1% of the dividend income. In the result, the assessee succeeded on this ground of appeal. Correct head of income - profit on sale of investment - capital gain or Business Income - assessee submits that the A.O. has assessed the income from sale of shares of Joint Stock Company as Capital Gains for all the years i.e. AY 1997-98 to AY 2012-13 - HELD THAT:- Assessee vehemently submitted that the A.O. taxed the income from sale of Joint Stock Company under the head Capital Gain. However, the ld. CIT(A) has treated the profit on sale of Joint Stock Company as Business Profit. As further noted that the department has accepted the similar profit on sale of investment as a Capital Gain from A.Y. 2002-03 to 2012-13 as the same has not been disputed by ld. DR while making his submission. Considering the fact that similar profit is accepted as Capital Gain from the year 2002-03 till 2012-13, therefore, the revenue should follow the consistency when there is no variance in the facts. Hence, we direct the A.O. to treat the profit on sale on investment as Capital Gain as has been accepted from A.Y. 2002-03 onwards. Therefore, the assessee also succeeded on this ground. Exemption u/s 10(23G) - assessee has claimed income exempt on gross basis in the return of income furnished by assessee - HELD THAT:- The co-ordinate bench of Tribunal in ADIT vs. Credit Agricole Indosuez [2013 (9) TMI 364 - ITAT MUMBAI] also held that it is an undisputed proposition that exemption under section 10(15) on the gross interest and not on net interest. The co-ordinate bench followed the decision Dresdner Bank Ag [2006 (10) TMI 175 - ITAT BOMBAY-F] and JCIT vs. American Express Bank Ltd. [2012 (8) TMI 371 - ITAT MUMBAI] . Considering the decision of coordinate bench of Tribunal, we direct the A.O. to allow the deduction on gross basis, of cource after deducting the direct expenses attributable to earning such income. In the result, the assessee also succeeded on this ground.
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