GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (10) TMI 2019 - ITAT MUMBAI

2015 (10) TMI 2019 - ITAT MUMBAI - TMI - Disallowance u/s 14A - Held that:- If some disallowance was required to be made, as per law, then, only the amount of ‘tax free’ investments was to be considered. Analysis of the aforesaid details clearly suggest that the total amount of ‘tax free’ investment was aggregating to ₹ 189.25 millions as against aggregate amount of ‘own funds’ of the assessee to the tune ₹ 2,555.07 millions. Thus, apparently the amount of ‘own funds’ is in far exces .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the assessee company are in far excess of the amount of ‘tax free’ investment appear to be factually correct to us. Hon’ble jurisdictional High Court in the case of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] has held that where the assessee’s own funds and other non-interest bearing funds were more than investment in tax free securities, then no disallowance was required to be made out of the interest expenses u/s 14A - Decided in favour of assessee.

Disallowance of 21% .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

₹ 9,09,960/-, it is noted that admitted case of the assessee is that these have been incurred for the purpose of acquisition of shares. Ld. CIT(A) has been very reasonable in restricting the disallowance to 21% of the said amount of expenses. Thus, the disallowance sustained is now of a very miniscule amount. The argument of the Ld Counsel, that no amount at all can be correlated with the dividend income, is not acceptable. Thus, on this issue we find that order of Ld. CIT(A) is quite just .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat no such disallowance has been made in the computation sheet as has been mentioned by the Ld. CIT(A) in its order with respect to proportionate indirect expenses disallowable u/s 14A. Under this mistaken belief, Ld. CIT(A) has presumed that the disallowance made by AO has resulted in double taxation. We find that the basic premise of the Ld. CIT(A) appears to be factually incorrect. There seems to be some error in mis appreciation of facts on the part of the Ld. CIT(A) in this regard. Therefo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1961. The only constraint before us is that there is no clear finding, of either of the lower authorities, with regards to the facts that whether any credit for the TDS was claimed and granted to the assessee in the impugned year or in the subsequent years pertaining to those TDS certificates for which impugned amount of bad debts is being claimed. Therefore, we send this issue back to the file of the AO for the limited purpose of verification of the fact whether any claim has been granted to th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessee was following mercantile system of accounting, aforesaid interest income was liable to be included in its taxable income of the year under consideration? - Held that:- it is noted that the assessee’s income fall in higher tax brackets and good amount of taxes are being paid by assessee every year. Under these circumstances, the Revenue is not going to suffer with the amount of tax, whether the interest income is taxed in the impugned year or in the next year, so long as, Return has .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ee is suffering with the amount of double addition on the same income. In our view, such kind of situation should have been avoided, as far as possible. Keeping in view these facts and circumstances of the case, we delete the addition - Decided in favour of assessee.

Disallowance u/s 36(1)(xi) for making computer systems of the assessee as Y2K compliant - Held that:- Revenue should avoid highly technical approach in such cases. If legislature has brought beneficial provisions on the s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

this regard - Decided in favour of assessee.

Disallowance of bad debts on account of writing off of non-convertible debentures - Held that:- In the amended law there is no requirement of proving the impugned amount of debt as ‘bad’. Further, it has been also been provided under the law that subsequently if any recovery is made out of the amounts claimed as bad debt, then the same would be included in the income of the assessee in the year in which recovery is made. Thus, the law is no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nterest also, when the principle amount itself is allowable as bad debt, then interest amount would also be allowable and accordingly we hold that Ld. CIT(A) has rightly deleted the disallowance made by the AO - Decided in favour of assessee.

Penalty order u/s 271(1)(C) - Held that:- Out of the disallowances mentioned we have deleted the disallowances on account of interest on deep discount bonds and software expenses. Therefore, with respect these two disallowances, the basis of levy .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

equently, the penalty order on this addition is also set aside. The AO shall be at liberty to initiate the penalty proceedings, if considered appropriate, after this issue is re-decided by the AO, as per law.

Addition invoking provisions of section 94(7) - disallowance of loss - Held that:- Section 94(7) is not retrospective and therefore, it cannot be invoked in the year under consideration. Further, Hon’ble Supreme Court in the case of Walfort Share and Stock Brokers (P) Ltd. [2010 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

expenditure on software expenses - Held that:- Expenditure incurred on the software expenses are revenue in nature and AO was not justified in disallowing the same. See CIT Versus Raychem RPG Ltd. [2011 (7) TMI 953 - Bombay High Court ] - Decided in favour of assessee. - ITA NO. 4325/Mum/2004, ITA NO. 4829/Mum/2004, ITA NO.5309/Mum/2006, ITA NO. 4103/Mum/2005, ITA No.4152/Mum/2005, ITA No.884/Mum/2007, ITA No.928/Mum/2007 - Dated:- 15-9-2015 - Shri Joginder Singh, Judicial Member, and Shri Ashwa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

/2004 and Revenue s Appeal in ITA No.4829/Mum/2004: These are cross appeals filed by the revenue and assessee against the order of Ld. Commissioner of Income Tax (Appeals) { hereinafter called as Ld. CIT(A)}, dated 18.03.2004 for the assessment year 2000-01. Grounds raised by the Assessee and Revenue are adjudicated as under: 1. Ground No.1 of the assessee s appeal: The assessee has challenged the action of Ld. CIT(A) in upholding the action of the Assessing Officer ( hereinafter called as AO ), .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

m from the balance sheet of the assessee company that assessee had received dividend income on stock- in- trade amounting to ₹ 32.053 crores. It was further observed by him that entire dividend income was claimed as exempt in the return of income filed by the assessee company. He observed that the assessee company did not attribute any expense towards earning of such exempted income. In view of these circumstances, the AO, after examining accounts of the assessee and the facts of the case, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

paid by the assessee company on the funds borrowed for earning dividend income. Detailed discussion has been made on this issue in page nos. 2 to 9 of the assessment order. 1.2. The assessee contested this matter before Ld. CIT(A) and inter alia submitted that own funds of the assesse company were much more than the amount of investment in tax free securities and no borrowed funds were used for this purpose and therefore, no disallowance could have been made under this Act out of interest expend .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

us, Ld. Counsel of the assessee has vehemently contested the orders of Ld. CIT(A) as well as AO. It has been argued by him that both of the lower authorities have made factual mistakes in analysing the balance sheet of the assessee company. It was submitted by him that the assessee company had sufficient funds to make investment in the shares/securities earning tax free dividend. He has submitted a chart showing break up and analysis of the amount of investment made in shares and own funds of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Tax-free - 144.23 186.60 644.72 Total 15,212.88 11,327.33 18,859.42 Securities held as investment 3 Taxable 184.61 469.06 481.42 4 Tax-free 45.02 45.02 45.01 5 Share Capital 2,030.03 2,030.03 2,030.03 6 Reserves & Surplus 525.04 701.51 1,161.85 Total Own Funds(5+6) 2,555.07 2,731.54 3,191.88 Total Tax-free investments (2+4) 189.25 231.62 689.73 Total Taxable investments (1+3) 15,253.26 11,609.79 18,696.1 7 Own Fund (Incremental) 224.66 176.47 460.34 8 Depreciation 52.61 48.74 13.44 Total ow .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an 548) (Bombay) iii. M/s. Ceat Limited, vs. ACIT (ITA NO.824/MUM/2012 (AY. 2008-09)) iv. Shopper s Stop Ltd. Vs. ACIT (ITA No. 1448 & 4475/Mum/2010 AY 06-07 and AY 07-08) v. Bharat Bijlee Ltd. v. ACIT (ITA 4160/M/2012) (AY 2008-09) Copies of aforesaid judgments were also placed and read out before us, during the course of hearing. 1.4. On the other hand, Ld Departmental Representative relied upon the orders of Ld. CIT(A) and AO on this issue, but he was fair enough to state that there was n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to us that while making analysis of the balance sheet, the lower authorities have inadvertently taken the aggregate amount of securities held as stock-in-trade and securities held as investment , without further looking into bifurcation of taxable and tax free investments, for the purpose of working out the amount to be disallowed u/s 14A. If some disallowance was required to be made, as per law, then, only the amount of tax free investments was to be considered. Analysis of the aforesaid detai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e no.1 to 10 of the paper book filed by the assesee company. We found that the figures shown in the aforesaid chart, submitted by the Ld. Counsel, duly tally with the figures shown in the balance sheet. Thus, claim of the assessee that amount of own funds of the assessee company are in far excess of the amount of tax free investment appear to be factually correct to us. Ld. DR also could not point out any mistake therein. 1.6. Having considered and examined these facts and under these circumstan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

340 (Bom), relevant para of the judgment is reproduced below: We find that the facts of the present case are squarely covered by the judgment in the case of Reliance Utilities & Power Ltd. (supra). The finding of fact given by the ITA T in the present case is that the Assessee s own funds and other non-interest bearing funds were more than the investment in the tax-free securities. This factual position is not one that is disputed. In the present case, undisputedly the Assessee s capital, pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nces brought before us and the position of law coming out from the aforesaid judgments quoted before us, we hold that the amount of disallowance made by the AO for ₹ 14.51 crores is contrary to law and facts. Consequently, the same is directed to be deleted, therefore Ground no.1 of the assesee s appeal is allowed. 2. Ground No.2, the assessee has challenged the action of Ld. CIT(A) in upholding the action of the AO in disallowing 21% of brokerage, stamp duty and custodial services charges .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.30 million was disallowed. 2.2. Before the Ld. CIT(A), the assessee has submitted that expenses on brokerage, stamp duty and custodial charges were not direct expenses for earning tax free income and it was further submitted that these expenses were incurred in relation to government securities, inter corporate deposits, and other deed instruments, income from which is taxable. After considering the submissions of the assessee, Ld. CIT(A) deleted the amount of ₹ 78,49,487/- being the amou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erage expenses are not incurred for earning dividend but for the purpose of acquiring investments. In support of his argument, he has relied upon following judgments: i.CIT vs. General Insurance Corporation (254 ITR 203) ii.CIT vs. Central Bank of India (130 Taxman 116) iii. CIT vs. Modem Terry Towers Ltd. (43s Taxmann.com 466)(2014) iv. CIT vs. United Collieries (203 ITR 857). He has placed copies of judgment and has read out the relevant portion of these judgments. On the other hand, Ld. DR ha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

noted that admitted case of the assessee is that these have been incurred for the purpose of acquisition of shares. Ld. CIT(A) has been very reasonable in restricting the disallowance to 21% of the said amount of expenses. Thus, the disallowance sustained is now of a very miniscule amount. The argument of the Ld Counsel, that no amount at all can be correlated with the dividend income, is not acceptable. Thus, on this issue we find that order of Ld. CIT(A) is quite justified and no interference .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the tribunal. The AO has discussed this issue at para 10 of the assessment order. It has been held by the Ld. AO that making investment in shares/securities, bonds etc. were purely professional activity. It requires much more skill than just by investing blindly in any shares and securities and therefore a complete research and thorough studies by highly competent people with adequate modern amenities and proper software were required. It was further observed by the AO that dividend yield was o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llion was required to be disallowed and accordingly the disallowance was made for the aforesaid proportionate amount. 3.1. The assessee contested the issue before the Ld. CIT(A). The Ld. CIT(A) discussed this issue at page 9 para 2.12 of the appellate order wherein the Ld. CIT(A) held as under: 2.12 As regards, the ad hoc disallowance of ₹ 2,50,10,0001-, I find that the-At) does not seems to have taken note of the suo moto disallowance of ₹ 18,23,39,510/- made out of indirect expense .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt gets part relief in regard to this component of disallowance also. In view of the foregoing, while the disallowance challenged in ground No.1 is being upheld, the Appellant gets part relief in ground No.2 & 3. All the three grounds are thus decided in the light of the above discussion. 3.2. Both of the parties have filed appeal against the order of Ld. CIT(A) on this issue. Before us, the Ld. Counsel has argued that consistent view is being taken by the Tribunal in cases of other assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e of the assessee, enclosed in the paper book. Therefore, we had raised a pointed query to Ld. Counsel to show us from the return of the assessee, whether any suo moto disallowance of ₹ 18,23,39,510/- has been made out of indirect expenses, which has been considered by the Ld. CIT(A) in the appeal order. In response, the Ld. Counsel fairly stated that no suo moto disallowance has been made by the assessee company in the computation sheet filed along with return of income, and it seems that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ation. We find that the basic premise of the Ld. CIT(A) appears to be factually incorrect. There seems to be some error in misICICI Securities Primary D. Ltd 16 appreciation of facts on the part of the Ld. CIT(A) in this regard. Therefore, in the interest of justice, we find it appropriate to send this issue back to the file of the Ld. CIT(A) to re-adjudicate the same after giving adequate opportunity of hearing to the assessee and after taking into consideration correct facts. Ld. CIT(A) shall .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bts written off amounting to ₹ 81,69,611/. The AO has dealt with this issue at page 14 to 18 of the assessment order. 4.1. The brief facts are that the assessee claimed write off of amount of ₹ 81,69,611/- being the amount of dues from various parties towards non-receipt of TDS certificates. The AO disallowed the said amount by observing as under: From the above submissions, it is clear that the assessee has received the entire amount of interest from the respective parties. While pa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessment or TDS is only appropriation of income and is not allowable as a deductible expense. Hence the writing off of these amounts as bad debts by the assessee cannot be allowed. The fact (that assessee could not receive TDS Certificates from various parties and hence could not claim the credit for payment of tax in respect of same, does not alter the paradigm as discussed above. The assessee could have gone for various remedies available in the law for claiming credit in respect of loss/non .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the non submission of the certificate to assessee, is hereby disallowed. 4.2. Being aggrieved, the assessee contested this matter before Ld. CIT(A). The Ld. CIT(A) did not give relief and confirmed the disallowance by holding as under: I have looked into the facts of the case. The allowability of bad debts is clearly governed by the provisions of Sec. 36(I)(vii) of the Act. It is necessary for the amount in question to fall in the category of debt, before it can be considered for allowability u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e claim, that in any case deduction for this amount was to be allowed u/s 37(1) of the Income Tax Act, as normal business loss/expenses. In support of this proposition, reliance was placed on the judgment of Hon ble Punjab and Haryana High Court in the case of CIT vs. Shreyans Industries Ltd. 303 ITR 393. On the other hand, Ld. DR has relied upon the orders of authorities below. 4.4. We have heard both the parties and agree, in principle, with the arguments of Ld. Counsel. It is held that the as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the file of the AO for the limited purpose of verification of the fact whether any claim has been granted to the assessee in this year or in any subsequent year with respect to these TDS certificates. If claim of assessee that no credit has been granted to the assessee, for want of these TDS certificates, is found to be factually correct, then the amount of bad debts claimed by the assessee shall be allowed as deduction. We direct accordingly. Ground no.4 of the assessee s appeal is allowed for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cussed this issue at page 18 para 4 of the assessment order. The relevant para of the AO is reproduced below: The assessee has claimed that a sum of ₹ 84,50,164/-being income accrued on various discounted instruments is not taxable income of the assessee for the year. However, as per Circular No.225/45/96-ITA.II dated 12.3.1996, the accrued income becomes interest income of the assessee during the relevant period. However, since the assessee is dealing in, purchase and sale of bonds it can .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e between the issue price and the redemption price was to be treated as interest income in the year of redemption and if the instrument was sold before the date of redemption, then the difference between the sale price and its cost was to be taxed in the year of sale. It was further submitted before the Ld. CIT(A) that if the intention was to tax the income on accrual basis, then capital gain would have been calculated as difference between the sale price and the cost plus the interest offered t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

under consideration, and therefore the AO was justified in making addition, and same was rightly upheld by the Ld. CIT(A). 5.3. Before us, Ld. Counsel of the assessee made detailed submissions and reiterated the submissions made before the Ld. CIT(A). Our attention was also drawn on the aforesaid circular of the board dated 12.03.1996 available at page no.34 of the paper book. Relevant portion of the circular is reproduced herein below for ready reference: It is clarified that the difference be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion of factual aspects and perusal of above, would clearly show that the Board has envisaged that on transfer of Bonds before the maturity, the difference between the sale consideration and issue price will be treated as capital gain/loss or profit/loss, depending upon the nature of activity carried out by the assessee. It would be possible and rational to give effect to this circular, if no amount of income on account of interest is brought to tax on accrual basis, on year to year basis. If th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tax, whether the interest income is taxed in the impugned year or in the next year, so long as, Return has been filed by the assesse showing taxable income and taxes have been paid thereon, in both the years. In our considered opinion, liberal approach should be adopted by the revenue and unnecessary litigation should be avoided. We derive support from the judgment of Hon ble Supreme Court in the case of Excel Industries Ltd. 358 ITR 295. It is further noted by us that the assessee has already .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s appeal deal with the disallowance made by the AO and partly confirmed by the Ld. CIT(A), out of expenses incurred by the assessee and claimed as deduction u/s 36(1)(xi) of the Act 1961 for making computer systems of the assessee as Y2K compliant. 6.1. The brief facts of the case are that an aggregate sum of ₹ 63,90,000/- was incurred by the assessee during the year as Y2K expenses and claimed this amount as deduction u/s 36(1)(xi). The AO was not satisfied with the claim of the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f assessment proceedings, but the AO was not satisfied on the ground that the said audit report should have been filed along with return of income, and filing of the auditors report during the course of assessment proceedings is not equivalent to making mandatory compliance of the statutory requirements of section 36(1)(xi). Accordingly the disallowance was made by the AO in the assessment order. 6.2. Before the Ld. CIT(A), the assessee contested this matter and submitted in detail that due comp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

upon the aforesaid judgments, it was held by him that by filing of audit report during the course of assessment proceedings, the assessee has made compliance of law and accordingly it was held by him that, in principle, the assessee was entitled for claim of deduction u/s 36(1)(xi). But on further analysis, the Ld. CIT(A) found that out of aggregate sum of ₹ 63,90,000/-an amount of ₹ 8,80,000/- pertains to prior period and accordingly disallowance to the extent of ₹ 8,80,000/-w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

audit report should be interpreted in liberal manner and further submitted that there was no prior period expenses and the impugned expenses were incurred during the year and Ld. CIT(A) has wrongly confirmed the disallowance of ₹ 8,80,000/-. On the other hand, Ld. DR submitted that the AO was justified in denying the claim in toto and the order of AO should be restored and full claim should be rejected. 6.4. We have heard both the sides, and find that Ld. CIT(A) was correct and justified i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is able to rightfully claim the benefits of the beneficial provisions. In our considered view, since the claim has been found genuine and the audit report was filed by the assessee, during the course of assessment proceedings and the same was examined by AO in which nothing wrong, has been found, thus, the assessee would be entitled for the benefits of the claim and Ld. CIT(A) is justified in granting relief to the assessee in this regard. We uphold the order of Ld. CIT(A) on this ground and acc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vance for an ongoing project. The final amount was payable on implementation or on delivery of the product. The undisputed fact is that implementation/execution/delivery of the work/ project was done during the year under consideration. Thus, the expenses got crystallised during this year. Therefore, these expenses, pertain to the year under consideration, and have been incurred during the year. In our view, these expenses should not have been disallowed, therefore disallowance of ₹ 8,80,0 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sed this issue at para no.2 to 4 of the assessment order. It was observed by the AO that the assessee has claimed bad debts for an aggregate amount of ₹ 6,67,22,070/- being the amount of non-convertible debentures issued by M/s. Nucent Finance Ltd. amounting to ₹ 5,69,69,000/- and interest receivable thereon for ₹ 79,75,660/-. According to the AO, these Debentures could not have been written off as bad debts, since the assessee company was able to recover a sum of ₹ 2,00, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e him, the assessee company made detailed submissions and these submissions are found to be relevant by us and therefore these are reproduced here under: 3.2 It has been submitted in appeal before me that the Appellant is a non banking finance company governed by the guideline by RBI, according to which when the company defaults either in the payment of interest on due date or repayment of principal on maturity, it turns into a NPA. The Appellant s representative produced before me the correspon .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essary for the Appellant to establish that the debts has become bad. Merely because part of the debt was recovered subsequently; does not mean that the debt has not become bad. It was pointed out that the amount subsequently recovered has been offered to tax. The ld. Representative for the Appellant drew support from the decision of Hon ble ITAT, Mumbai in the case reported at 86 ITD 193™, wherein, it was held that it is not obligatory for the Assessee to place demonstrative proof for esta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

judgments relied upon by the assessee. Now, Revenue has brought this issue before the Tribunal. 7.3. Before us, Ld. Counsel appearing on behalf of the assessee has submitted that now this issue is settled by Hon ble Supreme Court in the case of T.R.F. Ltd. v. CIT 323 ITR 397 (SC), wherein it has been held by the Hon ble Apex Court that the assessee need not prove that debts has become bad and mere write off in the books of accounts is sufficient. It has been further submitted by Ld. Counsel that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of CIT v. Bokaro Steel Limited 236 ITR 315 (SC) & Godhra Electricity Co. Ltd. v. CIT (1997) 225 ITR 746(SC). On the other hand, the Ld. DR supported the order of AO and submitted that since the assessee has not been able to prove that the impugned amount had become bad debt during the year and therefore, the AO had rightly disallowed the claim and therefore, the order of the AO should be restored and order of Ld. CIT(A) should be reversed. 7.4.. We have considered both the sides and have gon .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ellip;..any debts, or part thereof, which is established to have become bad debts in the previous year……. The perusal of these two sets of provisions, would show that earlier (i.e. before 01.04.1989), the requirement of the law was that the assessee was obliged under the law to establish that the impugned amount of debt had become bad and only thereafter the assessee could have claimed the same as bad debts in its profit and loss account. Thus, establishment of the amount as bad de .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e amended law there is no requirement of proving the impugned amount of debt as bad . Further, it has been also been provided under the law that subsequently if any recovery is made out of the amounts claimed as bad debt, then the same would be included in the income of the assessee in the year in which recovery is made. Thus, the law is now plain and simple. It has been so clarified in this very manner by Hon ble Supreme Court also in the case of T.R.F. Ltd. (supra). It is further noted by us t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

allowance made by the AO. Consequently, we hold that Grounds No. 2 & 3 of the appeal of the Revenue are dismissed. As a result thereof, appeal of the revenue is dismissed and appeal of the assessee is partly allowed. Revenue s appeal for Assessment Year 2001-02 in ITA No.5309/Mum/2006: This appeal has been filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals),-III Mumbai dated 14.08.2006, passed against the penalty order u/s 271(1)© for the assessment ye .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

inpenalty was deleted appeal of the assessee was allowed. Thereafter, Revenue filed the appeal against the order of Ld. CIT(A) deleting the penalty. 8.3. During the course of hearing before us, Ld. DR has relied upon the penalty order, whereas Ld. Counsel has relied upon the order of Ld. CIT(A). 8.4. Before going into the merits of the penalty order, it is noted by us that out of the disallowances mentioned in para 8.1. above, we have deleted the disallowances on account of interest on deep disc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sent back by us to the file of the AO for re-deciding the same. Therefore, as on date, this addition does not survive. Consequently, the penalty order on this addition is also set aside. The AO shall be at liberty to initiate the penalty proceedings, if considered appropriate, after this issue is re-decided by the AO, as per law. 8.5. As a result thereof, penalty appeal of the Revenue is partly allowed. Assessee s appeal in ITA No.4152/Mum/2005 & Revenue s appeal in ITA No.4103/Mum/2005 for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

this issue in favour of the assessee and held that no disallowance was called for, out of interest expenses u/s 14A. While deciding appeal for 2001-02, the Ld. CIT(A) has followed the order of A.Y.2000-01 of its predecessor and confirmed the disallowance. It is noted by us that facts are identical in this year as well and therefore, following our own order for A.Y. 2000-01 in ITA No.4325/Mum/2004, Ground No.1 of the assessee s appeal for A.Y. 2001-02 is allowed in favour of the assessee and cons .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

10.2. We have decided this ground in appeal of the assessee for A.Y. 2000-01 wherein it was raised as Ground No.2. The facts and circumstances in this year are also identical. Thus, following our own order, we direct that the disallowance of ₹ 7,00,000/- is confirmed and Ground No.2 of assessee s appeal for A.Y. 2001-02 is rejected. 11. Ground No.3 of assessee s appeal and Ground No.1 of revenue s appeal are common, wherein the assessee has challenged the action of Ld. CIT(A) in upholding .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1 wherein this issue has been sent back to the file of Ld. CIT(A) for readjudicating this issue after considering proper facts. Therefore, following our own order in this year also both these grounds are sent back to the file of Ld. CIT(A) for reexamination and re-adjudication in terms of our direction as contained in our order for A.Y. 2000-01. We direct accordingly. 11.2. In the result, Ground No.3 of assessee s appeal and Ground No.1 of Revenue s appeal are allowed for statistical purposes. 1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dmittedly facts are identical in this year as well. Thus, following our own order, we hold that the addition made by AO is not sustainable in law and therefore, the same is directed to be deleted. Consequently, Ground No.4 of assessee s appeal is allowed. 13. In Ground No.5 of assesseee s appeal; The assessee has challenged the action of Ld. CIT(A) in invoking provisions of section 94(7) of the Act and making an addition of ₹ 1,33,55,778/-. 13.1. It is seen that no addition was made by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

₹ 1,33,55,788/- which was netted of against the profits of the year under consideration. The Ld. CIT(A) further observed that no note to this effect was given in the notes to the accounts and it had been netted off like any other business transaction. It was further noted by the CIT(A) that important features of these transactions were that in all these cases units were purchased over a period of 8-10 days and in some cases, over a period of two weeks and then these were sold. Ld CIT(A) di .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dered the facts of the case and I have also gone through the submission made by the appellant. In the instant case, the appellant was fully aware of the facts and subsequent to the dividend being declared and credited in his account, the NAV would be correspondingly reduced and therefore, redemption proceeds on the date of reinvestment of the dividend would be loss. In view of the facts and case laws discussed earlier, I hold that this loss cannot be allowed as business loss and therefore, the s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ered with the judgment of Hon ble Supreme Court and section 94(7) was not applicable during the year under consideration and therefore, the loss has been wrongly disallowed and the action of Ld. CIT(A) should be reversed. On the other hand, Ld. DR supported the order of Ld. CIT(A) on this issue. However, on our specific query to Ld. DR with respect to the order of Hon ble Supreme Court in the case of Walfort Share and Stock Brokers (P) Ltd. (supra), Ld. DR had nothing to submit. 13.3. We have ca .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt appeared to be that the assessee was getting tax-free dividend and at the same time, it was claiming loss on the sale of the units; and that the assessee had purposely and in a planned manner entered into a pre-meditated transaction of buying and selling units yielding exempt dividends with full knowledge about the fall in the NAV after the record date and the payment of tax-free dividend and, therefore, loss on sale was not genuine. There was no merit in the arguments of the department. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng that the transaction was preplanned, there was nothing to impeach the genuineness of the transaction. With regard to the ruling in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 /22 Taxman 11 (SC), it may be stated that in the later decision of the Supreme Court in Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 / 132 Taxman 373 it has been held that a citizen is free to carry on its business within the four corners of the law. That, mere tax planning, without any motive to evade .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessment year(s) falling after 1-4-2002, the loss to be ignored would be only to the extent of the dividend received and not the entire loss. In other words, losses over and above the amount of the dividend received would still be allowed from which it follows that the Parliament has not treated the dividend stripping transaction as sham or bogus. It has not treated the entire loss as fictitious or only a fiscal loss. After 1-4-2002, losses over and above the dividend received will not be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2001. Section 14A was inserted with effect from 1-4-1962 whereas section 94(7) was inserted with effect from 1-4-2002. The reason is obvious, the Parliament realized that several public sector undertakings and public sector enterprises had invested huge amounts over last couple of years in the impugned dividend stripping transactions so also declaration of dividends by mutual fund are being vetted and regulated by the SEBI for last couple of years. If section 94(7) would have been brought into e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ields. Section 14A deals with disallowance of expenditure incurred in earning tax-free income against the profits of the accounting year under sections 30 to 37. On the other hand, section 94(7) refers to disallowance of the loss on the acquisition of an asset which situation is not there in cases falling under section 14A. Under section 94(7), the dividend goes to reduce the loss. It applies to cases where the loss is more than the dividend. Section 14A applies to cases where the assessee incur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mind the conceptual difference between loss, expenditure, cost of acquisition, etc., while interpreting the scheme of the Act. [Para 21] 13.4. On the perusal of aforesaid judgment, it is clear that the section 94(7) is not retrospective and therefore, it cannot be invoked in the year under consideration. Further, Hon ble Supreme Court has observed that in absence of section 94(7), the transactions done by the assessee in this regard were permitted under the income tax law and thus losses resulti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he AO on account of bad debts written off by the assessee. 14.1. This issue has been discussed by the AO at para 2 of the assessment order, whereas Ld. CIT(A) has discussed this issue in para 5 to 5.4. During the course of assessment proceedings, the AO observed that the assessee company has written off bad debts aggregating sum of ₹ 1,85,14,205/-. This amount represented dues from various parties towards non-receipt of its fees. The AO has disallowed the claim of the assessee for the reas .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

its write off of the debts. As per AO for making claim, it was necessary for the assessee to establish that the assessee has utilized all sources of means available to it to recover its dues and its debts cannot be simply allowed because it has been written off in the books of accounts. Thus, claim of the assessee was rejected. 14.2. This issue was contested by the assessee before the Ld. CIT(A). The Ld. CIT(A), relying upon the order of assessment year 2000-01 in the assessee s own case, held .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rrecoverable in the books of accounts. On the other hand, Ld. DR has relied upon the order by the AO. 14.4. We have heard both the sides. We have already passed a detailed order on this issue for A.Y. 2000-01 in the earlier part of this order and in view of judgment of Hon ble Supreme Court and our own order for A.Y. 2000-01, we uphold the order of Ld. CIT(A) on this issue and confirm the deletion of the disallowance. Consequently, Ground No.2 of Revenue s appeal is dismissed. 14.5. In the resul .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

allowance of interest amounting to ₹ 59,40,000/- and ₹ 4,03,00,000/- made by the AO, whereas the Revenue has challenged the relief provided by the Ld. CIT(A) of ₹ 7,44,10,000/-, out of total disallowance of ₹ 11,47,10,000/- made by the AO in the assessment order. 15.1. The AO has discussed this issue at para 2.1 to 2.3, and para 3 of the assessment order, wherein disallowance of interest has been made, on the ground that borrowed funds were used by the assessee company fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ards the facts and figures as contained in the working sheet submitted by him to impress upon the point that own funds were far in excess of investment made in these securities. In addition to the above, Ld. Counsel also drew our attention upon the judgment of Hon ble Supreme Court in the case of SA Builders vs. CIT 288 ITR 1 (SC). On the other hand, the Ld. DR relied upon the orders of Ld. CIT(A) and the AO. 15.4 We have heard both the sides. It is seen by us that facts in the preceding years a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the assessee and accordingly disallowance of interest of ₹ 59,40,000/- is directed to be deleted. Thus, total disallowance of ₹ 11,47,10,000/- made by the AO is also deleted and consequently Grounds no.1 and 2 of the assessee s appeal are allowed. 16. Ground No.3 of assessee s appeal and Ground No.2 of Revenue s appeal: In these grounds the assessee has challenged the action of Ld. CIT(A) in upholding the action of the AO of disallowing brokerage, stamp duty and custodial charges .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sue. On perusal of record and consideration of arguments advanced from both sides, we note that this issue has already been decided by us in proceedings years. It is seen that disallowance was made by AO was on the similar pattern as in earlier years and Ld. CIT(A) has given major relief to the assessee and sustained disallowance of a small amount, following the same pattern as in earlier years. Thus, following our order of A.Y. 2000-01, we sustain the order of Ld. CIT(A). Thus, action of Ld. CI .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d by the AO in the assessement order in para 3, whereas Ld. CIT(A) has discussed this issue in his order in paras 5 to 5.5. 17.2. Before us, both the parties have relied upon the submissions made in preceding years in A.Ys. 2000-01 & 2001-02. In these years, this issue has been sent back to the file of CIT(A), and following the same in this year also, this issue is sent back to the file of the CIT(A), in terms with the same directions as in A.Ys. 2000-01 & 2001-02. Thus, Ground no.4 of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

favour of the assessee. Ground No 5 of assesse s appeal is allowed. 17.4. Ground No.6 of assessee s appeal: The assessee company is aggrieved against the action of Ld. CIT(A) in confirming the action of the AO in treating the loss of ₹ 20,77,919/- arising from the sale of shares of South Indian Bank as speculative loss , which was claimed by the assessee as business loss . The assessee is also aggrieved against the action of the AO in not allowing the Long Term Capital Loss of ₹ 7,7 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

een the indexed purchase price and the market value of the shares as on the date of conversion amounting ₹ 7,74,718/- was treated by the assessee as long term capital loss in view of the provisions contained in section 45(2) of the I.T. Act. As per this section, such profit or gain is chargeable to income-tax as income of the previous year in which such stock-in-trade was sold or otherwise transferred. The said long term capital loss of ₹ 7,74,718/- was set off by the assessee agains .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lanation to section 73. Therefore, invoking the provisions contained in Explanation to section 73, the AO treated the loss of ₹ 20,77,719/- as speculation loss and also did not allow the long term capital loss, claimed by the assessee at ₹ 7,74,718/-. Accordingly, the set off of the long term capital loss of ₹ 7,74,718/-against the short capital gains, as claimed by the assessee, was not allowed by the AO. 17.6. The assessee contested the matter before the Ld. CIT(A), but Ld. C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ame are reproduced hereunder: 2.1.We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is a share broker and trader in shares/investor. During the year under consideration, the assessee received brokerage of ₹ 26,61,904/- and also loss on account of trading in shares amounting to ₹ 1,72,33,233/-, which was treated as deemed speculation. The assessee carried forward the loss on account of alleged speculative .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ze the company to make investment in the shares and securities of other companies. Your honours attentions is also invited to the definition of short term M/s Mother India Securities Pvt. Ltd. capital asset as provided u/s 2(42A) of the income Tax Act which states that if the shares are held by an assessee for not more than 12 months the same are to be treated as short term capital asset and accordingly as per section 2(42B) the capital gain arising on the transfer of such asset should be treate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tand of the assessee before the ld. Commissioner of Income Tax (Appeals) was that application of explanation to section 73 of the Act is quite unjustified as the provision is not applicable, where income on sale of shares held as investment offered under the head capital gain/capital loss by further claiming that section 73 is applicable in respect of loss in speculation business. The ld. Commissioner of Income Tax (Appeals) granted relief to the assessee. 2.3. The Revenue is aggrieved and is in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ertain shares were held as investment on which LTCG/STCL was suffered by the assessee. Broadly, we are in agreement that the assessee held the shares as investment on STCG by incurring loss. The proviso/explanation to section 73 applies in respect of business of company consisting of purchase of shares of other companies. However, the assessee is in the business of sale and purchase of share but the transaction in share, held as investment, give rise to LTCG/STCL, which cannot be held to be busi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

been wholly set off under sub-section (1), so much of the loss is not to be set off are whole loss, where the assessee has no income from any other speculation business, shall, subject to the other provisions of this chapter, be carried forward to the following assessment years and (i) It shall be set off against the profit and gains, if any, of any speculation business carried on by him assessable for that assessment year and M/s Mother India Securities Pvt. Ltd. (ii) If the loss cannot be who .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

finding of the ld. Commissioner of Income Tax (Appeals) that the LTCG and STCG were not speculative transactions. On the other hand, the Ld. DR has relied upon the orders of Ld. CIT(A) and the AO and has vehemently argued that these losses have been rightly disallowed. It was further submitted by the Ld. DR that the pleading has been taken for the first time by the assessee company before Hon ble Tribunal. It was further submitted by Ld. DR and that this issue has not been examined by the lower .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

The AO shall take into consideration new factual pleadings made by the assessee and all other facts as would be required for deciding this issue. The assessee shall be free to submit further details and evidences as may be required by the AO and as may be considered appropriate by the assessee in support of its claim. The AO shall take into account the judgments of M/s. Mother India Securities Pvt. Ltd. (supra) and M/s. Onyx Investments Pvt. Ltd.(supra) or another judgment as may be found releva .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

this issue in para 8 to 8.2 of the appellate order. 18.1. The AO found that following expenses incurred on the software were of capital nature: PARTY PARTICULARS AMOUNT ICICI Infotech IRS Program 6,45,000 Goldmine software Purchase of Software- EQ Research 2,76,000 Aptech System Inc. Purchase of GAUSS Software 4,18,843 Fineng Solutions Ltd. Website Development 15,00,000 ICICI Infotech Oracle License 11,45,580 In response to the query of the Ld. AO, the assessee submitted as under: 1. Any softwa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the management to carry on the business more efficiently and profitably; 5. The life cycle of such software is computer technology and obsolescence rate is also high; The AO was not satisfied and expenses incurred on these softwares were held to be disallowable. 18.2. Before the Ld. CIT(A), the assessee made detailed submissions reiterating the arguments made before the AO, but Ld. CIT(A) was also not satisfied and the disallowance made by the AO was confirmed. 18.3. Before us, Ld. Counsel has m .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ly made the disallowance. 18.4. We have gone through the order of the Ld. CIT(A) and AO. We have also considered the submissions made by both the sides. We have observed that impugned software expenses are routine expenses which are required to be incurred to enable the assessee company to run day to day business operations more efficiently. It is well known fact that today s technology is changing very fast and rate of obsolescence is very high. It has been held by the Hon ble Bombay High Court .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version