TMI Blog2015 (5) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... ee during the year consideration. The Ld. CIT(A) also rejected the explanation of the assessee, without pointing out any defect in the amount of disallowance worked out by the assessee (copy of which is placed at page no. 111 of the paper book). In the present case it seems that neither the AO nor the Ld. CIT(A) considered the facts of the present case in right prospective. We, therefore, deem it appropriate to remand this issue back to the file of the AO to be decided afresh in accordance with law after providing due to a reasonable opportunity being heard to the assessee. He is also directed to consider the various case laws relied by the Ld. Counsel for the assessee while deciding the issue afresh. - Decided in favour of assesse for statistical purposes - ITA NO. 5386/DEL/2011, ITA No. 5501/ Del/ 2011 - - - Dated:- 15-5-2015 - SHRI N.K.SAINI AND SHRI A.T.VARKEY, JJ. For the Appellant : Sh. Salil Agarwal, Adv. Shailesh Gupta For the Respondent : Sh. Gaurav Dudeja , Sr. Dr, Adv. ORDER Per N.K.Saini, A. M. : These cross appeals by the department and the assessee are directed against the order dated 20.10. 2011 of CIT(A)- VII New Delhi. 2. First we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28. (i) ..(ii) (vii) subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year: Further as per sub section (2) of section 36 of the Income tax act, 1961 any deduction for a bad debt or part thereof, the following provisions shall apply i) .. no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee;] (ii) . (iii) . . . . In this regard we would like to point out that these bad debts have been actually written off in the books of account of the assessee company and also these amounts have been taken in to account in computing the income of the assessee company in earlier previous years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal no. 4 raised by the appellant is accordingly allowed. 7. Now the department is in appeal. The Ld. DR reiterated the observations made by the AO and strongly supported the assessment order dated 23.12.2010. In his rival submissions, the Ld. Counsel for the assessee reiterated the submissions made before the authorities below. 8. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee had written off debts in its books of accounts and it is not the case of the AO that the debts written off were not related to the business of the assessee. On a similar issue the Hon ble Supreme Court in the case of TRF Ltd. v. CIT [2010] 323 ITR 397 has held as under :- After 1st April 1989, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. 9. We, therefore, keeping in view the ratio laid down by the Hon ble Supreme Court in the aforesaid referred to case, do not see any valid to interfere with the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO during the course of assessment proceedings noticed that the assessee received dividend income of ₹ 2,72,25,894/-. He asked the assessee to show cause as to why disallowance u/s 14A of the Act read with Rule 8D of the Income-Tax Rules 1962 should not be made. In response, the assessee furnished the written submission along with the detailed working of disallowance u/s 14A of the Act. The AO observed that the assessee had not maintained separate bank accounts in respect of investment and other activities and that there was no feature distinguishing the funds used for investing in shares. He did not accept this contention of the assessee that there was common pool of funds and it could not be ascertained whether investments were made out of internal accruals or from borrowed funds. The A.O. was of the view that had the company not made investment, the total borrowings would have been lower leading to reduction to the interest costs. He also observed that there were certain expenses for earning exempt income and was of the view that the administrative expenses should have been attributable towards earning of dividend. The AO made a disallowance of ₹ 4,41,02,91 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44,814/- ii Investment as on 31.03.2008 ₹ 64,54,23,814/- During the current assessment year i.e. AY 2008-09 the assessee company has sold investment in M/s Thomson Press(India) Limited and out of the sale proceeds it made fresh investment as under :- iii Investment in M/s ITAS Media Pvt. Ltd. ₹ 1,00,000/- iv. Investment in M/s Today Retail Network Pvt. Ltd. ₹ 1,00,000/- During last 18-20 years the assessee company has not made any investment out of borrowed funds which is quite evident from the year wise investment chart [Copy of the same is attached herewith as Annexure-A]; From the Year wise investment chart it is quite evident that no investment has been made by the assessee company from borrowed funds and accordingly interest and finance charges should not be considered for the purpose of calculation of disallowance u/s 14A read with Rule 8D; In the case of Siva Industries Holding Ltd. [ITA No. 2148/Mds/2010 dated 20.05.2011] Chennai Tribunal held that only those investments on which dividend is received during the year are required to be considered for the purpose of disallowance u/s 14A and not all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the AO was confirmed. 16. Now the assessee is in appeal. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the AO wrongly worked out the disallowance u/s 14A of the Act read with Rule 8D of the IT Rules. It was, further, submitted that the assessee correctly worked out the figure of disallowance in accordance with the Rule 8D at ₹ 8,70,491/-, a reference was made to page no. 111 of the assessee s paper. It was further, submitted that the assessee had not incurred / debited the direct expenditure to Profit Loss Account, for earning exempt income. It was pointed out the assessee had already added back a sum of ₹ 10,54,292/- in respect of expenditure relating / attributable to exempt income, in the computation of taxable income which has also been confirmed by the auditor in clause 17 (k) of tax audit report. It was submitted that only those investment which earned the income could have been considered by the AO while making the disallowance, however, the AO did not appreciate the facts in right prospective. It was pointed out that for the year under consideration the investment of ₹ 2,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court) 18. CIT vs. M/a Lakhani Marketing Incl. Ltd. ITA No. 970 of 2008 (P H High Court) 19. M/s JM Financial Limited vs. ACIT ITA No. 4521/Mum/2012 (ITAT Mumbai) 20. M/s EIH Associated Hotels vs. DCIT In ITA No. 1503/Mds/2012 (ITAT Chennai) 21. CIT vs. Oriental structural Engineers Ltd. In ITA No. 605/2012 (Delhi High Court) 22. M/s GDA Finvest Trade P. Ltd. in ITA No.3353/Del/2013 (Hon ble ITAT) 23. CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. (2014) 42 taxmann.com 270. 24. CIT vs. UTI Bank Ltd. (2013) 32 taxmann. Com 370. (Gujarat High Court) 25. ACIT vs. Champion Commercial co. Ltd. ITA No. 644/Kol/2012 (ITAT Kolkata) 26. M/s DCIT vs. REI Agro Ltd. in 160 TTJ 107. (ITAT Kolkata) 17. In his rival submissions, the Ld. DR supported the orders of the authorities below and reiterated the observations in the assessment order made by the AO and in the impugned order by the Ld. CIT(A). 18. We have considered the submissions of both the parties and careful gone through the material available on the record in the present case, it appears ..... X X X X Extracts X X X X X X X X Extracts X X X X
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