TMI Blog2017 (3) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Under these circumstances, we do not find it necessary to adjudicate the other issues raised by the assessee with regard to these grounds. Disallowance on account of Sundry Debtors written off by the assessee during the year - Held that:- CIT(A) has passed nonspeaking order without giving proper reasoning. We find it appropriate to send this issue back to the file of the AO. The assessee shall submit on record requisite details and evidences to justify its claim. The assessee is required to show that the impugned amount has already been included in its income in earlier years so as to claim the benefit of paid debts u/s 36(1)(vii). The AO shall decide this issue again after considering all the facts and circumstances, as may be brought on record by the assessee. The assessee is also permitted to make any alternative claim as may be permitted under the law. Disallowance of TDS written off during the year - Held that:- Disallowance has been confirmed by the lower authorities without examining facts and figures. It was shown that these amounts were recoverable from the parties on account of TDS deposited by the assessee on behalf of these parties, but the payment in full was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Ld. CIT(A) u/s 14A is hereby confirmed. It is noted that exempt income has been earned by the assessee during the year under consideration. Nothing has been brought before us that why disallowance of 0.5% of average value of investments as envisaged under rule 8D(2)(iii) should not be made in the given facts of this case. Further, nothing incorrect has been pointed out in the order passed by Ld. CIT(A) while confirming the disallowance. - ITA No.921/Mum/2016, ITA No.1404/Mum/2016 - - - Dated:- 15-2-2017 - Shri Mahavir Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Member For The Appellant : Vimal Punmiya (AR) For The Revenue : Shri M.V. Rajguru (CIT-DR) ORDER Per Ashwani Taneja: These appeals involve identical issues, and therefore these were heard together and are disposed of by this common order. 2. During the course of hearing, arguments were made by Shri Vimal Punmiya, Authorised Representatives (AR) on behalf of the Assessee and by Shri M.V. Rajguru, Departmental Representative (DR) on behalf of the Revenue. First we shall take up assessee s appeal in ITA No.921/Mum/2016 for Assessment Year 2011-12: 3. This appeal has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities in making addition on notional basis on account of interest accrued on the amount of capital contribution made by the assessee in the partnership firms namely Kamanwala Lakshachandi Todays Developers (KLTD) and Kamanwala Lakshachandi Todays Construction (KLTC). 5.1. The brief background is that the AO observed during the assessment proceedings that the assessee had made investment by way of capital contribution in the aforesaid partnership firms from which no interest on capital has been offered for taxation even though the deed of partnership firm provided for the same. During the course of assessment proceedings, the assessee made submissions before the AO to argue that no interest had accrued during the year under consideration, therefore, same was not credited in the books of accounts. The AO was not satisfied with the arguments of the assessee, and therefore addition was made by the AO for an aggregate amount of ₹ 4,07,30,483/- (i.e. ₹ 2,91,40,922/- +1,15,99,516). 5.2. During the course of appeal before Ld. CIT(A), the assessee submitted copy of partnership deed entered with these firms and also filed terms of agreement of loan sanction letter of cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le assessment of same income. Such a situation is highly unjustified and not permitted under the provisions of income tax law. Therefore, keeping in view alternative prayer of the assessee, we direct that interest income offered in the subsequent years should be excluded from total income to remove the double addition. The AO is directed to pass requisite rectification order in Assessment Years 2012-13 2013-14 so as to give effect to our order. The assessee is also directed to furnish requisite details and documentary evidences to the AO to show that same interest income has already been offered in A.Y. 2012-13 and 2013-14. Thus, these grounds may be treated as allowed in accordance with the aforesaid directions. Under these circumstances, we do not find it necessary to adjudicate the other issues raised by the assessee with regard to these grounds. 6. Ground No.2: This ground deals with the action of lower authorities in making disallowance of ₹ 9,79,200/- on account of Sundry Debtors written off by the assessee during the year. 6.1. During the course of assessment proceedings, it was noted by the AO that assessee has written off a sum of ₹ 9,79,200/- on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim. The assessee is required to show that the impugned amount has already been included in its income in earlier years so as to claim the benefit of paid debts u/s 36(1)(vii). The AO shall decide this issue again after considering all the facts and circumstances, as may be brought on record by the assessee. The assessee is also permitted to make any alternative claim as may be permitted under the law. With these directions, this ground is restored to the file of AO and may be treated as allowed for statistical purposes. 7. Ground No.3: In this ground, the assessee is aggrieved with the action of lower authorities on account of disallowance of ₹ 1,99,905/- being the amount of TDS written off during the year. 7.1. The brief background is that the AO had made disallowance of this amount for the same reasons as in Ground No.2 above and the disallowance was confirmed by the Ld. CIT(A) in the similar manner. 7.2. The brief background as brought before us by Ld. Counsel is that as assessee had paid gross amount to various parties and also paid the TDS, therefore an amount aggregating to ₹ 1,99,905/- was shown as recoverable from these parties. Since the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. The appellant has also argued that the principle of consistency must be followed when there is absolutely no difference in the facts of the case. Perusal of the 26th and 27th Annual Report with respect to the related party transaction is reproduced as under for ready reference:- 27th Annual Report Transa ction Associates Joint venture Key Management personal Other Director Relative of key managerical personal total Rent paid 7,68,000 (7,68,000) - 5,00,000(-) - (4,52,000) 4,24,000 (3,56,000) 16,92,000 (15,76,000) 26th Annual Report Transaction Associates Ke Management personnel Other director Relatives of key managerical personnel Total Rent paid 6,68,000 -- 4,52,00 3,56,000 15,76,000 The same is careful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding business meetings by the executives of the assessee company with the prestigious customers and other numerous business associates. It has also been submitted that in earlier year this rent was allowed by the AO. It was also submitted that rental income has been duly assessed in the hands of these persons by the income tax department. Thus action of the AO is contradictory in as much as, on the one hand income is being assessed in the return of payees, but on the other hand, expense is being disallowed in the return of the payer (i.e. assessee). Further, without prejudice, entire amount could not have been disallowed u/s 40A(2)(b). 8.4. Per contra, Ld. DR submitted that nothing has been brought on record to show that how and in what manner these assets were used for the purpose of business of the assessee. Only bald statement has been made that too unsupported with any evidences. 8.5. We have gone through the facts and circumstances of the case as well as orders passed by the lower authorities and also the submissions made before us. Undoubtedly, the assessee is best judge to make any expenditure keeping in view commercial expediency and best interest of its business. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged the action of lower authorities, in disallowing the claim of ₹ 87,50,000/- made by the assessee on account of write off of the investment made in Joint Venture. 9.1. The brief background is that it was noted by the AO that the assessee had debited in its profit and loss account aforesaid sum under the head Investment in Joint Venture written off, and therefore assessee was asked to explain the nature of the said claim and justify how it was allowable. It was explained by the assessee that it had made an investment in a Joint Venture project with M/s Kamani Tubes Ltd. for development of leasehold property belonging to the said company as per agreement dated 22nd April 1995. As per the agreement the assessee had reserved all the rights for net realization of sale of the property. But, the assessee was not comfortable about the ability of the said company to work as per the agreement. Therefore further payments were stopped. Thereafter, the said company filed a case against the assessee company before BIFR. Under these circumstances, since the assessee company considered the debt (i.e. aforesaid amount given to the aforesaid company) as doubtful, it was written off. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.5. On the other hand, Ld. DR submitted that the evidences relied upon by the Ld. Counsel have not been examined by the lower authorities. The facts regarding subsequent recovery and its inclusion in the income of offer to tax are also not clear. Therefore, this issue needs proper examination by the AO. 9.6. We have gone through the facts of the case. It is noted that evidences brought before us have not been properly examined by the lower authorities. The evidences do indicate that the debt had become but in absence of their examination in the light of facts of this case, no proper conclusion can be drawn by this stage. Further, requisite facts regarding subsequent recovery and its inclusion in the income of subsequent years have also not been properly brought on the records and anlysed by the lower authorities. Under these circumstances, in the interest of justice, we find it appropriate to send this issue back to the file of the AO. The assessee shall bring on record complete facts and evidences on record and shall also place judgments in support of its claim as may be considered appropriate. The AO shall give adequate opportunity of hearing and shall decide this issue afres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. The shares are also sold at ₹ 1 only. The appellant should, in the first place, give the proper value of the unquoted shares. If, after submitting of such details, if assessing officer has not found the values proper, then only the onus will shift to the assessing officer to substantiate as to why the valuation is not found to be proper. In the case here, the appellant has not provided anything for adoption of the value of shares of M/S Shakun Gases Pvt Ltd. Hence, in my opinion, it is held that the appellant should have to first substantiate the value of ₹ 1, which it adopted for s shares of M/s Shakun Gases Pvt Ltd to associated person. 10.4. Being aggrieved, the assessee filed before the Tribunal. 10.5. During the course of hearing before us it has been submitted that section 40A(2)(b) has been wrongly applied as the said section does not apply on loss of sale of assets but only applies upon claim of expenditure made in the Profit and Loss Account for computing income the head income from business. Further, merely because the promoter of the said company hails from the Jain family, it would not come automatically within the definition of the term relativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of ₹ 1,51,05,130/- u/s 14A r.w.r.8D of the Income Tax Act, 1961 without considering the facts that the assessee made substantial investments in partnership firms the income form which was exempt in its hands. 2. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 11. The brief background is that the AO noted that assessee had made substantial investment in partnership firm, the income which is exempt in the hands of the assessee. But, the assessee had not made any suo motu disallowance u/s 14A. Under these circumstances, he worked out disallowance u/s 14A on account of interest for ₹ 1,37,37,50/- and on account of administrative expenses for ₹ 13,67,600/- aggregating to ₹ 1,51,05,130/-. 11.1. During the appeal before the Ld. CIT(A) detailed submissions were made and it was vehemently submitted that no exempt income had been earned during the year. Accordingly, Ld. CIT(A) deleted the disallowance made by the AO by observing as under: It is seen that the appellant's main contention is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly following these judgments it is noted that no interference is called for by us in the order passed Ld. CIT(A). Therefore, his order is upheld. We are not going into other issues at this stage. 12. In the result, appeal filed by the Revenue is dismissed. Now we shall take assessee s appeal for A.Y. 2012-13 in ITA No. 5488/Mum/2016 on the following grounds: 1. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the non reduction of the Interest Income of ₹ 2,91,30,922/- from the total income of assessee, as the same is assessed in A.Y.2011-12 on the assumption of crystallization of interest in A.Y. 2011-12 against that offered by assessee in A.Y. 2012-13. 2.On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the disallowance of ₹ 10,04,000/- paid as rent in view of section 40A(2)(b) of the I.T. Act, 1961 and addition of the same to the total income of the assessee. 3. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the disallowance of the expenditure of ₹ 10,48,931/- in view of section 14A of the I T Act, 1961 and addition of the same to the t ..... 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