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2015 (5) TMI 722 - ITAT DELHI

2015 (5) TMI 722 - ITAT DELHI - [2015] 40 ITR (Trib) 610 (ITAT [Del]) - Disallowance of the claim of bad debts - CIT(A) deleted the disallowance - Held that:- 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 in the case of TRF Ltd. v. CIT [2010 (2) TMI 211 - SUPREME COURT] wherein held that After 1st April 19 .....

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14A of the Act read with Rule 8D of the ITA rules. He also included those investment on which no dividend income was received by the assessee 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 rig .....

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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 will deal with the appeal of the department in ITA No. 5386/Del/2011. Only effective ground has been raised in this appeal read as under :- 1. On the facts and in the circumstances of the case and in .....

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n off amounting to ₹ 40,16,401/- in the P & L Account. The AO asked the assessee to justify the claim of bad debts. The AO observed that some of the bad debts were related to the sister concerns which by no stretch of imagination could be said to be bad debts. According to the AO, the assessee had not furnished any convincing explanation and had not established that the requisite conditions of Section 36(1) (vii) read with Section 36 (2) of the IT act 1961 (hereinafter referred to the .....

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ITR 528 (Kerla) CIT vs. Coats of India Limited (1998) 232 ITR 324. 5. Being aggrieved the assessee carried the matter to the Ld. C.I.T.(A) and submitted as under : The statement given by Ld. Assessing Officer that No evidence has been produced so as to explain the contention of the assessee that these debts become bad in this year or in the earlier year is wrong statement. We are enclosing herewith the party wise detail of bad debts written off along with the years in which the bad debts has bee .....

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ion (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 .....

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s held that 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. We are also relying on the following judgment to substantiate of our claim in this regard CIT vs. Vistar Construction Pvt. Ltd, [2010 - TMI - 201401 Delhi High Court ] CIT vs. Modi Telecommunication Ltd, [2010] 325 ITR 291 (Delhi High Court) CIT vs. Bonanza Portfolio Ltd, .....

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far as the provisions of section 36(1) (vii) read with section 36(2) of the Act are concerned. After 1-4-1989, 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, subject to the provisions of section 36(2) that 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 .....

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Ltd. v. CIT [2010] 323 ITR 397/190 Taxman 391. In view of the aforesaid, the disallowance of ₹ 40,16,401/- on account of bad debts written off is directed to be deleted. As a result, the Ground of appeal 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 submission .....

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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 findings of the Ld. CIT on this issue. Accordingly we do not see merit in this appeal of the department. 10. Now, we will deal wi .....

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ing expenses for earning dividend Income to the extent of ₹ 4,41,02,912/- by considering those Investment on which no dividend has been received by the assessee company during the year; 2(c) That the Ld. Commissioner of Income tax (Appeals) has gone wrong in disallowing expenses for earning Dividend Income to the extent of ₹ 4,41,02,912/- by considering bank charges as interest; 2(d) That the Ld. Commissioner of Income tax (Appeals) has gone wrong in disallowing expenses for earning .....

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not made any investment out of borrowed fund but has utilized its internal revenue generation; 2(g) That the Ld. Commissioner of Income tax (appeals) has gone wrong in passing a non-speaking order on the submitted issues; 2. That the appellate reserve the right to add, amend, later, delete, any/all grounds of appeal either before or at the time of the hearing of the appeal. 11. From the above ground it is gathered that the grievance of the assessee relates to the sustenance of the addition to t .....

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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 investm .....

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to income which does not form part of total income 0 2. In a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula- AX B/C Where A= amount of expenditure by way of interest other than the amount of interest included in clause (1) incurred during the previous year B= the average of value of investment, income from which does no .....

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e balance sheet of the assessee, on the first day and the last day of the previous year ½ % of average investment of ₹ 77,73,84314/-= 38,86,921/- Total disallowance Amount disallowed by the assessee Further disallowance to be made /- ₹ 4,51,57,204/- Rs. 10,54,292/,- Rs. 4,41,02,912 13. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted as under :- During the Assessment Year 2008-09 the assessee has received dividend of ₹ 2,72,25,894/- mainly .....

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any 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 c .....

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4A and not all the investments on which no dividend is received during the year. Chennai Tribunal has given its decision after considering the cases of Godrej & Boyce Mfg Co. Ltd. [328 ITR 81 (Bom)] and Walfort Share and Stock Brokers Pvt. Ltd. 233 CTR 42 (SC). 14. The Ld. CIT(A) after considering the submissions of the assessee observed that the issue involved in the appeal was decided by Delhi Special Bench of the ITAT in the case of Cheminvest Ltd. Vs. ITO (2009) 121 ITD 318 (Delhi) (SB). .....

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interest, etc. pertaining to that would also not be allowable because there is no taxable income of the assessee against which such expenditure can be allowed; (b) the disallowance under section14A could be made in a year in which no exempt income had been earned or received by the assessee; (c) the allowance of expenditure in relation to dividend income would not be admissible in computing the income of an assessee under the Act in both the situations, whether the shares are held as investment .....

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46 SOT112 relied by the assessee was distinguishable because in the said case the assessment year involved was 2006-07. The Ld. CIT(A) by relying the decision of the Delhi Special Bench of the ITAT in the case of Cheminvest Ltd. vs. ITO (Supra) held that the disallowance u/s 14A could be made in a year in which no exempt income had been earned or received by the assessee. Accordingly, the disallowance made by the AO was confirmed. 16. Now the assessee is in appeal. The Ld. Counsel for the asses .....

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t & 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 fact .....

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e Ld. CIT(A) had also not considered the facts in right prospective and wrongly applied the decision of the ITAT. It was submitted that those investment on which no dividend income was received by the assessee in current year should have been excluded from the investment while calculating the disallowance u/s 14A of the Act. The reliance was placed on the judgment of the Hon ble Delhi High Court in the case of CIT vs. HOLCIM INDIA P. LTD. reported at [(2014) 90CCH0081 (Delhi)], copy of the said .....

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011 (ITAT Delhi). 7. Sam P. Barucha in ITA No. 3889/Del/2011. (ITAT Mumbai) 8. Siva Industries Holdings Ltd. vs. ACIT 145 TTJ 497 (ITAT Chennai) 9. M/s Mercantile Capital & Finance Services P. Ltd. ITA No. 2571 / Del/ 2011 (ITAT Delhi) 10. M/s DCIT vs. REI Agro Ltd. 144 ITD 141 (ITAT Kolkata) 11. CIT vs. Consolidated Photo & Finvest Ltd. 358ITR310 (HC Delhi) 12. CIT vs. REI Agro Ltd. ITA No. 161 of 2013 (HC Calcutta) 13. CIT vs. Holcim India P. Ltd. in ITA No. 486 of 2014 (HC Delhi) 14. .....

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012 (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 s .....

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