TMI Blog2012 (5) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that the claim for depreciation u/s 32 is independent of and unconnected with the items of income added by the A.O. in assessment u/s 143(3) r.w.s. 147. As such this deduction cannot be allowed. - Decided against the assessee. However relief granted to assessee, that if the depreciation allowance is not to be actually allowed then the written down of the assets, which was reduced by claiming depreciation should be accordingly increased, subject to verification by AO. Deduction u/s 80IA - Exemption u/s 10(23G) in respect of any income by way of dividend, interest or long term capital gains of an infrastructure capital fund or an infrastructure capital company or investment made by way of shares or long term finance in any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility, which fulfils the conditions specified in sub-section (4A) of section 80-IA. - shares purchased prior to the introduction of this provision are ineligible for the benefit. - held that:- there is no logic in denying the exemption u/s 10(23G) in respect of the shares which were purchased on 31.01.1996. We have noticed above that the exemption under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which we have allowed vide para 3 of the said order. Ground no.2 is against the confirmation of disallowance of sports club expenditure of Rs.1,64,925. This ground is similar to ground no.2 for assessment year 1998-99 which we have allowed vide para 5 of the order. Following the view taken in immediately preceding year, we allow these two grounds of appeal. 4. Ground no.3 is against the confirmation of disallowance of contribution to Death Benevolent Fund / Scheme amounting to Rs.39,74,926. This ground is similar to ground no.3 for assessment year 1998-99 which has been disposed off in para 6 by restoring the matter to the file of A.O. with a direction to allow deduction on actual payment basis and not on provision made. Following the view taken in assessment year 1998-99, we set aside the impugned order and restore the matter to the file of A.O. for taking similar decision after allowing a reasonable opportunity of being heard to the assessee. 5. Ground no.4 is against confirmation of disallowance of Rs.1,49,345 out of advertisement expenses. This ground is similar to ground taken by the assessee for the assessment year 1998-99, which has been discussed in para 6 of the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening stock. The Hon ble jurisdictional High Court in CIT Vs. Mahalaxmi Glass Works Pvt. Ltd. [(2009) 318 ITR 116 (Bom.) ] and the Hon ble Delhi High Court in CIT Vs. Mahavir Alluminium [(2008) 297 ITR 77 (Del.) ] have held to this extent. As the authorities below have not adjusted other figures with the amount of tax, duty, cess etc., we set aside the impugned order and restore the matter to the file of A.O. for deciding it afresh in accordance with the afore-noted judgements and the provisions of section 145A. 10. Ground no.8 is against not allowing unabsorbed business loss, depreciation and investment allowance of the amalgamating companies. Similar issue was subject matter of ground no.11 for assessment year 1998-99 and we have upheld the view taken by the learned CIT(A) in directing the A.O. to look into this matter and after considering the allowability as per the provisions of the Act, to deal with this issue accordingly. Following the same view, we direct the AO to decide the issue accordingly. 11. Ground no.9 is against not allowing deduction u/s 80HHC. This ground is similar to ground no.12 for assessment year 1998-99. Considering the judgment of the Hon ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken in the immediately preceding year, we uphold the impugned order and dismiss this ground of appeal. 17. Last ground of the Revenue s appeal is against deletion of addition of Rs.53,74,474 being expenses from Global Depository Receipts issue. This ground is similar to the last ground of the Revenue s appeal for assessment year 1998- 99, which has been disposed off by us through para 34 of the said order. Following the view taken by us in the said earlier year, we overturn the impugned order on this issue and restore the view of the Assessing Officer. This ground is allowed. 18. In the result, both the appeals are partly allowed. ITA No.4362/Mum/2006 : Asst.Year 2000-2001 : Assessee s appeal : 19. Ground nos. 1 to 3 deal with the initiation of reassessment proceedings and the further challenge has been made to the additions made by the Assessing Officer in his order u/s 147 on the issues which were not there in the reasons for initiation of reassessment proceedings. Briefly stated the facts of these grounds are that the assessee furnished its return declaring loss of Rs.101.09 crore. The return was processed u/s 143(1). Thereafter it was observed by the A.O. that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 was issued but also all such other items of income which come to his notice during the course of proceedings under this section having the effect of escapement of income. We, therefore, hold that the contention raised by the learned A.R. in this regard is not acceptable. These three grounds are not allowed. 21. Ground nos.4 and 5 about loss on exchange rate fluctuation on outstanding foreign currency loans of Rs.3,29,41,000 was not pressed by the learned A.R. These grounds are, therefore, dismissed. 22. Ground nos.6 and 7 are against the confirmation of addition of Rs.3,30,49,518 on account of unutilized Modvat credit to the closing stock. The facts and circumstances of this ground are mutatis mutandis similar to ground no.7 for assessment year 1999-2000 which has been discussed above while disposing off the appeal for the said year. Following the same view, we set aside the impugned order and restore the matter to the file of A.O. for working out the addition, if any, as per our directions above. 23. Ground nos.8 and 9 about not granting deduction for bad debt were not pressed by the learned A.R. The same, therefore, stand dismissed. 24. Ground no.10 is against confirma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reason that the relation between the assessee and M/s Bilt Electronics Private Limited is not that of holding and subsidiary company but that of the sister-concerns only. The parameters for allowing deduction in respect of irrecoverable amount advanced to subsidiary company by holding company are different from those given by one sister-concern to another sister-concern. The obvious reason is that the subsidiary company is wholly or at least partly dependent on its holding company. It is in the advancement of the interest of the holding company that the funds are advanced by such holding company to its subsidiary company for meeting its day-to-day needs. It is obvious that any upswing or downfall in the business of the subsidiary company has direct impact on the holding company. Per contra the position is different qua to sister-concerns. Unless there is a relationship of holding company and subsidiary company between two concerns, the profitability of one sister concern has no direct impact on the profitability of the other sister-concern. Adverting to the facts of the instant case we observe that the assessee advanced the said sum to its sister-concern only and that too in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal return filed by the assessee, no claim for depreciation allowance u/s 32 was made. Only when notice u/s 148 was issued, the assessee filed return and made claim for depreciation u/s 32 for the first time. The primary question which falls for our consideration is as to whether any fresh benefit can be claimed in the proceedings u/s 147. The Hon ble Supreme Court in the case of Sun Engineering Works (P) Ltd. (supra) has held that in the reassessment proceedings it is not open to assessee to claim a review of the concluded items, unconnected with the escapement of income. Further in the case of Chettinad Corporation (P) Ltd. (supra) it has been held that reopening of an assessment can be only for the benefit of Revenue and thus the subject matter at the instance of the assessee not relevant to the proceedings, cannot be considered at the stage of reassessment. The position which, therefore, emerges is that the assessee cannot lodge a fresh claim for the first time in the proceedings flowing out of notice u/s 148. As section 147 deals with the escapement of income, it is impermissible to the assessee to make fresh claims in such reassessment proceedings. Proceedings u/s 147 are fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to Rs.63,16,01,082 which has not been allowed in the current year. This ground is not allowed. 30. In the result, the appeal is partly allowed for statistical purposes. ITA No.5811/Mum/2006 : Asst.Year 2001-2002 : Assessee s appeal : 31. First ground is against the confirmation of disallowance of Rs.1.21 crore u/s 14A of the Act. This ground is similar to the ground raised in assessment year 1998-99, which has been disposed off in our separate order by remitting the matter to the file of A.O. with certain directions. Following the view taken in the said earlier year, we set aside the impugned order and remit the matter to the file of A.O. for deciding this issue afresh in accordance with our directions contained in para 8 of our order for assessment year 1998-99. 32. Ground no.2 about the confirmation of addition of Rs.6,04,57,000 towards loss due to exchange rate fluctuation on outstanding foreign currency loans was not pressed. The same is, therefore, dismissed. 33. Ground nos. 3 and 4 is against confirmation of addition of Rs.2,14,00,783 on account of inclusion of unutilized Modvat credit in the value of closing stock. This ground is similar to ground no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er law after allowing a reasonable opportunity of being heard to the assessee by considering the correct facts relevant to the current year alone. 36. Last ground is against not allowing exemption u/s 10(23G) in respect of capital gain of Rs.20,49,33,542 arising on the shares of M/s.Skycell Communication Limited. The facts apropos this ground are that the assessee sold shares of M/s Skycell Communication Limited, which secured cellular phone operator licence for the city of Chennai, in the year under consideration and claimed such capital gain to be exempt u/s 10(23G). On being called upon to furnish the details in this regard the assessee filed the following detail showing date of investment, assessment year in which investment was made, number of shares, cost of shares, total cost, sale consideration and gain on sale of shares. Date of investment Asst. Year of Inv. No.of shares (crores) Cost (Crores) 31.01.1996 1996-97 0.84 8.4 23.12.1997 1998-99 0.84 8.4 08.03.1998 1998-99 0.84 8.4 Total cost 2.52 25.2 Sale consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quarters about the continuance of exemption available u/s 10(23G) in respect of investments made prior to 1st June, 1998 for assessment year 1999-2000 and onwards. The Central Board of Direct Taxes have clarified by way of a press release that the exemption available under the provisions of section 10(23G), prior to its amendment by the Act, will continue to govern the investments made prior to 1st June, 1998. The Rules and Forms in this regard have since been notified vide notification No.S.O.897(E) dated 12th October, 1998 [(1998) 149 CTR (St) 48]. (Emphasis supplied by us) 39. Accordingly the Finance Act, 1998 introduced Explanation 2 providing as under:- Explanation 2. : For the removal of doubts, it is hereby declared that any income by way of dividends, interest or long-term capital gains of an infrastructure capital fund or an infrastructure capital company from investments made before the 1st day of June, 1998 by way of shares or long-term finance in any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility shall not be included and the provisions of this clause as it stood immediately before its amendments by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision is available on income resulting from the transfer of shares and not from the purchase of shares. If the eligible shares as sold in the relevant period, exemption cannot be denied simply on the ground that such shares were purchased in 1996. Our view is fortified by the order passed by the Hyderabad Bench of the Tribunal in the case of V.B.C.Ferro Alloys Limited Vs. ACIT [(2007) 107 ITD 367 (Hyd.) ] for the assessment year 2000-2001 and 2001-2002 in which it has been categorically held that section 10(23G) inserted by the Finance Act, 1999 is declaratory and hence retrospective in operation. In this case also, the assessee has been entitled to exemption u/s 10(23G) on long term capital gain arising on infrastructure capital fund investment before 1st June, 1998. The reliance of the learned Departmental Representative on the judgment of the Hon ble Supreme court in the case of Reliance Jute and Industries Ltd. Vs. CIT [(1979) 120 ITR 921 (SC )] is misplaced because in that case the loss incurred in assessment year 1950-51 was held to be not available for set off against the income of assessment year 1960-61. On the strength of the ratio of this judgment, the learned Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.11.29 crore, the A.O. made disallowance of Rs.1,76,04,933. The learned CIT(A) observed that the Assessing Officer had applied rate of 13.50% on such diversion of funds to the tune of Rs.11.29 crore for the entire year. Considering the fact that the A.O. disallowed interest on advance given to JCT Electronics Limited which was amalgamated with the assessee-company, the disallowance of interest to that extent was not called for. Applying the rate of 9.01% interest, the learned CIT(A) reduced the disallowance to Rs.11,62,912. The assessee is aggrieved against this addition. 44. We have heard the rival submissions and perused the relevant material on record. It is observed that the assessee gave loan of Rs.11.29 crore to its sisterconcerns without interest. From the balance sheet of the assessee it can be noticed that there is Share capital of Rs.5.23 crore and Reserves and surplus to the tune of Rs.403.14 crore. If we consider the Debit balance of the Profit and loss account in the Balance sheet to the tune of Rs.13.49 crore, the interest free funds available with the assessee in the form of share capital and reserves and surplus are a little less than Rs.400 crore. As against tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he last effective ground is against the deletion of disallowance of guest house expenses of Rs.19,04,680 and depreciation in respect of guest house at Rs.6,75,571. 51. After considering the rival submissions and perusing the relevant material on record, it is observed that the Hon ble Supreme Court in the case of Britania Industries Limited Vs. CIT [(2005) 278 ITR 546 (SC)] has held that the guest house expenses cannot be allowed as deduction. This decision was rendered in the context of sub-sections (4) and (5) of section 37, which specifically provided that the guest house expenses cannot be allowed as deduction. It is relevant to note that the Finance Act, 1997 has omitted sub-sections (4) and (5) with effect from 01.04.1998. The effect of the omission of these sub-sections is that now the deduction has to be allowed if the guest house is used for the business purposes. In the light of the omission of these provisions, the ratio of the judgment in the case of Britania Industries Ltd. (supra) is not applicable in the period after such omission. As we are concerned with assessment year 2003-2004 when such provision is not there on the statute and further there is no finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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