TMI Blog2016 (5) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... ce u/s 14A - Held that:- Assessee has an additional ground mentioning that some investments made in the subsidiaries yielded dividends chargeable to tax in India. Such investments should be kept outside the scope of the provisions of Rule 8D of the IT Rules, 1962 while determining the quantity to be disallowed u/s 14A of the Act. In this regard, Ld Counsel for the assessee cited various decisions and various arguments in support of his claim. One of such judgment is pronounced by the Hon‟ble Delhi High Court in the case of Joint Investments Private Limited [2015 (3) TMI 155 - DELHI HIGH COURT ] which is relevant for the proposition that the disallowable amount u/s 14A must not mean that the entire exempt income should be disallowed. Various decisions have come up on this issue involving the disallowance u/s 14A r.w. Rule 8D of the Act. This issue requires reconsideration and fresh decision by the AO in the light of the said decisions on the issue. - Decided in favour of assessee for statistical purposes Disallowance of deduction of bad debts - Held that:- AO has not been able to point out an instance of bad debts where the action of the appellant was mala fide. An assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FCCBs in the year under consideration. These are optionally convertible bonds into equity and the same is supported by the issue documents. When the same are not converted into equity, the bonds are to be redeemed with premium. The bonds were issued with a view to utilise the proceeds for the purpose of strategic acquisitions and / or alliances overseas. The undisputed fact is that none of the bond subscribers exercised the option to convert the bonds into equity. In substance, all the bonds were redeemed with premium without any conversion into equity whatsoever. Assessee incurred the above sum of ₹ 5.82 Crs (rounded off) in connection with rise of such FCCBs, which were eventually redeemed with premium to the bond holders. The said ₹ 5.82 Crs was incurred on accounts of (i) fee paid to the lead managers to the issue; (ii) fees paid to the legal advisors to the issue and (iii) listing fees paid. While accounting of the above claim of ₹ 5.82 Crs in the books of accounts, assessee transferred the same to the security premium account in the balance sheet and did not debit the same in the Profit Loss Account. However, in the computation of income, the assessee clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ITR 611) (Rajasthan High Court) Supreme court has dismissed department‟s SLP vide appeal (Civil) 10548) of 2008 dated 11th August, 2009. Sukhjit Starch Chemicals Ltd (326 ITR 29) (P H) High Court ITC Hotels Ltd (334 ITR 109) (Karnataka High Court) Mahindra and Mahindra Limited (36 SOT 348) (Mumbai Tribunal) Dolphin Offshore Enterprises (I) Ltd (ITA No. 4273/M/2011) dated 28th June, 2013 (Mumbai Tribunal) Faze Three Limited (ITA No.5449/M/2011) dated 16th August, 2013 (Mumbai Tribunal) Crane Software International Limited (ITA Nos. 741 741/Bang/2010 and ITA Nos. 774 775/Bang/2010) dated 8th February, 2011. Aurobindo Pharma Limited (62 SOT 214) (Hyderabad Tribunal) 2.16. In the view of the above, it is respectfully submitted that expenses incurred on FCCB issue should be allowed as revenue expenditure u/s 37(1) of the Act. 6. On the other hand, Ld DR for the Revenue heavily relied on the order of the Tribunal in the case of Zee Telefilms Limited (33 taxmann.com 413), wherein it was held that such expenses should be considered as per the provisions of section 35D of the Act. 7. In this regard, Ld Counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ITR 611) and in the case of Sukhjit Starch and Chemicals Ltd (326 ITR 29). Thus, Ld Counsel for the assessee summed up by stating that the revenue expenditure incurred in connection with the FCCBs constitutes an allowable revenue expenditure u/s 37(1) of the Act and relied heavily on the judgment of the Hon‟ble Bombay High Court in the case of Grindwell Nortion India Limited (ITA No.694 of 2012) dated 24th December, 2014. Further, it is the case of the Ld Counsel for the assessee that the Ld DR cannot make a new case before the Tribunal, which was not raised during the assessment / first appellate proceedings. For this, he relied on the Special Bench decision in the case of Mahindra and Mahindra (supra). 8. We have heard both the parties and perused the orders of the Revenue Authorities as well as the citations by the Ld Representatives of both the parties. Our adjudication on the core issue is given in the following paragraphs: 9. Assessee spent ₹ 5,82,40,318/- by way of payments to (i) fee paid to the lead managers to the issue; (ii) fees paid to the legal advisors to the issue and (iii) listing fees paid. The same was paid to those parties who contributed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. 11. Legal propositions : Scope of Ld DR - Making out a new case of applicability of Section 35D: Ld DR for the revenue filed written note stating that that the claim of such expenses is to be considered within the meaning of the provisions of section 35D of the Act. In this regard, Ld AR for the sssssee traced the way AO dealt with this issue and submitted that AO's case is if the said expenses constitutes Revenue or Capital with in the meaning of section 37 of the Act. Applicability of the provisions of Section 35D of the Act was never the issue before either the AO or before the CIT(A). At the second appeal, Ld CIT DR cannot make a new case by invoking section 35 D of the Act even if it is correctly invokable. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Joint Investments Private Limited, dated 25.2.2015, which is relevant for the proposition that the disallowable amount u/s 14A must not mean that the entire exempt income should be disallowed. Various decisions have come up on this issue involving the disallowance u/s 14A r.w. Rule 8D of the Act. Ld Representatives of both the parties suggested that this issue requires reconsideration and fresh decision by the AO in the light of the said decisions on the issue. 15. After hearing both the parties and on perusal of the cited decisions, we remand Ground nos. 2 and 3 filed by the assessee to the file of the AO for deciding the issue afresh after granting a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Accordingly, Ground nos. 2 and 3 are allowed for statistical purposes. Ground no.4 which relates to the interest u/s 234D of the Act, since related to the outcome of Ground no.2 and 3, this ground also remanded. Accordingly, Ground nos.2, 3 and 4 are allowed for statistical purposes. 16. In the result, appeal of the assessee is allowed for statistical purposes. ITA No.8066/M/2011 (By Revenue) C.O.No.233/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 36(2) of the Act, the assessee is eligible for deduction on account of bad debts. Assessee also relied on the judgment of the Hon‟ble Supreme Court in the case of TRF Limited (323 ITR 397) (SC) apart from many other decisions mentioned in para 5.11 of the note furnished by the assessee. On appreciating the submissions of the assessee, CIT (A) granted relief to the assessee as per the discussion given in paras 5 to 5.7 of his order. For the sake of completeness of this order, relevant para 5.7 is extracted as under:- 5.7. The Ld AO has not been able to point out an instance of bad debts where the action of the appellant was mala fide. An assessee is entitled to re-evaluate and revalue its debtors from time to time failing which he will have unrealistic realizable figures in his books of accounts and the appellant has exactly done the same in this case. In view of the above facts, the disallowance of ₹ 24,88,85,482/- on account of bad debts is directed to be deleted. 19. Considering the above, we are of the opinion that the order of the CIT (A) on this issue is fair and reasonable and it does not call for any interference. Accordingly, grounds raised in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
