TMI Blog2015 (10) TMI 2237X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed deposit of ₹ 30 lakhs made with SBI. The assessee neither credited any interest income to the P&L Account nor disclosed in the return of income. This fact when confronted to Ld. Counsel for the assessee, he fairly conceded that this addition can be confirmed. Accordingly, we are of the view that the addition on account of interest income accrued on fixed deposit of ₹ 30 lacs is to be sustained. Accordingly, we confirm the addition and reverse the order of CIT(A) on this count. - Decided against revenue. Addition on interest from loan - CIT(A) deleted the addition - Held that:- No notional interest can be added unless and until there is positive proof that the assessee has actually charged interest or credited interest. We find that this is purely a notional interest and assessee specifically contended that this is interest free loan. The assessee since FY 2002-03 no interest has been charged and revenue has not made any addition qua this earlier years also. In view of the above facts, we confirm the order of CIT(A) in deleting the addition and this issue of revenue’s appeal is dismissed. - Decided against revenue. Addition made under the head loss on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 - BOMBAY HIGH COURT ), the provision being prospective and not retrospective. In term of the above, we are of the view that the Tribunal is taking a consistent view and restricted the disallowance at 1% of the exempt income. Hence, we also direct the AO to make disallowance to the extent of 1% of the dividend income. The AO is directed accordingly. Both the ground of appeal of revenue and that of the assessee are partly allowed as indicated above. Addition under the head repair charges - CIT(A) deleted the addition - Held that:- We find that the assessee before the AO has filed complete details in respect to repair expenses and this is verified by the CIT(A) as observed by him in his order. Even otherwise, the assessee now before us contended that in AY 2006-07 the repair expenses were allowed by the AO in full while framing assessment u/s. 143(3) of the Act dated 24.12.2008. We find no infirmity in the order of CIT(A) and hence, this issue of revenue’s appeal is dismissed. - Decided against revenue. Addition in the head of Corporation Tax - CIT(A) deleted the addition - Held that:- All the letters regarding payment of corporation tax was filed before AO vide letter dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions by assessee are arising out separate orders of CIT(A)-XX, Kolkata in appeal Nos. 488/CIT(A)-XX/Cir-34/07- 08/Kol dated 22.02.2010 and 202/CIT(A)-XX/DC.Cir-34/08-09/Kol dated 23.02.2010. Assessments were framed by ACIT/DCIT, Circle-34, Kolkata u/s. 143(3) of the Incometax Act, 1961 (hereinafter referred to as the Act ) for AYs 2005-06 and 2006-07 vide its separate orders dated 31.12.2007 and 24.12.2008 respectively. 2. The first common issue in the appeal of revenue for AY 2005-06 and the cross objection of assessee is against the order of CIT(A) restricting the disallowance of general expenses at 10% as against the disallowance made by AO at ₹ 17,92,993/-. For this, revenue has raised following ground no.1 and assessee has also raised following ground no.1 in Cross Objection: Revenue s Ground No. 1: 1. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of general expenses of ₹ 16,13,694/- made by the AO. Assessee s ground No. 1: 1. For that in view of the facts and in the circumstances the Ld. CIT(A) is wholly unjustified in not fully deleting the arbitrary, ad hoc and estimated disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2006-07: 1. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of club expenses of ₹ 25,342/- made by the AO. 5. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has made disallowance on account of claim of club expenses considering the same as personal nature based on tax audit report of the assessee. The assessee before AO and also before CIT(A) claimed that these are genuine business expenditure. He clarified that the claim relates to club expenses does not include club membership fee but expenses are related to entertainment of clients engaged with the business of the assessee from where it is getting business. Ld. Counsel for the assessee drew our attention to column no.17(d)(ii) i.e. page 4 of the tax audit report which specifies the expenses as cost for club services and facilities used. In this regard, the CIT(A) deleted the addition by observing that the AO has not specified any particular item of expenditure which is personal in nature and not related to business. He also took note of the fact that 10% of general expenses have already been disallowed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , no notional interest can be added as income of the assessee. Accordingly, he deleted the addition. Aggrieved, assessee is in second appeal before Tribunal. 8. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has not made addition of notional interest but this interest has accrued to the assessee on fixed deposit of ₹ 30 lakhs made with SBI. The assessee neither credited any interest income to the P L Account nor disclosed in the return of income. This fact when confronted to Ld. Counsel for the assessee, he fairly conceded that this addition can be confirmed. Accordingly, we are of the view that the addition on account of interest income accrued on fixed deposit of ₹ 30 lacs is to be sustained. Accordingly, we confirm the addition and reverse the order of CIT(A) on this count. This issue of revenue s appeal is allowed. 9. The next issue in this appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the addition made by AO under the head interest from loan amounting to ₹ 1,80,000/-. For this, revenue has raised following ground no. 4: 4. The Ld. CIT(A)-XX, Kolkata has erred on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 66,04,500 (ii) Globe Stock Securities Ltd. ₹ 3,91,300 (iii) Sangatri Construction Ltd. ₹ 4,77,309 (iv) Stanbey Securities Ltd. ₹ 1,32,320/- The AO also observed that the major portion of share loss of ₹ 66,04,500/- has been claimed to have from the transaction of share of Assam Roofing Ltd., which is a company related to the assessee as a sister concern or as a financier. He also noted that the assessee has received a sum of ₹ 6,94,559/- as interest from above stated company out of loan given to the company. Accordingly, he said that this is a plain claim of loss to adjust against the rental income. Accordingly, he disallowed the claim of loss. Aggrieved, assessee preferred appeal before CIT(A). Before him assessee contended that all the details of share trading along with closing stock of shares, copies of contract notes, purchase and sale bills were produced and no specific defect was pointed out in the share transaction and on the basis of the same, CIT(A) deleted the addition by observing as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO is totally on the basis of conjecture and surmises. The assessee has filed complete details which was considered by CIT(A). In view of the above, we are of the view that the CIT(A) has rightly allowed the claim of loss and we confirm the same. This issue of revenue s appeal is dismissed. 14. The next issue in this appeal of revenue for AY 2006-07 is against the order of CIT(A) deleting the addition made under the head speculation loss. For this, revenue has raised following ground no. 4: 4. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of speculation loss on account of ₹ 79,30,000/- made by the AO. 15. At the time of hearing, both the representatives of revenue and assessee conceded that the issue is identical and the facts are common to the ground of appeal for AY 2005-06. Since we confirmed the action of CIT(A) and dismissed the ground of appeal of revenue for AY 2005-06, and since the issue is identical and facts are common to the ground of appeal of revenue for AY 2006-07, following the same, we also dismiss this ground of appeal of revenue. 16. The next issue in this appeal of revenue for AY 2005-06 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance of expense on a/c of interest paid on loan u/s. 14A of the Act read with Rule 8D of the I T Rules allegedly attributable to the earning of exempt dividend income of ₹ 17,40,745/- without establishing the direct nexus between the expenses incurred and the dividend earned and also without considering the fact and the law that the new Rule 8D introduced w.e.f. 24.03.2008 was not applicable for the relevant AY 2005-06. 3. For that in view of the facts and in the circumstances the Ld. CIT(A) is wholly unjustified in issuing the aforesaid direction to the AO to compute the disallowance of expense on a/c of interest paid on loan u/s. 14A of the Act read with Rule 8D of the I. T. Rules, without first directing the deletion of the arbitrary, ad hoc and estimated disallowance of ₹ 17,40,745/- made in assessment. 20. Briefly stated facts are that the assessee has earned dividend income of ₹ 17,40,742/- from investment in shares. The AO noted from the accounts of the assessee that it had taken loan of ₹ 15,48,11,638/- and invested in shares at ₹ 7,73,33,203/- which represents 49.95% of the loan taken and balance 49.85% borrowing represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the I. T. Rules allegedly attributable to the earning of exempt dividend income of ₹ 30,14,985/- without establishing the direct nexus between the expenses incurred and the dividend earned and also without considering the fact and the law that the new Rule 8D introduced w.e.f. 24.03.2008 was not applicable for the relevant AY 2006-07. 2. For that in view of the facts and in the circumstances the Ld. CIT(A) is wholly unjustified in issuing the aforesaid direction to the AO to compute the disallowance of expense u/s. 14A of the Act read with Rule 8D of the I. T. Rules, without first directing the deletion of the arbitrary, ad hoc and estimated disallowance of ₹ 10,29,476/- made in assessment. 23. At the time of hearing, both the representatives of revenue and assessee conceded that the issue on hand is identical and the facts are common to the ground of appeal for AY 2005-06. In this case also the AO is unable to prove any nexus with the disallowance of expenditure and that of the earning of exempt income. However, the relevant assessment year involved is 2006-07 and Rule 8D of the I. T. Rules will not apply to this assessment year as held by Hon ble Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal of revenue for AY 2005-06 is against the order of CIT(A) deleting the addition of corporation tax made by AO amounting to ₹ 14,91,863/-. For this, revenue has raised following ground no. 9: 9. The Ld. CIT(A)-XX, Kolkata has erred on facts and in law in deleting the addition in the head of Corporation Tax of ₹ 14,91,863/- made by the A.O. 28. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has disallowed the payment of Corporation tax claimed by the assessee at ₹ 14,91,863/- in the absence of any evidence. Aggrieved, assessee preferred appeal before CIT(A) and assessee contended that all the letters regarding payment of corporation tax was filed before AO vide letter dated 19.02.2007. The same letter was filed before Tribunal also wherein complete details of Corporation Tax paid is enclosed at annexure-7. The relevant details are given at page 35 of assessee s paper book, which clearly proves that the assessee has paid the Corporation tax and it is the responsibility of the owner only to pay the Corporation tax and not the tenant. Accordingly, we confirm the order of CIT(A) and this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses to the extent of ₹ 25,058/- (10% of ₹ 2,50,580/-) without considering the facts that the expenses on this a/c were incurred wholly and exclusively for the purpose of business. 33. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO made the disallowance on account of personal use of telephones. The assessee contended that the expenses are genuine and incurred for business purposes. The CIT(A) restricted the disallowance to 10% instead of 25% as made by AO by observing that personal use of telephone cannot be ruled out and the disallowance as made by AO is on higher side. We find no infirmity in the order of CIT(A) in restricting the disallowance to 10% as the disallowance made by AO is on higher side and hence, the same is hereby upheld. This ground of appeal of assessee is dismissed. 34. The next issue in this appeal of revenue in ITA No. 886/K/2010 for AY 2006-07 is as regards to the order of CIT(A) deleting the addition of bad debts written off amounting to ₹ 42,22,131/-. For this, revenue has raised following ground no.2: 2. The Ld. CIT(A)-XX, Kolkata has erred on facts and in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in the accounts of the assessee. When a bad debt occurs, the bad debt account is debited and the customer s account is credited, thus, closing the account of the customer. In the case of companies, the provision is deducted from sundry debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This exercise has not been undertaken by the Assessing Officer. Hence, the matter is remitted to the Assessing Officer for de novo consideration of the abovementioned aspect only and that too only to the extent of the write-off. As the issue is settled by Hon ble Supreme Court in the case of TRF Ltd. (supra) and going through the facts and circumstances of the present case as narrated above, we are of the view that there is no reason for us to interfere in the order of CIT(A). We dismiss this ground of appeal of revenue. 37. In the result, both the appeals of r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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