TMI Blog2015 (5) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance u/s 14A - Assessee claimed deduction u/s 10(23)G on gross basis, whereas the AO held that in view of insertion of section 14A w.r.e.f. 01.04.1962 only the net income has to be included for the purpose of deduction against the gross interest and is to be reduced from the total income - Held that:- From the perusal of the accounts, it is prima facie seen that assessee’s net worth including reserve and surplus is more than the average investments. In such a situation, the applicability of 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 and Power Ltd. ( 2009 (1) TMI 4 - HIGH COURT BOMBAY) needs to be considered. Since this aspect has not been looked into either by the AO or by the Ld. CIT(A), therefore, we are of the opinion that this matter should be restored back to the file of the AO to examine this contention of the assessee - Decided in favour of assessee for statistical purposes. Disallowance u/s 14A while computing the book profit u/s 115JA - Held that:- This issue had also come up for consideration before the Tribunal in assessee’s own case wherein after taking note of the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed on the WDV of the leased assets. - Decided in favour of assessee. - ITA No. 4600/Mum/2001, ITA No. 4783/Mum/2001 - - - Dated:- 10-4-2015 - Shri Sanjay Arora And Shri Amit Shukla JJ. For the Appellant : Shri D.V. Lakhani For the Respondent : Ms. S. Padmaja ORDER Per Amit Shukla, JM: These are the cross appeals filed by the Assessee as well as Revenue against the order dated 14.05.2001 passed by Ld. CIT(A)-8, Mumbai for the quantum of assessment u/s 143(3) for the A.Y. 1998-99. 2. We will first take up, assessee s appeal wherein various grounds of appeal have been taken challenging the impugned order on following issues:- i) Ground no. 1 and 2 relates to disallowance of deduction u/s 35D of ₹ 601353/-. ii) Ground no. 3 is alternative to ground no. 1 and 2, wherein, the assessee has contended that the deduction should be allowed u/s 37(1). iii) In Ground no. 4 and 5 the assessee has challenged the disallowance u/s 14A while determining the deduction u/s 10(23)G. iv) In ground no. 6 to 8, the assessee has challenged the disallowance u/s 14A while computing the book profit u/s 115JA. 3. The assessee s company is engaged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance. We therefore, remit this issue to the file of the Assessing Officer with the directions to decide this issue afresh in the light of our order after allowing the assessee reasonable opportunity of being heard in the matter. Thus consistent with the view taken in the earlier years we also set aside this issue to the file to the AO with the similar directions. 6. As regards ground no. 3 is concerned, this is an alternative ground that if such a deduction is not allowed u/s 35D, then same should be allowed u/s 37(1). Since this matter has been restored back to the file of the AO, therefore, the AO will examining this claim while deciding the issue of deduction u/s 35D. In case deduction u/s 35D is not allowed then the Assessing Officer will examine the claim u/s 37(1) after hearing the assessee and decide in accordance with the law. Thus ground no. 3 is allowed for statistical purposes. 7. In ground 4 and 5, the assessee has challenged the disallowance u/s 14A, on the ground that deduction u/s 10(23)G has been computed at ₹ 85,66,405/- instead of claim of the assessee at ₹ 2,88,26,805/- and further reducing the deduction u/s 10(33) at ₹ 89,83,946/- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. On the other hand, Ld. DR strongly relied upon the orders of the authorities below and submitted that identification of source of investment should be looked into, if the assessee has claimed that it has made investment out of its own surplus funds. 11. We have heard the rival contention and also perused the relevant material placed on record. From the perusal of the accounts, it is prima facie seen that assessee s net worth including reserve and surplus is more than the average investments. In such a situation, the applicability of decision of the Hon ble Bombay High Court in the case of HDFC Bank Ltd. (supra) and Reliance Utilities and Power Ltd. (supra) needs to be considered. Since this aspect has not been looked into either by the AO or by the Ld. CIT(A), therefore, we are of the opinion that this matter should be restored back to the file of the AO to examine this contention of the assessee and also the other contentions and decide in view of the decision of the Hon ble jurisdictional High Court and in accordance with law, after giving effective opportunity of hearing to the assessee to present its case. Accordingly, ground no. 4 and 5 are treated as allowed for stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d expenditure includes expenditure by way of entrance fees, which, where so, would assume the character of a capital expenditure, inadmissible u/s 37(1). We decide accordingly, so that AO shall allow the expenditure subject to his verification as to club entrance fees, if any. 16. In ground no. 2, revenue has challenged deduction of interest u/s 36(1)(iii) of ₹ 19,76,12,033/-. It has been admitted by both the parties that this issue is also covered by the decision of the Tribunal for the earlier years and also in the subsequent years from the A.Ys. 1999-2000 to 2001-02. 17. As in the earlier years, the assessee has claimed a sum of ₹ 19,76,12,033/- as interest capitalized in the books, but was claimed as deduction u/s 36(1)(iii) in the computation of income. The Assessing Officer disallowed the said claim after detailed discussion mainly on the ground that, after capitalization, the amount of interest has merged with the cost of the assets and after insertion of Explanation 8 to section 43, the various case laws as relied upon by the assessee will not be applicable. The Ld. CIT(A) allowed the assessee s claim following the earlier order of the Ld. CIT(A) holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company had entered into genuine lease transaction and assessee being the owner of the leased assets and has been used for the business purpose, therefore, depreciation is to be allowed. 19. Before us, Ld. DR relied upon the decision of ITAT Special Bench in the case of Indus-in Bank Ltd. Vs. ACIT, whereas the learned counsel relied upon the order of the Tribunal in assessee s own case and also the decision of Hon ble Supreme Court in the case of ICDS Ltd Vs. CIT. 20. After considering the rival submissions and the decisions of the Tribunal in assessee s own case for the earlier years, it is an undisputed finding of fact that, the assets has been leased under operating lease and such lease transaction have been found to be genuine transaction. In such a case, the claim of depreciation on these assets is to be allowed in view of the decision of Hon ble Supreme Court in the case of ICDS Ltd. This view has been reiterated by the Tribunal in all the earlier years and also in the subsequent years. If depreciation has been allowed on the lease assets in the earlier years, then in this year same depreciation cannot be disallowed on the WDV of the leased assets. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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