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M/s. TVS Motor Company Ltd. Versus The Assistant Commissioner of Income Tax, Company Circle III (2) , Chennai and Vica-Versa

Revision u/s 263 - A.O. has not examined whether the depreciation is admissible under section 32(iia) as additional depreciation can be claimed only on assets installed during the relevant previous year - Held that:- If the assessee has not used the new assets for more than 180 days, the assessee is only eligible to claim additional depreciation at 50%. The statute provides 50% for the year under consideration in which it is put to use. The statute does not provide anything to claim additional d .....

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ught forward capital loss and benefit under section 112 - A.O. has not examined whether the units sold by the assessee would fall within the definition given in Explanation to section 115AB and whether the proviso to section 112 would apply to the assessee as the said proviso would appear to apply only to those shares, bonds or units which are eligible for indexation benefit under second proviso to section 48 read with third proviso thereof - Held that:- In the assessment order, the Assessing Of .....

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Accordingly, the ld. CIT has rightly invoked section 263 of the Act on this issue.- Decided against assessee.

Non consideration of disallowance of expenditure relating to exempt income as provided in section 14A - Held that:- The Assessing Officer has not examined the issue at all and simply allowed the claim of the assessee. Therefore, we are of the opinion that the ld. CIT has rightly invoked section 14A of the Act - Decided against assessee.

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ore the Assessing Officer, the assessee has not filed the above certificate and copies of registration with SEBI. Accordingly, it is fresh evidence, which was produced before the ld. CIT(A), which is the basis for his conclusion. In our opinion, it is appropriate to remit the issue to the file of the Assessing Officer for fresh consideration. Since the set off of brought forward capital loss and benefit under section 112 of the Act are interlinked, we set aside the order passed by the ld. CIT(A) .....

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n notified with effect from 24.03.2008 and applicable with effect from the assessment year 2008-09. Therefore, the ld. CIT(A) has rightly followed the decision of the Tribunal and restricted the disallowance to 2% of the exempt income. In view of the above, we find no infirmity in the order passed by the ld. CIT(A) - Decided against revenue. - I.T.A. Nos. 756/Mds/2009 & 53/Mds/2014, I.T.A. No. 942/Mds/2011 - Dated:- 28-8-2015 - Shri Chandra Poojari and Shri V. Durga Rao, JJ. For The Appellant : .....

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Tax (Appeals) III, Chennai dated 21.02.2011 for the assessment year 2004-05. I.T.A. No. 756/Mds/2009 2. Brief facts of the case are that the assessee company is engaged in the business of manufacture and sale of two wheelers. The assessment was completed under section 143(3) of the Act on 29.12.2006 by determining total income of the assessee at Rs. .201,90,40,968/-. Thereafter, the ld. CIT, while exercising power under section 263 of the Act issued notice for the following reasons: a) The asse .....

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33 and after setting off the brought forward losses the capital gains computed was Rs. . 8,05,38,781. This has been taxed at 10% instead of 20% as applicable. The A.O. has not examined whether the units sold by the assessee would fall within the definition given in Explanation to section 115AB. The A.O. has also not examined whether the proviso to section 112 would apply to the assessee as the said proviso would appear to apply only to those shares, bonds or units which are eligible for indexati .....

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disallowance of expenditure relating to exempt income as provided in section 14A of the Income Tax Act. 3. In response to notice under section 263, the assessee filed written submission before the ld. CIT. After considering the written submissions in respect of additional depreciation, the ld. CIT has observed that according to the assessee, as per clause (iia) of section 32(1) in case of new machinery or plant which has been acquired and installed, the assessee is eligible to claim an additiona .....

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in law which states that additional depreciation will be carried on the subsequent year and allowed in that year. And the assessee is only eligible for 7.5% and law does not permit to carry forward the remaining balance of 7.5% out of 15% if the asset is not put to use for more than 180 days. 4. In so far as set off of brought forward capital loss and benefit under section 112 of the Income Tax Act are concerned, the assessee has submitted before the ld. CIT that the Sundaram Mutual Funds are r .....

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eligible for the benefit of 10% under proviso to Sec.112 has not been explained. The mutual fund referred by the assessee is not eligible for indexation with third proviso thereof. Only the capital indexed bonds issued by the Government are eligible for indexation benefit under second proviso to Sec. 48. That being the case, the question is whether the assessee will be eligible for the benefit of proviso to Sec.112, which states that 10% tax is to be computed before indexation. Proviso to Sec.11 .....

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to the second proviso to Sec.48. However, as the issue of application of proviso to Sec.112 was not considered by the Assessing Officer, I would set aside the issue to him with a direction to examine the same in the light of the assessee s reply 4.2 The assessee s reply on the issue of application of Sec.112 based on CBDT Circular was considered. CBDT Circular only speaks of application of flat rate of tax u/s.112 and not on the application of proviso to Sec.112 which is with reference to tax p .....

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come rather than gross may also be examined by the Assessing Officer on the basis of CBDT Circular in 721 of 13.09.1995. 5. In so far as disallowance under section 14A is concerned, it was submitted before the ld. CIT that dividend income is exempt under section 10(34) and the assessee had incurred any expenditure in relation to the dividend income. Further, the investments were not made out of any borrowed funds and hence no interest expenditure was incurred. However, the ld. CIT was of the opi .....

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icer, during the course of assessment proceedings, specifically asked the eligibility in respect of additional depreciation which has been pointed by the ld. Counsel for the assessee from paper book page No. 11. He further submitted that as per the question raised by the Assessing Officer, the assessee has replied with regard to additional depreciation in paper book page Nos. 17, 22 & 27 and therefore, the ld. Counsel for the assessee has submitted that the Assessing Officer, after consideri .....

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ers Pvt. Ltd. v. ACIT in I.T.A. No. 165/mds/2014 dated 09.04.2014. 8. On the other hand, the ld. DR has submitted that as per clause (iia) of section 32(1), in case of new machinery or plant which has been acquired and installed, the assessee is eligible to claim additional depreciation of 15% provided the conditions as stated under the said section is fulfilled. The ld. DR has submitted that the assessee has not put to use the new machinery for more than 180 days for the assessment year under c .....

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not permitted under law. 9. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The issue involved in this appeal is with regard to allowability of additional depreciation. The facts are not disputed with regard to use of machinery was below 180 days. During the course of assessment proceedings, the Assessing Officer has asked the assessee as per paper book page No. 11 to furnish list of machinery on which additional depreciation is claimed .....

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d in page Nos. 457 to 526 of the return of income and confirm that we have claimed additional depreciation only on the eligible assets. It was also stated that we also confirm that we have not claimed additional depreciation on dies. At page 27, it has also submitted a note on additional depreciation claimed on assets acquired between 01.10.2002 to 31.03.2003. Clause (iia) of section 32(1) provides for an allowance of 20% of the actual cost of the asset of certain conditions are fulfilled. We ha .....

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nce 50% in the assessment year 2004-05. We wish to confirm that we have not claimed more than 20% as additional depreciation considering both the years together . The Assessing Officer, by following the above computation given by the assessee, allowed the claim of the assessee. For the sake of convenience, the relevant provision of section is reproduced as under: Provided: (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after .....

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hich it is put to use. The statute does not provide anything to claim additional depreciation in the subsequent year. Therefore, the Assessing Officer, without applying his mind, simply accepted the explanation given in the Note by the assessee and allowed the claim of the assessee. Therefore, the order passed by the Assessing Officer is erroneous and prejudicial to the interests of Revenue. In our opinion, the ld. CIT has rightly invoked section 263 of the Act. Therefore, we confirm the order o .....

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tion 32(1)(iia)of the Act. According to the appellant, when it satisfied all the conditions stipulated under the provisos to section 32(1)(iia) of the Act, the Assessing Authority ought not to have restricted the depreciation permissible under the said section by resorting to the second proviso to section 32(1) of the Act. The learned counsel however fairly pointed out before us that in the second proviso to section 32(1) of the Act, that very clause (iia) itself was inserted by Finance Act, 200 .....

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Authority and the Tribunal in having affirmed the action of the Assessing Authority. We, therefore, do not find any scope to entertain the said question of law. 15. In view of the above decision of the Hon ble Jurisdictional High Court, there is no possibility of two views and there is only one view which was expressed by the Hon ble High Court. Even if there is difference of opinion of Coordinate Bench of the Tribunal, the view expressed by the Hon ble High Court has to be accepted. Therefore, .....

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v. Anuja A Sheth, HUF 324 ITR 191. Therefore, he has submitted that the order passed by the Assessing Officer cannot be said that it is prejudicial to the interest of Revenue. 17. On the other hand, the ld. DR has submitted that the Assessing Officer, without making any enquiry, simply allowed the claim of the assessee. Therefore, it is erroneous and prejudicial to the interest of Revenue and the ld. CIT has rightly exercised the jurisdiction on this ground and requested that the same may be uph .....

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ra) and therefore, he has submitted that it cannot be said that the Assessing Officer has not applied his mind. We have carefully gone through the judgement of the Hon ble Bombay High Court in the case of CIT v. Anuja A Sheth, HUF (supra), wherein the Hon ble Bombay High Court has considered that the long term capital gains on sale of shares, the assessee is entitled to benefit of indexation under section 112 of the Act. The above judgement of the Hon ble Bombay High Court is relating to capital .....

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unit as per section 10(23D) of the Act. Therefore, we are of the opinion that the Assessing Officer has failed to discharge his duty to examine the issue. Accordingly, the ld. CIT has rightly invoked section 263 of the Act on this issue. 19. So far as claim of exemption under section 14A of the Act, the Assessing Officer has not examined the issue at all and simply allowed the claim of the assessee. Therefore, we are of the opinion that the ld. CIT has rightly invoked section 14A of the Act 20. .....

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case are that in this case, the assessment was completed on 21.09.2006 under section 143(3) of the Act. Thereafter, the ld. CIT, Chennai I, Chennai has passed an order under section 263 on 31.03.2009 by directing the Assessing Officer to examine the claim of the assessee with regard to set off of brought forward capital loss and benefit under section 112 of the Act. In the assessment order, the Assessing Officer has clubbed both the issues of set off of brought forward capital loss and benefit .....

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well as benefit under section 112 of the Act. The ld. DR has submitted that the assessee neither eligible for set off of brought forward capital loss nor benefit under section 112 of the Act. 23. On the other hand, the ld. Counsel for the assessee has relied on the judgement of the Hon ble Bombay High Court in the case of CIT v. Anuja A Sheth, HUF 324 ITR 191. 24. We have heard both sides, perused the materials on record and gone through the orders of authorities below. We find that the issue i .....

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T(A), the assessee has submitted that as per section 74 of the Act, the brought forward capital loss has to be set off of against capital gains. The ld. CIT(A) has accepted the submission of the assessee and observed that no restriction has been placed on set off of such losses against the capital gain of the subsequent year. We find that the above findings of the ld. CIT(A) is not correct as per section 74(1)(b) - In so far as such loss relates to a long term capital asst, it shall be set off a .....

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ns of section 74(1)(b) of the Act and decide the issue de novo. 25. In so far as benefit under section 112 of the Act is concerned, the Assessing Officer was of the opinion that the Sundaram Bond Saver is only a bond and not unit and he has not considered explanation (b) to section 115 and clause 23(D) to section 10 of the Act. For the purpose of examining whether the Sundaram Bond Saver is a unit or not, it is necessary for the Assessing Officer to examine whether the Sundaram Bond Saver is rec .....

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to certify that Sundaram BNP Paribas Mutual (formally known as Sundaram Mutual Fund) is registered with Securities and Exchange Board of India (SEBI) vide Registration No.MF/034/97/2. Sundaram BNP Paribas Bond Saver (formally known as Sundaram Bond Saver) is a scheme floated by Sundaram BNP Paribas Mutual and the units under the Scheme are securities as defined under the Securities Contracts (Regulation) Act 1956. However, we find that before the Assessing Officer, the assessee has not filed the .....

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the Assessing Officer is directed to decide the issues de novo in accordance law after giving opportunity to the assessee. Accordingly, the ground raised by the Revenue is allowed for statistical purposes. 28. The next issue involved in the appeal of the Revenue is relating to disallowance under section 14A. The Assessing Officer, by invoking the provisions of Rule 8D read with section 14A of the Act worked out the expenditure attributable to exempt income at Rs. .1,48,57,381/- and added back to .....

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der disallowance at 2 per cent of dividend income following decision of ITAT. I find that similar issue came up for adjudication in appellant s own case for A.Y. 2005•06. The ld. CIT(A) in that case had held that the disallowance of 2% made by the AO was not correct in view of Rule 8D introduced subsequently. He held that the disallowance should be made in accordance with Rule 8D. However, the Hon ble ITAT in ITA No.697, 757, 976 & 1017/Mds/2009 dated 22.12.2010 for A.Ys 2000-01 and 200 .....

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x (Appeals) found that the disallowance of 2% made by the assessing authority was not correct in view of the Rule 80 introduced subsequently. The Commissioner of Income-tax (Appeals) held that the disallowance should be made in accordance with Rule 8D. Accordingly, he directed the Assessing Officer to enhance the quantum of disallowance. The Hon ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd v. DCIT (320 ITR 81) has held that the operation of Rule 8D is only prospective and .....

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und raised by the assessee. It is clear from the above that provisions of rule 8D, which has been notified with effect from 24.03.2008, shall apply with effect from assessment year 2008-09 onwards. Since the assessment year involved is A.Y. 2006-07, provisions of rule 8D will not apply for the impugned assessment year. In view of the above facts and respectfully following the decision of the Hon ble ITAT in appellant s own case, the AO is directed to restrict the disallowance to 2% of the exempt .....

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view of the above, we find no infirmity in the order passed by the ld. CIT(A) and the ground raised by the Revenue stands dismissed. 31. In the result, the appeal filed by the Revenue is partly allowed for statistical purposes. I.T.A. No. 53/Mds/2014 32. So far as appeal of the assessee against the order of the ld. CIT(A) III, Chennai dated 21.02.2011 passed under section 143(3) r.w.s. 263 of the Act is concerned, the same is found to have filed late by 980 days. The assessee has filed an Affid .....

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he ITAT. While giving effect to the CIT(A) passed u/s.263, the AO by order dated 29.12.2009 has confirmed all the additions directed by the CIT. Against which appellant preferred an appeal before the CIT(A). The CIT(A) disallowed the claim of the Appellant regarding additional depreciation and allowed all other claims made by the appellant. Against which the department filed an appeal before the Tribunal and is pending. The Appellant did not pursue appeal before the Tribunal with regard to disal .....

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allowance of additional depreciation confirmed by the CIT(A) by order dated 21.02.2011. Subsequently during discussions with our advocates we were advised that it is better we should file an appeal against the order of the first appellate authority to the tribunal. I submit that the omission to file the appeal was because of the mistaken interpretation of the provisions by me and it was inadvertent and not willful. 33. The ld. DR has strongly objected for condoning such huge delay in filing the .....

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