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2015 (11) TMI 926 - ITAT KOLKATA

2015 (11) TMI 926 - ITAT KOLKATA - [2016] 45 ITR (Trib) 285 - Disallowance of relief u/s 43B - interest on term loan paid to ICICI during the previous year relevant to the assessment year 2001-02 - Held that:- It is clear that the AO does not dispute the fact that an amount was interest on term loan which was paid to ICICI during the previous year relevant to A.Y.2001-02. It is also not in dispute that the provision of section 43B of the Act will apply to such interest payment and therefore the .....

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ion u/s 43B of the Act is not a requirement and the decision of the Hon'ble Calcutta High Court in the case of Associated Pigments Ltd. Vs CIT (1998 (9) TMI 78 - CALCUTTA High Court) supports the plea of the assessee in this regard. The only objection which remains for consideration is as to whether in the absence of a revised return of income filed by the assessee making claim for deduction on account of interest expenses the deduction can be allowed. The reliance placed by the revenue in this .....

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e squarely support the stand of the assessee in this regard. We, therefore, hold that a sum should be allowed as deduction. - Decided in favour of assessee.

Addition of interest on account of non-provision of interest on Non-performing Asset (NPA) - CIT(A) deleted the addition - Held that:- In the instant case due to uncertainty in collection there was no accrual of income having regard to the real income theory which is engrained in the RBI's prudential norms for recognition of reven .....

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so as to defeat the provisions of the Act and the Rules. Further there can be no dispute with regard to the proposition laid down in Tuticorin Alkali's case (1997 (7) TMI 4 - SUPREME Court) but the fact is that there is no accrual of income in so far as the assessee is concerned. CIT(A) was justified in coming to the conclusion that interest on NPA need not be recognized as income by the Assessee. - Decided in favour of assessee.

Addition on account of interest on Recurring Deposits .....

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nce there is no accrual of interest prior to maturity. - Decided in favour of assessee.

Write off under section 36(1)(vii) on interest income - Held that:- The facts show that there was a debit to the profit and loss account of a sum of ₹ 26,43,24,776 because the credit side of interest income shown in the profit and loss account was reduced to this extent and this has the effect of a debit to the profit and loss account. However as to whether the debtors account was reduced to .....

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ere factually there was no write off as bad debts in the books of accounts. The said decision will not apply to the facts of the present case. We therefore allow ground of assessee subject to verification of the write off in the debtors account as stated above.

Computation of interest under section 234C - Held that:- The plea of the Assessee that the charging of interest u/s.234C of the Act should be with reference to the tax on total income declared in a revised computation of income .....

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R> Disallowance u/s 14A r.w.r. 8D - Held that:- We are however of the view that the disallowance under Sec.14A of the Act cannot be in excess of the tax free income earned by the Assessee during the previous year. We therefore hold that the disallowance u/s.14A of the Act be restricted to the tax free income earned by the Assessee. The direction given above will result in relief to the Assessee than what was given by the CIT(A). - Decided against revenue

Disallowance u/s.35D - Regist .....

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e same was allowed in the first year and thereafter for the following 6 AYs. In the 7th AY, the AO restricted deduction on ground that only eligible expenses were allowed to be spread over u/s. 35D and therefore, expenses only to extent that had nexus to eligible projects were admissibl. However, Tribunal, noted that in last seven years, no such disallowances were made and directed such benefit to be granted. On appeal by the Revenue, the Hon'ble Gujarat High Court held, since last several years .....

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that the disallowance u/s.,35D of the Act be deleted. - Decided in favour of assessee. - ITA No. 388/Kol/2008, ITA No.464, 463, 389, 580, 568/Kol/2008, ITA No.1080/Kol/2009, ITA No.1028/Kol/2011, ITA No.984/Kol/2011, ITA No.604, 324, 1283, 1283/Kol/2012, C.O.No.104/Kol/2012 - Dated:- 16-10-2015 - N. V. Vasudevan, JM And M. Balaganesh, AM For the Petitioner : Shri Rajat Subra Biswas, CIT(DR) & Shri Pinaki Mukherjee, JCIT, Sr. DR For the Respondent : Shri J P Khaitan, Sr. Adv. & Shri Anand .....

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the Income tax Act 1961 in respect of interest aggregating to ₹ 14077397/- on term loan paid to ICICI during the previous year relevant to the assessment year 2001-02 when no claim for deduction was made by the Appellant on this account in any other assessment year. II. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) should have held that mistake in not recognizing interest expenditure aggregating to ₹ 14077397/- on term loan paid to ICICI on mercantile b .....

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y registered with the Department of Non-Banking Supervision, Kolkata Regional Office of Reserve Bank of India. During the previous year relevant to A.Y.2001-02 i.e. on 18.9.2000 and 18.11.2000 the assessee paid EMI to ICICI bank in respect of term of loan taken by the assessee. The EMI comprised of both repayment of principal and interest. The interest component on the payment of EMI was a sum of ₹ 1,40,77,397/-. Due to inadvertence the interest payment had not been claimed as deduction in .....

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he year in which the interest is actually paid. The assessee pointed out before CIT(A) that the interest payment cannot be claimed in any other assessment year in view of the specific provision of section 43B of the Income Tax Act, 1961 (Act). Since the payment was actually made by the Assessee, the same should be allowed. The assessee also pointed out that there was no requirement of debiting the interest expenses in question to the profit and loss account and in this regard the decision of the .....

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o revised return was filed by the assessee nor was the interest expenses in question shown as allowable or disallowable u/s 43B of the Act. 5. Aggrieved by the order of CIT(A) the assessee has raised ground nos.1 and 2 before the Tribunal. 6. We have heard the submissions of the ld. Counsel for the assessee and the ld. DR. The ld. Counsel for the assessee besides reiterating the submissions made before CIT(A), further submitted that the requirement of debit in the profit and loss account of inte .....

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a revised return of income and that such bar does not extent to the appellate authorities under the Act. Our attention was drawn to the following decisions for the proposition that the ratio laid down by the Hon'ble Supreme Court in the case of Goetze (India) Ltd does not apply to the appellate authorities under the Act. (i) Universal Subscription Agency P. Ltd. Vs. JCIT 293 ITR 244 (All) (ii) CIT vs Pruthvi Brokers & Shareholders (P) Ltd 349 ITR 336 (Bom) (iii) CIT vs. Sam Global Secur .....

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sions. From a perusal of the remand report of the AO, a copy of which is placed at page 39 of the paper book filed by the assessee, it is clear that the AO does not dispute the fact that an amount of ₹ 1,40,77,397/- was interest on term loan which was paid to ICICI during the previous year relevant to A.Y.2001-02. It is also not in dispute that the provision of section 43B of the Act will apply to such interest payment and therefore the interest expenditure in question cannot be claimed by .....

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ecision of the Hon'ble Calcutta High Court in the case of Associated Pigments Ltd. Vs CIT (supra) supports the plea of the assessee in this regard. The only objection which remains for consideration is as to whether in the absence of a revised return of income filed by the assessee making claim for deduction on account of interest expenses the deduction can be allowed. The reliance placed by the revenue in this regard is on the decision of the Hon'ble Supreme Court in the case of Goetze .....

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77,397/- should be allowed as deduction. We hold and direct accordingly and allow the grounds raised by the assessee in this regard. ITA No.464/Kol/2008 (Revenue's appeal) 10. Ground No.1 raised by the revenue reads as follows :- "1. That the Ld. CIT(A) has erred in law as well as on facts by deleting the addition of interest of ₹ 1,24,31.423/- made on account of non-provision of interest on Nonperforming Asset (NPA)." 11. The factual background with regard to the ground rais .....

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considered a sum of ₹ 1,24,31,423/- which was interest on NPA which was not recognized by the assessee as income in the books of accounts. The AO was of the view that the prudential norms of Reserve Bank of India are not binding when it comes to computing the total income under the Income Tax Act, 1961. AO also referred to his order in A.Y.2002-03 on similar issue that had come for consideration in assessee's own case and the issue was held against the assessee. It was also held in th .....

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consideration in assessee's own case in A.Y.2002-03 and the Tribunal held that the assessee need not recognize the interest income on NPS. The Hon'ble Supreme Court in the case of Southern Technologies Ltd. 320 ITR 577 (SC) no doubt took a view that the Prudential Norms of Reserve Bank of India regarding NPA will not be applicable when it comes to computing the total income under the Income Tax Act. The aforesaid decision of the Hon'ble Supreme Court was however considered by the Ho .....

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e Act is applicable in assessee's case. The relevant provisions of Sec.43D of the Act reads thus: "Sec.43D: Special provision in case of income of public financial institutions, public companies, etc. Notwithstanding anything to the contrary contained in any other provision of this Act,- (a) in the case of a public financial institution or a scheduled bank or a State financial corporation or a State industrial investment corporation, the income by way of interest in relation to such cat .....

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or the scheduled bank or the State financial corporation or the State industrial investment corporation or the public company to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier. Explanation : For the purposes of this section,- (a) "National Housing Bank" means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 19 .....

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987); (c) "public financial institution" shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956); (d) "scheduled bank" shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36; (e) "State financial corporation" means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 19 .....

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providing long term financial for industrial projects. All the shares of the assessee are held by the West Bengal Government Clause (2) of the main objects of the assessee specifically provides that the object of providing credit facilities relating to infrastructure etc. The terms of money lending with the assessee extend repayment of period of more than five years. In terms of section 43D of the Act interest in respect of non-performing assets is chargeable to tax in the year in which such in .....

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the categories of institution mentioned in section 43D. In the assessment order for the assessment year 2004-05 the AO held that the assessee did not fall under section 43D because it was not notified under section 4A(2) of the Companies Act, 1956. We are of the view that section 4A is in respect of public financial institutions only, a category separately covered by Explanation (c) of section 43D. The assessee, being a State Industrial Investment Corporation, it is covered by Explanation (f) a .....

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ear 2004-05, it is noted that in consonance with the comments of the Comptroller and Auditor General of India, the Company has written back the entire provisions for doubtful debts recoverable from the agencies of the Govt. of West Bengal, which has been realized in full with interest on 3l.3.2007. Further interest accrued thereon till the end of the year has been .treated as income for the year". As such. the assessee has filed additional ground in ITA 324/K/12 for the assessment year 2006 .....

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the RBI directives had no binding effect on the Income Tax Act. It was also contended that under the mercantile system income had to· be booked· as soon as it accrued and the question of taxability was to be decided according to principles of law and not accountancy practice. Reliance in this behalf was placed on the judgment of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd., (1997) 227 ITR 172 (sc), State Bank of Travancore v CIT (1986) 158 ITR .....

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e Bank of Travancore's case (supra) actually supports the assessee. In that case, it was held that the concept of real income was certainly applicable in judging whether there had been income or not. In Shiv Prakash Janak Raj's case (supra), for the assessment year 1968- 69, resolution for waiver of interest was passed during the previous year but for the assessment years 1969-70 to 1971-72, such resolution was passed after the expiry of the relevant previous year. The revenue did not pr .....

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of Travancores case to hold that the concept of real income cannot be employed so as to defeat the provisions of the Act and the Rules. Further there can be no dispute with regard to the proposition laid down in Tuticorin Alkali's case(supra) but the fact is that there is no accrual of income in so far as the assessee is concerned. 20. For the reasons given above, we are of the view that the CIT(A) was justified in coming to the conclusion that interest on NPA need not be recognized as incom .....

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06 read with the order dated September 21, 2007 passed on the MA against the aforesaid order. The material facts are that the assessee creates sinking fund by depositing from time to time the required amounts with Banks in the form of recurring deposits of varying periods ranging from 3 to 10 years. Interest on such recurring deposits is not payable at the end of previous year but is payable only on the maturity of the period for which the respective recurring deposits have been made. Such recur .....

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axed every year and not altogether at the time of maturity. 23. The said issue constituted grounds (XII) and (XIII) In the appeal for the assessment year 2002-03 (page 89 of the Paper Book filed by the assessee in ITA 464/K/08) which was dealt with in paragraphs 13 to 15 at pages 99 to 102 of the said Paper Book. By the MA order dated September 21,2007 certain mistakes in figures were corrected (pages 103, 104 of the said Paper Book). 24. We also find that the Hon'ble Kerala High Court in CI .....

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ITA No. 1080/K/2009 for the assessment year 2005-06. It was submitted that in the event the grounds relating to interest on recurring deposit in the revenue's appeals for the assessment years 2001-02, 2003-04 and 2004-05 are adjudicated against the assessee, the AO should be directed to exclude such interest accounted for and offered to tax in the assessment year 2005-06 from the assessment for that year. 25. On behalf of the revenue, reliance was placed on the judgment of the Hon'ble S .....

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see in its contention that interest income is taxable only upon maturity when the right to receive interest accrued to the assessee. In Laxmipat Singhania v CIT, (1969) 72 ITR 291 (SC), relied upon on behalf of the revenue it was held that where the amount had escaped assessment on accrual basis it could not be taxed in another year on the basis of receipt. No such situation has arisen in the instant case inasmuch as accrual of interest is only upon maturity and there is no question of any incom .....

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t ground of appeal of the Revenue. 27. In the result the appeal of the revenue is dismissed. ITA No.463/Kol/2008 & ITA No.389/Kol/2008: 28. ITA No.463/Kol/2008 is an appeal by the Revenue while ITA No.389/Kol/2008 is an appeal by the Assessee. Both these appeals are directed against the order dated 22.1.2008 of CIT(A)-VI, Kolkata, relating to AY 2003-04. ITA No.463/Kol/2008: (Revenue's appeal): 29. The grounds of appeal raised by the revenue in this appeal reads thus: "1. That the L .....

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and arise under same facts and circumstances. For the reasons stated while deciding similar grounds of appeal in AY 2001-02, we do not find merits in these grounds of appeal raised by the revenue. Consequently, the appeal by the Revenue is dismissed. ITA No.389/Kol/2008: (Assessee's appeal): 31. Ground No. I to III raised by the Assessee reads as follows: "I. That on the facts and in the circumstances of the case, ,the Ld. CIT(Appeals) erred in holding that interest amounting to ₹ .....

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s Office in the Appellant's own case for the immediately preceding assessment year 2002-03 on the same issue when facts in both the assessment years were identical. III. That the Ld. CIT(Appeals) erred in not following the Order of the jurisdictional Income Tax Appellate Tribunal in the Appellant's own case for the assessment year 2002-03 when the same was accepted by the Department." 32. The facts with regard to the aforesaid grounds of appeal are as follows: The assessee has made .....

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had not been paying interest for the said deposits and the office of the Accountant General raised an objection and suggested that these accounts be transferred from Major Head 8342 to 8449, a non-interest bearing head. Accordingly, the said transfer was effected by the Principal Secretary to 8449, a non-interest bearing head. Thereafter it was felt necessary by the State Government to maintain the deposit account of the Assessee under interest bearing head i.e. 8342 and for that reason the Prin .....

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ing to the rate at which loan for Central Plan Assistance is allowed. However by a letter dated 31st March, 2004 ultimately the State Government decided to pay interest on the deposits of the appellant with the Pay and Accounts Office at the rate applicable for Normal Ways and Means Advance availed by the State Government. 33. According to the Assessee the point of time when interest income can be considered as crystalized is when the State Government by its letter dated 28.2.2005 ultimately qua .....

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General in his comments u/s.619(4) of the Companies Act, 1956 on the accounts of the Assessee. Accordingly a sum of ₹ 50.31 Crores was added to the total income of the Assessee. 35. Before CIT(A) the Assessee pointed out that in AY 2002-03 identical issue was considered by the Tribunal in Assessee's own case in ITA No. 395/Kol/2006 and by order dated 25.8.2006 the addition made by the revenue authorities was deleted by the CIT(A). The CIT(A) was however of the view that the letter date .....

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onfirmed by the CIT(A). 36. We have heard the rival submissions and perused the letters dated 13.6.2001 and 5.3.2004 and 31.3.2001, copies of which are placed at pages 43 to 50 of the paper filed by the Assessee in ITA No.389/Kol/2008 for AY 2001-02. It would be seen from the letter dated June 13, 2001 (page 43) that the Principal Secretary wrote to the Principal Accountant General (A & E) for approval in respect of the Government's decision to pay interest on deposit with Pay & Acco .....

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e for normal ways and means advance availed by the State Government from the Reserve Bank of India. The said letter dated March 5, 2004 was to take effect from April 1, 2003. By the letter dated March 31, 2004 (page 46) the said letter dated March 5, 2004 was modified to say that it would be effective from April 1, 2001. Letter dated March 31, 2004 (page 47) is with regard to sanction of interest for the period from April 1, 2001 to March 31, 2002. The letter dated February 28, 2005 (page 50) is .....

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the letter dated June 13, 2001 Was decided to be applied with retrospective effect. The sanction was finally given in respect of the amounts quantified in February 2005. The assessee in fact accounted for such interest in its accounts for the financial year ended March 31, 2005 (Note 4(iii) at page 33 of the printed accounts included in the Paper Book for the assessment year 2005-06 being ITA No. 1080/K/2009). The assessee offered the said interest income to tax in the assessment year 2005-06. 3 .....

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76/- being interest income on loans credited in earlier financial years was an allowable deduction in computing the total income when the same was reversed following the RBI Prudential Norms and Directives on the relevant assets becoming Non-Performing Assets (NPA) and written off in the Profit and Loss Account and shown by way of reduction from the interest income in the previous year relevant to the assessment year 2003-04." 39. The material facts relating to the 4th ground are that durin .....

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o the extent of ₹ 26,43,24,776/- and the same amount was reduced from the interest income credited to the profit and loss account. The effect of reduction of the said amount from the interest income on the credit side of the profit and loss account was the same as that of a debit to the profit and loss account. The assessee having written off the debt which had become bad as irrecoverable in its accounts, it claimed deduction in respect thereof under section 36(1)(vii) of the Act. The spec .....

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here is no question of writing off under section 36(1)(vii) of the Act. 41. It was submitted that the finding of the CIT(A) is contrary to the specific case pleaded by the assessee viz. that the amount in question was a bad debt written off as irrecoverable and in respect of which the assessee was entitled to deduction under section 36(1)(vii) of the Act. It was submitted that the decision in the case of State Bank of Hyderabad (supra) was a case in which there was no write off in the books of a .....

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of Hyderabad and in ignoring the assessee's claim of bad debt under section 36(1)(vii). 42. We have considered the rival submissions and are of the view that that if there is a write off the interest amount in question in the debtors account, than the deduction should be allowed. The facts show that there was a debit to the profit and loss account of a sum of ₹ 26,43,24,776 because the credit side of interest income shown in the profit and loss account was reduced to this extent and th .....

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n referred to by the CIT(A) in the case of State Bank of Hyderabad (supra) is a case where factually there was no write off as bad debts in the books of accounts. The said decision will not apply to the facts of the present case. We therefore allow ground No.IV subject to verification of the write off in the debtors account as stated above. 43. In the result, the appeal by the Assessee is partly allowed. 44. In the result appeal by the Assessee is partly allowed and that by the revenue is dismis .....

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#8377; 55,27,48,832/- made on account of non-provision of interest on Non Performing Assets (NPA). 2. That the Ld. CIT(A) has erred in law as well as on facts by deleting the addition of ₹ 138,72,53,722/- on account of interest on Recurring Deposits made on accrual basis. 47. The aforesaid grounds of appeal are identical to the grounds of appeal raised by the Revenue in ITA No.464/Kol/2008 for AY 2001-02 and arise under same facts and circumstances. For the reasons stated while deciding si .....

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a State Industrial Investment Corporation, a Government Company within the meaning of section 617 of the Companies Act 1956 and engaged in the business of providing long term finance for industrial projects. Therefore, the provision to section 36(1)(viii) of the Income Tax Act 1961, is not applicable in this case. II. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in relying upon the proviso to section 36(1)(viii) of the Income Tax Act 1961, when t .....

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to in section 28: (viia) in respect of any provision for bad and doubtful debts made by- (c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A):" ………. Explanation : For the purposes of this clause- (v) "State industrial investment corporation" means a Government company w .....

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n under this clause) carried to such reserve account: Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess. Explanation: In this clause,- (a) "specified entity" means,- (i) a financial corporation specified in section 4A of the Companies Act, 1956 (1 of 1956); (ii) .....

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se (a), the business of providing long-term finance for- (A) industrial or agricultural development; (B) development of infrastructure facility in India; or (C) development of housing in India; (ii) in respect of the specified entity referred to in sub-clause (v) of clause (a), the business of providing long-term finance for the construction or purchase of houses in India for residential purposes; and (iii) in respect of the specified entity referred to in sub-clause (vi) of clause (a), the busi .....

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the Explanation to sub-section (4) of section 80P; (e) "housing finance company" means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes; (f) "public company" shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956); (g) "infrastructure facility" means- (i) an infrastructure facility as .....

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ny loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years; 50. Both the grounds relate to the assessee's claim for deduction of provision made in accordance with section 36(1)(viia)(c) of the Act amounting to ₹ 1,45,93,510/-. The Assessing Officer held that the assessee having not been notified under section 4A(2) of the Companies Act, 1956, it was not covered by section 36( .....

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n 36(1)(viia)(c), inter alia, to a State Industrial Investment Corporation defined in Explanation (v). Public financial institution notified under section 4A of the Companies Act, 1956 is separately mentioned in Explanation (iii). That the assessee is not a public financial institution notified under section 4A of the Companies Act, 1956 does not affect its coverage under Explanation (v). The said Explanation (v) to section 36(1)(viia)(c) reads as follows:- "(v)"State industrial invest .....

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17 of the Companies Act 1956 engaged in the business of providing long term finance for industrial projects. The other requirement of Explanation (v) is that the assessee must be eligible for deduction under clause (viii) of section 36(1). 53. The requirement of Explanation (v) is only that the corporation must be eligible for deduction under clause (viii). It is not stipulated that the deduction under the said clause should have been claimed or allowed. Clause (viii) of section 36(1) is applica .....

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of the reserve and determination of amount of deduction are matters relating to allowance of the deduction under clause (viii) and have nothing to do with the eligibility for deduction. The CIT(A) was therefore wholly unjustified denying the assessee's claim by referring to the proviso to section 36(1)(viii) which is only for determination of the quantum of deduction. 54. The assessee is a "specified entity" in terms of Explanation (a)(ii) to section 36(1)(viii). The assessee being .....

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to clause (2) of the main objects of the assessee extracted hereinabove. The infrastructure facilities for the development of which the assessee provides finance fall within the purview of the Explanation to clause (i) of section 80IA(4). The finance provided by the assessee is repayable along with interest during a period of more than five years. 55. The aforesaid provision of ₹ 1,45,93,510/- was written back during the previous ear relevant to the assessment year 2006-07. Although the AO .....

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are of the view that the Assessee is entitled to deduction u/s.36(1)(viia)(c) of Act as the Assessee satisfies the conditions laid down in the provisions referred to above. In view of the above conclusion, the alternative submission made by the Assessee does not require adjudication. The grounds of appeal of the Assessee are accordingly allowed. 57. In the result appeal by the Assessee is allowed and that by the revenue is dismissed. ITA No.1080/Kol/2009 58. This is an appeal by the Revenue aga .....

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ion of ₹ 58,84,56,852/- being accrued interest on non-performing loans without appreciating the fact that in the year under consideration the assessee has recognized income on accrual basis on other investments of similar nature. 3. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in law in deleting the said addition of ₹ 58,84,56,852/- without considering that the assessee is not covered under the provision of Section 43D of the I.T.Act, 1961, which only .....

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e Revenue is dismissed. ITA No. 604/Kol/2012 & ITA No. 324/Kol/2012: 61. ITA No.604/Kol/2012 is an appeal by the Revenue while ITA No.324/Kol/2012 is an appeal by the Assessee. Both these appeals are filed against the order dated 30.12.2011 and relate to AY 2006-07. ITA No.324/Kol/2012: (Assessee's Appeal): 62. The ground raised by the Assessee reads as follows: "1. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) should have held that write back of provi .....

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imed by the Assessee by the AO and the CIT(A). While deciding the appeal of the Assessee for AY 04-05 in ITA No.580/Kol/2008, We have already allowed the claim of the Assessee for the aforesaid deduction. In the present AY 2006-07, the Provision was written back and offered as income by the Assessee as the debts ceased to be bad debts or were realised. The claim of the Assessee was that if the amount claimed as deduction in AY 04-05 is not allowed as a deduction, than the write off the said sum .....

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on of law to facts on record. They are therefore admitted for adjudication: 65. The first additional ground of appeal reads thus: "1. For that in the event the ground relating to interest on Non Performing Assets (NPS) in ITA NO.463/Kol/2008 for assessment year 2003-04, ITA NO.464/.Kol/2008 for assessment year 2001-02, ITA NO.568/Kol/2008 for assessment year 2004-05 and ITA NO.1080/Kol/2009 for assessment year 2005-06 relating to non provision of interest on NPA being adjudicated against th .....

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e same income is taxed twice. In other words, the Assessee did not offer the interest income on NPA in the past and now that the said interest income is considered as having accrued to the Assessee under the mercantile system of accounting, the same ought to be offered to tax and taxed and has been done so. The Assessee therefore cannot have any grievance whatsoever in this regard. The first additional ground is accordingly dismissed. 67. The second additional ground raised by the Assessee reads .....

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nd of appeal is dismissed. 69. In the result, the appeal by the Assessee is dismissed. ITA No.604/Kol/2011 (Revenue's Appeal): 70. There is a delay of 14 days in filing this appeal by the Revenue. The same has been explained as owing to intervening public holidays and break down of photo copy machine. We have considered the reasons assigned for the delay in filing the appeal and are of the view that the delay in filing the appeal has occasioned owing to reasonable and sufficient cause. The d .....

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elete or modify any of the grounds of appeal before or at the time of hearing." 72. The only ground in the revenue's appeal relates to the computation of interest under section 234C. The material facts are that the assessee filed its original return on November 30, 2006 showing a total income of ₹ 495.03 crores and a sum of ₹ 6.12 crores as refundable (page 37 of Paper Book in ITA 324/K/12). The said return was processed under section 143(1) on May 30, 2007. The statutory au .....

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87,807/- payable under section 234C. The AO computed the assessee's income as per the revised computation of income. However, he charged interest under section 234C of ₹ 62,13,902/- on the basis of the income figures shown in the return submitted on November 30, 2006. The CIT(A) following his predecessor's order for the assessment year 2004-05 granted relief to the assessee. He held that interest under section 234C was to be charged on the basis of the revised computation which was .....

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reference to the accepted basis of assessment. Aggrieved by the order of the CIT(A) the Revenue is in appeal before the Tribunal. 73. It was submitted that the CIT(A) was entirely justified in taking the view that he did. Interest under section 234C is payable in case of shortfall in payment of advance tax instalments with reference to the tax due on the returned income. It was submitted that in a case like the assessee's, delay occurs on account of statutory audit and CAG audit and subsequ .....

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se to accept revised computation on the basis of audited accounts for the purpose of completing the assessment. In the assessment order for the assessment year 2006-07 the Assessing officer made the following observation :- "The income as per revised computation is accepted as conventionally for undertakings of Govt this kind of delay due to late statutory audit had been allowed earlier." 74. We have considered the rival contentions and the order of the CIT(A) in the light of the relev .....

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ay of September is less than forty-five per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent of the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of one per cent per month for a period of three months on the amount of the shortfall from fifteen per cent or forty-five per cent or seventy-five per cent, as the case may be, of the tax due o .....

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r, as the case may be, thirty-six per cent of the tax due on the returned income, then, it shall not be liable to pay any interest on the amount of the shortfall on those dates; (b) the assessee, other than a company, who is liable to pay advance tax under section 208 has failed to pay such tax or,- (i) the advance tax paid by the assessee on his current income on or before the 15th day of September is less than thirty percent of the tax due on the returned income or the amount of such advance t .....

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n the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income: Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of underestimate or failure to estimate- (a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of .....

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me where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment) Act, 2000, and the assessee has paid the amount of shortfall, on or before the 15th day of March, 2001, in respect of the instalment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000, and the 15th day of December, 2000: Provided also that nothing contained in this sub-section shall apply to an .....

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ection, "tax due on the returned income" means the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable, as reduced by the amount of,- (i) any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which .....

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isions of section 115JAA. (2) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years." 75. Interest u/s.234C is charged for deferment of advance tax and is charged with reference to tax due on returned income. "Tax due on returned Income" has been defined in explanation to 234C(1) as tax chargeable on the total income declared in the return of income furnished by the ass .....

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interest is mandatory and if there are good ground waive interest than it is for the Assessee to seek appropriate remedies open to it in law. The CIT(A)'s order in our view is contrary to the provisions of law and cannot be sustained. Accordingly, the appeal of the revenue is allowed. 76. In the result, the appeal by the Assessee is dismissed and that by the Revenue is allowed. ITA No. 1028/Kol/2011 & ITA No.984/Kol/2011: 77. ITA No.1028/Kol/2011 is an appeal by the Revenue while ITA No .....

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appeal has occasioned owing to reasonable and sufficient cause. The delay is accordingly condoned. 79. The grounds raised by the Revenue reads thus: "1. That on the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of ₹ 1,76,10,845/- made by the Assessing Officer on account of disallowance of prior period expenses. If the fact of prior period expenditure which came for discussion during the assessment proceedings remained uncontroverted, it can .....

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ncome in complete disregard to the particulars and details of various income submitted during the course of assessment. II. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) should have held that the assessment of the Appellant's income was required to be made based on the real income of the Appellant during the previous year corresponding to the assessment year 2007-08. III. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) should have h .....

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the Ld. CIT(Appeals) was not justified in treating a sum of ₹ 750000/- as not admissible under the Income Tax Act, 1961 when the same was claimed by the Appellant as normal revenue expenditure being 1/10th of the amortization expenses for change in Object Clause and the said amount had all along been granted to the Appellant upto assessment years 2006-07. V. That the Appellant craves leave to alter, amend and/or to take additional grounds before or at the time of hearing this appeal." .....

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the Assessee. 82. The first two grounds of the assessee's appeal are against the action of the A0 in ignoring the revised computation of income based on audited accounts filed in course of assessment proceedings on June 23, 2009 after expiry of the time limit prescribed under section 139(5) which has been upheld by the CIT(A) mainly relying upon Goetze (India)'s case. Though the AO framed the assessment on the basis of the revised return filed on March 15, 2008, he picked up prior perio .....

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appeal. 83. The material facts that could be gathered are that the assessee filed its original return on October 30, 2007 declaring income of ₹ 146.33 crores which was revised on March 15,2008 for claiming higher TDS credit. The statutory auditors completed audit on December 29, 2008, the CAG on March 3, 2009. The accounts were adopted at the Annual General Meeting on April 9, 2009. Based on such audited accounts, the assessee filed revised computation in course of assessment proceedings o .....

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on and audited accounts as there was delay in completing the audit. 84. The purpose of the assessment is to arrive at the proper figure of income and it would be a travesty of justice if audited accounts which become available during the course of assessment proceedings are ignored merely because of expiry of the time limit for filing revised return. Further, in the instant case, the assessee also submitted explanation for the difference between the revised return and the revised computation of .....

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matter of Ground 0.3 of the assessee's appeal. The assessee's submissions in respect of Goetze (India)'s case have been made while dealing with ITA 388/K/08 for the assessmet year 2001-02. 85. After considering the rival submissions, we are of the view that the order of CIT(A) has to be set aside and the AO should be directed to make an assessment de novo on the basis of the audited statements available. In this regard, we are also of the view that the principle laid down in Goetze I .....

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en. Thus both the appeals of the Assessee and revenue are allowed for statistical purposes. ITA No.1283/Kol/2012 & C.O.No.104/Kol/2012: 86. ITA No.1283/Kol/2012 is an appeal by the Revenue against the order dated 1.6.2012 of CIT(A)-VI, Kolkata relating to AY 2008-09. The Assessee has filed Cross objection being C.O.No.104/Kol/2012 against the very same order of CIT(A). ITA No.1283/Kol/2012: Revenue's Appeal: 87. There is a delay of 5 days in filing the appeal by the Revenue. The same has .....

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14A of the Income tax Act read with Rule 8D of the Income Tax Rules should not be applied on the investments made in preference shares of Haldia Petrochemicals Ltd. (HPL) under direction of Government of West Bengal. 2. That the appellant craves for leave to add, delete or modify any of the ground of appeal before or at the time of hearing." 89. The Assessee had added back an amount of ₹ 55,92,B96/- u/s 14A read with Rule BD. The Assessing Officer, however, recomputed the disallowanc .....

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the assessment year 2008-09. It had invested ₹ 25 crore in SBI-SHF Liquid Plus Units - Institutional Plan Daily Dividend on 11.12.2007 which had since been realized on 5.3.2008. Dividend earned on the said investment was ₹ 39,29,933/- for a period of 88 days (from 11.12.2007 to 5.3.2008). A further sum of ₹ 25 crore was invested by the Assessee in SBI-SHF Liquid Plus Units- Institutional Plan Daily Dividend on 28.3.2008 and dividend aggregating to ₹ 172914/- accrued there .....

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in the Directors' Report (Page-6 of the Printed Accounts). Interest at the rate of 8.90% p.a. for 92 days on investments of ₹ 25 crore worked out to ₹ 55,92,896/-, which the Assesseee had considered disallowable u/s 14A read with Rule 8D. 91. While computing the quantum of disallowance u/s 14A, the Assessee did not consider an aggregate sum of ₹ 198,80,09,710/- (Rs. 194,61,95,7101- in 1% Cumulative Preference Shares of Haldia Petrochemicals Ltd (HP L) and ₹ 4,18,14,00 .....

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ns made by the State Government from time to time. HP L was formed near Haldia Port in the district of Midnapore in the State of West Bengal as a joint venture where the Government of West Bengal is a major shareholder with the objective of promoting all-round development in the State. On the basis of request by said HP L, the Assessee had granted unsecured loans for the purpose of laying gas pipe line and other infrastructural activities to the extent of ₹ 175.00 crore at interest rate of .....

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anding loan and accrued interest aggregating to ₹ 194.62 crore into Preference Shares of HPL. Thus, due to circumstances beyond the Assessee, it had to realign the outstanding loan and accrued interest into investment which otherwise had been doubtful of recovery. Subsequent to the conversion of unsecured loan into Preference Shares, till date the Assessee Company had not received any amount as dividend on such Preference Shares. Accordingly, investments in Preference Shares of HPL had not .....

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sector enterprise of the Government of West Bengal. The Appellant is primarily engaged in the business of providing finance for infrastructural development in the State of West Bengal and the Appellant is required to follow the guidelines made by the State Government from time to time. HPL was formed near Haldia Port in the district of Midnapore in the State of West Bengal as a joint venture and the Government of West Bengal is a major shareholder. On the basis of request by said HPL, the Appell .....

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nt of West Bengal, the e-promoter ,of HPL instructing the Appellant-Company to realign the outstanding loan and accrued interest aggregating to ₹ 194.62 crores into Preference Shares of HPL. Thus due to circumstances beyond the Appellant-Company's control, it had to realign the outstanding loan and accrued interest into investment which otherwise had been doubtful of recovery as per the appellant. 5. The appellant has never received any amount as dividend on such Preference Shares subs .....

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on to the said preference shares of HPL and it has resulted in to a loss from interest to no dividend. The appellant has converted its loan amount which is a business item into a capital item because of compulsion only. 6. Rule 8D read with section 14A is applicable from the Assessment Year 2008- 09 and does not provide any exception for expenditure @ % % on the total investments. The Assessing Officer has also not disallowed proportionate interest under rule 80(2)(ii) read with section 14A. 7. .....

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nce shares. The debtor is still incurring losses and no dividend what so ever has been received ever by the appellant. The interest was also not received since long as discussed supra. Therefore, in these facts and circumstances where a loan as a compulsion is converted into preference shares which has not yielded any dividend, the plea of the appellant on equity principle is accepted that the expenses under rule 80(2)(iii) should not be disallowed on the said amount of ₹ 194.62 crores wor .....

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7; 63,22,363/- before CIT(A)]. The AO did not specify a single reason as to why the assessee's claim of expenditure was not acceptable and straightaway embarked upon computing disallowance under rule 8D. Such action of the AO is wholly unsustainable in view of the judgments of the Hon'ble Calcutta High Court in GA No.2290 of 2013, ITAT No.157 of 2013, v Shri Ashish Jhunjhunwala decided on January 8,2014 and in GA No.3022 of 2013,, ITAT No.161 of 2013, CIT v REI Agro Ltd. Decided on Decem .....

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erence shares have to be considered to determine the average value of investments is not in dispute. The fact that a loan was converted into preference share consequent to direction of State Government can be no ground not to treat preference share as investment which are likely to yield tax free income. The dividend earned on such preference shares would certainly be claimed as deduction. In such circumstances, we are of the view that the conclusions of the CIT(A) cannot be accepted. 96. The le .....

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e Act cannot be made as there was no dividend received on the preference shares and in any event the disallowance u/s.14A of the Act cannot be in excess of the dividend income earned by the Assessee. For the proposition that when there is no dividend income no disallowance u/s.14A of the Act is called for, the learned counsel for the Assessee has placed reliance on the following decisions: CIT Vs. Winsome Textile Industries Ltd. 319 ITR 204 (P & H) CIT Vs. Corrtech Energy (P) Ltd. 372 ITR 97 .....

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he learned counsel for the Assessee. The proposition laid down in the aforesaid decision is that in the absence of existence of tax free income there can be no disallowance u/s.14A of the Act. In the present case however there was exempt income and therefore provisions of Sec.14A of the Act have to be applied. The learned counsel for the Assessee has however argued that since no dividend was received on Preference shares the investment in preference share should not be considered for the purpose .....

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Sec.14A of the Act cannot be in excess of the tax free income earned by the Assessee during the previous year. We therefore hold that the disallowance u/s.14A of the Act be restricted to the tax free income earned by the Assessee. The direction given above will result in relief to the Assessee than what was given by the CIT(A). The relevant grounds of the revenue are accordingly treated as dismissed. C.O.No. 104/Kol/2012 in ITA No.1283/Kol/2012: (By Assessee) 98. The grounds raised in the CO rea .....

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essee claimed deduction of a sum of ₹ 7,50,000/- which was 10% of amortisation of expenses for change in object clause the Assessee considered as revenue expenditure and claimed as deduction u/s.35D of the Act. In the financial year 2000-01, a sum of ₹ 75,00,000/- was paid on account of Registration Fees for change in object clause and the same was debited under the head "Miscellaneous Expenditure" and 1/10th of the said amount, i. e., ₹ 7,50,000/- was amortised every .....

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ted by the Department and therefore, on the same set of facts, the Ld. Assessing Officer can not disallow the claim. The Assessee relied on the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Hindusthan Motors Ltd [192 ITR 619} wherein it was held that it is true that there is no res judicata but there must be some substantial ground for one Income Tax Officer to differ from another Income Tax Officer in the earlier assessment year. Reliance was also placed on the decision .....

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n to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." 100. The CIT(A) however upheld the order of the AO, observing as follows: "I have carefully considered the observations of the Assessing Officer in the assessment order and submissions of the appellant. The expenditure incurred by assessee is not kind of expenditure allowed u/s 350 of the Income Tax Act, 1961. The expenditure was incurred on chan .....

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een disallowed by the Assessing Officer in assessment year 2007-08 and therefore the principal of rule of consistency in assessment year 2008-09 is also not applicable. '15. My Ld. Predecessor in the assessment year 2007-08 vide appeal No.880/CIT(A)NII2009-10/Cir-6/Kol dated04.03.2011 also disallowed the said expenditure by observing in his appellate order as follows:- "Here I find that this amortized expenditure is being claimed by the assessee for the registration fees paid for change .....

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find that this expenditure was incurred after commencement of business i.e. in F. Y 2000-01. Since the assessee is not an industrial undertaking therefore it cannot be allowed amortized amount for an expenditure which is incurred after commencement of business. Therefore, 1 am of the opinion that this amount to ₹ 7,50,0001- cannot be allowed to the assessee. As regards the argument of the assessee that this expenditure should be allowed because it has been allowed in earlier assessment yea .....

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eld on identical facts that the disallowance of expenses u/s.35D of the Act which is to be allowed over a period of 10 years cannot be disallowed in the 7th year. In that case, Preliminary expenses were amortized claimed as deduction u/s. 35D. The same was allowed in the first year and thereafter for the following 6 AYs. In the 7th AY, the AO restricted deduction on ground that only eligible expenses were allowed to be spread over u/s. 35D and therefore, expenses only to extent that had nexus to .....

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