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2016 (7) TMI 834 - ITAT MUMBAI

2016 (7) TMI 834 - ITAT MUMBAI - TMI - Disallowance of diminution in value of investments - Held that:- In the earlier years, the Tribunal had allowed this claim by following the decision rendered by Hon’ble Bombay High Court in the case of CIT Vs. Bank of Baroda (2003 (3) TMI 80 - BOMBAY High Court ). We notice that the Ld CIT(A) has followed the above said binding decision of Hon’ble jurisdictional High Court as well as the orders passed by the ITAT. Hence we do not find any infirmity in the o .....

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on’ble Supreme Court. Consistent with the view taken in the assessee’s own cases in the earlier years by the co-ordinate benches, the order passed by Ld CIT(A), wherein he has directed the AO to examine this issue in the light of decision rendered by Hon’ble Supreme Court in the case of Catholic Syrian Bank (supra) is upheld. - Disallowance u/s 14A - Held that:- Consistent with the view taken therein we direct the AO to restrict the disallowance to 1% of the exempt income in AY 2007-08, sinc .....

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he AO. Accordingly, we set aside the orders passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine this issue afresh in the light of fresh explanations that may be furnished by the assessee by duly considering various case laws relied upon by the assessee. - Disallowance of lease premium paid - Held that:- This issue has been decided against the assessee by the Tribunal in AY 2006-07 by following the decision rendered by Special Bench of Tr .....

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”. The Tribunal has held that the banks will also be covered by the inclusive definition given for the expression “financial Corporations” in sec. 36(1)(viii) of the Act. Consistent with the view taken therein, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the claim. - Disallowance of expenditure relating to issue of capital - Held that:- There is difference between funds inflow and funds outgo. The funds raised by issuing capital shall increase the capi .....

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ld by Hon’ble Supreme Court in the case of Brooke Bond India Ltd (1997 (2) TMI 11 - SUPREME Court ), since it would incidentally help in the business of the company and may also help in the profit making. - I.T.A. No. 2966/Mum/2014, I.T.A. No. 3412/Mum/2014, I.T.A. No. 3085/Mum/2014, I.T.A. No. 3959/Mum/2014 - Dated:- 13-7-2016 - Shri B.R. Baskaran (AM) And Ramlal Negi (JM) For the Assessee : Shri C. Naresh For the Department : Shri Shishir Dhamija ORDER Per B. R. Baskaran (AM) These cross appea .....

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of bad debts written off. The AO restricted the deduction in excess of the amount available in Provision for bad and doubtful Debts Account created u/s 36(1)(viia) of the Act. The Ld CIT(A), however, directed the AO to apply the principles laid down by Hon ble Supreme Court in the case of Catholic Syrian Bank Ltd (343 ITR 270). 4. At the time of hearing, both the parties agreed that this issue is covered by the decision rendered by co-ordinate benches of Tribunal in the assessee s own case in I .....

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ad (ITA No.578 and 579/Hyd/2010 dated 07-09-2012) and held that the Explanation 2 to sec. 36(1)(vii) introduced by Finance Act 2013 shall be applicable from 1.4.2014, i.e., AY 2014-15. In the case of Catholic Syrian Bank (supra), the Hon ble Supreme Court had held that the restriction provided in the proviso to sec. 36(1)(vii) shall apply only to the provision created for rural advances. Accordingly, the Tribunal has restored this matter to the file of the AO with the direction to allow the clai .....

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rs, the Tribunal had allowed this claim by following the decision rendered by Hon ble Bombay High Court in the case of CIT Vs. Bank of Baroda (262 ITR 334). We notice that the Ld CIT(A) has followed the above said binding decision of Hon ble jurisdictional High Court as well as the orders passed by the ITAT. Hence we do not find any infirmity in the order passed by him on this issue. 7. The next issue relates to the disallowance of depreciation claimed on leased assets. We notice that the identi .....

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e shall take up the appeals filed by the assessee. The first common issue urged by the assessee in both the years relate to the disallowance made u/s 14A of the Act. In both the years under consideration, the AO worked out the disallowance u/s 14A of the Act in accordance with Rule 8D of the Act. The Ld CIT(A) took note of the binding decision rendered by Hon ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd (328 ITR 81), wherein it was held that the provisions of Rule 8D shal .....

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lable with the assessee is in far excess of the investments. (HDFC Bank (284 CTR 409)(Bom)) (b) All investments are held as stock in trade and hence the provisions of sec. 14A should not be applied to it. (India Advantage Securities (ITA 1131 of 2013) The Ld A.R placed his reliance on various case laws. 10. We heard Ld D.R and perused the record. We notice that the Tribunal has restricted the disallowance to 1% of the exempt income in AY 2006-07 and earlier years. Consistent with the view taken .....

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since the assessee is required to hold certain funds as pure investments. We notice that this aspect of the submissions require verification at the end of the AO. Accordingly, we set aside the orders passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine this issue afresh in the light of fresh explanations that may be furnished by the assessee by duly considering various case laws relied upon by the assessee. 12. The next common issue urged by .....

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d by the assessee relates to the applicability of provisions of sec. 115JB to it. This issue has been decided in favour of the assessee in AY 2006-07, wherein the Tribunal has followed the decision rendered in the assessee s own case in ITA No.1498/Mum/2011 relating to AY 2001-02. Consistent with the view taken in AY 2006-07, we set aside the order passed by Ld CIT(A) on this issue and hold that the provisions of sec. 115JB shall not be applicable for both the years under consideration. 14. We s .....

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by the inclusive definition given for the expression financial Corporations in sec. 36(1)(viii) of the Act. Consistent with the view taken therein, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the claim. 15. In AY 2008-09, the assessee is contesting the disallowance of expenditure relating to issue of capital. During the relevant year, the paid share capital of the assessee has been increased from ₹ 488 crores to ₹ 525 crores by issuing new sha .....

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IT(A) confirmed the disallowance by holding that the expenditure incurred for expansion of capital base is Capital Expenditure. In this regard, the Ld CIT(A) took support of the decision rendered by Hon ble Supreme Court in the following cases:- (a) Brooke Bond India Ltd Vs. CIT (1997)(225 ITR 798) (b) Punjab State Indl. Corporation Ltd Vs. CIT (225 ITR 792) (c) CIT Vs. Kodak India Ltd (2002)(253 ITR 445) 16. The Ld A.R submitted that the assessee was constrained to increase the share capital by .....

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t in the case of Glaxo Pharmaceuticals Ltd (181 ITR 59). The Ld A.R further submitted that the funds received from share capital issued by the assessee shall be used for working capital purposes only, since the money is stock in trade for the assessee. He submitted that Hon ble Supreme Court has decided, in the case of Brooke Bond India Ltd (supra), the issue relating to expenses incurred on capital raised to meet capital expenditure requirements. With regard to the contention of the assessee th .....

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base is capital expenditure, as held by Hon ble Supreme Court in the case of Brooke Bond India Ltd (supra). He submitted that the user of funds so raised shall not be taken as determinative factor for deciding the nature of expenditure. 18. We have heard rival contentions on this issue and perused the record. We notice that the facts prevailing in the case of Glaxo Laboratories (India) Ltd (supra) are different, i.e., in the case before Hon ble Bombay High Court, the assessee was not in require .....

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r, in the instant case, the assessee has been carrying on the business for the past several years. The Reserve Bank of India, the apex body which monitors the functioning of banks, had prescribed certain norms that should be complied by the banks. In the course of compliance of those norms, the assessee has raised capital by issuing shares. It was not the case of the assessee that it was not in need of funds. It was also possible to reach the required Capital adequacy ratio by generating profit .....

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ith the issue of fresh lot of shares in 1967?" The Hon ble Supreme Court noticed that an identical issue came up for its consideration in the case of Punjab State Industrial Development Corporation Ltd and accordingly held as under:- We find that this matter has come up for consideration before this Court in m/s Punjab State Industrial Development Corporation Ltd., Chandigarh v. Commissioner of Income Tax. Patiala. (Tax Reference No. 1 of 1990 decided on December 4, 1996). In that case, the .....

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n in the impugned judgment. This Court has also taken note of the decisions in Empire Jute Company Ltd. (supra) as well as India Cements Ltd. (supra). While holding that the amount of ₹ 1,50,000/- paid to the Registrar of Companies as filing fee for enhancement of the capital was not revenue expenditure, this Court has said:- "We do not consider it necessary to examine all the decisions in extenso because we are of the opinion that fee paid to the Registrar for expansion of the capita .....

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ecision of the Madras High Court in Kisenchand Chellaram's case." This decision thus covers the question that falls for consideration in this appeal. The Counsel appearing before Hon ble Supreme Court raised alternative contention as under:- Dr. Pal has, however, submitted that this decision does not cover a case, like the present case, where the object of enhancement of the capital was to have more working funds for the assessee to carry on its business and to earn more profit and that .....

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e statement of case sent by the Tribunal does not indicate that a finding was recorded to the effect that the expansion of capital was undertaken by the assessee in order to meet the need for more working funds for the assessee. After having observed so, the Hon ble Supreme Court further held as under:- In any event, the above quoted observations of this Court in M/s Punjab State Industrial Development Corporation Ltd. Chandigarh (supra) clearly indicate that though the increase in the capital r .....

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