TMI Blog2017 (6) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... that:- The issue has already been decided by the Co-ordinate Bench of this Tribunal in assessee’s own case to hold that the expenses incurred for welfare of the employees does not come within the purview of section 40A(9). We also find that the case of AO is not excessive or unreasonable expenses. In our view the AO before disallowing the school running expenses should have considered the earlier expenses. More over from the submission of the assessee before the ld. CIT-A, we find that the AO disallowed the expenses on the ground that the order of ITAT cited by the assessee at the time of assessment has not reached finality. The ld. DR has not brought anything contrary to the finding of ld. CIT-A. Accordingly respectfully following the precedent as above we hold that there is no infirmity in the order of the ld. CIT(A) - Decided against revenue Addition on account of gain on settlement of loan - Held that:- In the instant case, the fact that the loan was utilized for the acquiring of fixed assets has not been disputed by the AO. Thus, it is clear that the instant loan was not utilized for the trading liability of the assessee and therefore the waiver off the same cannot amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion only those shares which have yielded dividend income in the year under consideration. Since this issue raised by the assessee as an alternative contention is squarely covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the case of CIT Vs. Teenlok Advisory Services Limited (2016 (8) TMI 682 - ITAT KOLKATA) we direct the Assessing Officer to compute the disallowance as per Rule 8D by taking into consideration only those shares, which have yielded dividend income in the year under consideration. The alternative contention of the ld. counsel for the assessee is accordingly accepted. Disallowances under the provisions of MAT in relation to exempted income we find that the disallowance needs to be made in terms of the clause (f) to the explanation 1 of the provisions of section 115JB of the Act. The provisions of the MAT are self contained code. Thus provisions of section 14A read with rule 8D are not applicable to expenses to be disallowed under clause (f) to the explanation 1 of section 115JB of the Act. In view of above we hold that the AO needs to work out the disallowances independently in relation to exempted income as envisaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 94-95 50,49,72,790 4 95-96 61,19,88,996 5 96-97 Nil 6 97-98 91,09,53,629 5. Aggrieved assessee preferred an appeal before Ld. CIT(A) who allowed the appeal in favour of The aforesaid brought forward of unabsorbed depreciation was allowed to be carried forward in the year under consideration in the original assessment order completed u/s. 143(3) of the Act. Thereafter Ld. CIT in his order u/s 263 of the Act observed that the assessee is entitled to carry forward of unabsorbed depreciation only upto to eight succeeding assessment years. But in the instant case the Assessing Officer in his assessment order has allowed the unabsorbed depreciation to be carried forward beyond the period of eight assessment years. Accordingly, Ld. CIT held the order of AO as erroneous and prejudicial to the interest of Revenue vide his order dated 27.09.2011 and directed the AO to make fresh assessment order as per law after giving opportunity of being heard to assessee. Therea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been dispensed with the unabsorbed depreciation from the assessment year 1997-98 to 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, and, had to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and consequently, was available for carry forward and set-off against the profits and gains of subsequent years without any limit whatsoever. Following the decision of the Hon'ble High Court of Gujarat in the case of General Motors India (P), it is to be held that the unabsorbed depreciation for the assessment years up to 2001-02 shall be carried forward to the assessment year 2002-03 and become part thereof, and, has to be governed by the provisions of section 32(2) as amended by Finance Act, 2001. The AO is directed accordingly. . The Revenue, being aggrieved, is in appeal before us on the following ground:- (i) That the Ld. CIT(A) has failed to appreciate that the Hon'ble Gujarat High Court did not have the benefit of the decision of the Special Bench of Hon'ble ITAT Mumbai in the case of Times Guarantee Ltd before arriving at its decision and, thus, the decision of the Hon'ble High Court does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. Similarly, we also find that the Hon'ble jurisdictional High Court in GA No. 1930 of 2016 dated 11.08.2016 in the case of CIT vss. M/s India Jute And Industries Ltd. has decided the issue in favour of assessee and against the Revenue. The relevant extract of the order is reproduced below:- Challenging the aforesaid order the learned Appellate Tribunal was approached by the Revenue unsuccessfully. The learned Tribunal has upheld the appellate order also relying upon the judgment of the Guarat High Court in the case of General Motors India Pvt. Ltd., the views expressed therein by the Gujart High Curt are as follows:- .. we are of the considered opinion that any unabsorbed depreciation available to an assessee on 1st day of April 2002 A.Y 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. And once the Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uarantee has been overruled. Thus we find no reason to interfere with the finding of the Ld. CIT(A). Under the circumstances, this issue of Revenue s appeal is dismissed. AO is directed accordingly. 8. In the result, Revenue s appeal is dismissed. Coming to Revenue s appeal in ITA No.610/Kol/2013 for A.Y. 08-09 . 9. First issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by the AO for ₹ 14,28,510/- u/s 40A(9) and 36(1) of the Act on account of staff welfare expenses. 10. The assessee in the year under consideration has incurred expenses on employees welfare, the details as under:- 1 Expenses subsidy to staff workers club at Jaykaypuram Rs.1,84,875/- 2 Expenses subsidy to Ladies club at Jaykaypuram, Sirohi ₹ 47,118/- 3 Expenses for running school at Jaykaypuram Rs.11,96,517/- Rs.14,28,510/- During the course of assessment proceedings, the AO requested the assessee to furnish the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced hereunder:- We after hearing both the parties and taking into consideration the orders of tax authorities find that since the ld. CIT(A) while deleting the addition has given a categorical finding by observing that it was made for the welfare of the employees and therefore the decision of the Hon'ble Kerala High Court in the case of P. Balakrishnan, Commissioner of Income Tax -vs- Travancore Cochin Chemicals Ltd (supra) was well applicable which has not been rebutted or controverted by the ld. Departmental Representative for the Revenue before us. We, therefore, respectfully following the decision of Hon'ble Kerala High Court reported in 243 ITR 284, confirm the action of ld. CIT(A) and reject the ground raised by the Revenue. Respectfully following the said order of the Hon'ble ITAT, we allow this ground in favour of the assessee and hold that the expenses incurred for welfare of the employees does not come within the purview of section 40A(9) of the IT Act, 1961 and in that view deleted the disallowance of ₹ 15,17,126/-. This ground of the revenue is, therefore, dismissed . We also find that the case of AO is not excessive or unreason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO in his assessment order. In the case of CIT vs Xylon Holding (P) Ltd, the Hon'ble Bombay High Court has held that the cessation of liability on account of repayment of loan taken to purchase capital asset does not result in a revenue receipt and is not taxable u/s. 28(iv) or 41(1). In view of the above, I am of the opinion that the case of the appellant is covered directly by the above decisions of the Hon'ble ITAT Ahmedabad and Bombay High Court. Respectfully following the above decision, the addition of ₹ 43,05,78,782/- is directed to be deleted. Ground no 2 is allowed. The Revenue, being aggrieved, is in appeal before us on the following ground:- (ii) That the Ld. CIT(A) has failed to appreciate the ratio laid down in the decision of the Hon'ble Supreme Court in the case of Emil Webber vs- CIT (1993) [200 ITR 483] that anything which can properly be described as income is taxable under the Act unless it is exempted under one or the other provision of the Act, and subsequently, has erred in Law as well as facts of the case in directing to delete the addition of ₹ 43,05,78,782/- made on account of Gain on Settlement of Loan. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be chargeable as income under the head Profits and gains of business or profession . In the instant case, the fact that the loan was utilized for the acquiring of fixed assets has not been disputed by the AO. Thus, it is clear that the instant loan was not utilized for the trading liability of the assessee and therefore the waiver off the same cannot amount to income which is chargeable to tax. In holding so, we find guidance support from the judgment of Hon'ble Delhi High Court in the case of CIT v. Tosha International Ltd. [2011] 331 ITR 440/[2009] 176 Taxman 187 wherein it was held as under : The assessee was engaged in the manufacturing of black and white picture tubes. The assessee-company ran into huge losses and it ultimately became a sick company and registered with the BIFR. Under the one time settlement scheme, the financial institutions and banks required the assessee to pay 60 per cent of the amount due towards principal and waived the entire interest payment. There is no dispute with regard to the waiver of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the P and L account, and also the remission of the principal amount of loan so obtained from the bank and financial institution had not been claimed as expenditure or trading liability in any of the earlier previous year. So far as waiver of interest is concerned, the assessee-company itself has treated the same either as income or has not claimed the same as expenditure in the computation of income filed before the lower authorities. 4. We see no reason to interfere with the conclusions of the Tribunal as the same have been rendered on a correct appreciation of law. The principles enunciated in Mahindra Mahindra Ltd. v. CIT [2003] 261 ITR 501 (Bom.) are fully applicable and we see no reason to take a different view. 5. Consequently, no substantial question of law arises for our consideration. The appeal is dismissed. Thus, from the aforesaid legal discussion and facts of the case before us, we find that the order passed by the Ld. CIT(A) is well reasoned and based on correct legal position and, therefore, no interference is called for in his order. Thus, the same is upheld. Ground raised by the Revenue is dismissed. 19. Next issue raised by Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case in admitting, going against the ration laid down by the Hon'ble Supreme Court in the case of Goetze India Ltd vs- CIT [284 ITR 323 (SC) (2006)], the fresh claim of the assessee in respect of additional depreciation on interest capitalized which was never made by the assessee in the return of income or in the course of assessment and consequently, in directing to allow the additional claim of depreciation of ₹ 72,69,648/-. 21. Before us both the parties relied on the order of Authorities Below as favourable to them. 22. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that the Hon'ble Co-ordinate Bench of this Tribunal has decided the issue in favour of assessee in assessee s own case in ITA No.1275/Kol/2010 (supra) the relevant extract of the order is reproduced below:- 22. We have heard the rival contentions and gone through facts and circumstances of the case. We find that Ld. counsel for the assessee stated that in the return of income for earlier years interest, for the purpose of acquisition of capital assets had been claimed as re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) erred in deleing the addition made by the AO for ₹13,85,41,566/- on account of bad debts written off in the computation of income. 26. The AO during assessment observed that the bad debts claimed as deduction by the assessee in computation of income have not been debited in the profit and loss a/c. On question for the aforesaid deduction of bad debts by the AO the assessee submitted that the bad debts have been written off against the provision of bad debt which were created in earlier years. These provisions were created in earlier years by debiting profit loss account and these were also disallowed and offered to tax. Therefore, the bad debt actually written off in the books were written off against the provisions. Therefore, the same was not reflected in the profit and loss a/c. However, the AO disregarded the claim of assessee by observing that bad debt has not been debited in the profit and loss a/c and therefore same cannot be allowed as deduction. Thus, the AO disallowed the claim of ₹13,85,41,566/- and added to the total income of assessee. 27. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tel Ambassador (2002) [253 ITR 430(Ker.)], relied upon by the AO and, accordingly, in directing to delete the disallowance to the tune of ₹ 13,12,19,105/-. 28. Before us both the parties relied on the order of Authorities Below as favourable to them. 29. We have heard rival contentions of both the parties and perused the materials available on record. From the foregoing discussion, we find that assessee has debited the provision for bad debt in the earlier year which were offered to tax. It is because under the Income tax Act, the provisions for bad debts are not allowable expenses until and unless these are actually written off in the books of account. However, in the year under consideration, the bad debts have actually been written off and adjusted with the provisions which were made earlier years in the books of accounts. The necessary details of the provision made in the earlier year are placed on pages 19 to 22 of the paper book. Now the assessee in the year under consideration has actually been written off the bad debt against the provision which were created in the earlier years. It is also important to note that there is no disputes with regard to the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B of the Act. 32. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who granted relief to assessee by observing as under:- 14. Ground no 8 relates to the computation of book profit u/s. 115JB. The issue which requires adjudication is whether the appellant is entitled to deduction of the lower of the amount of brought forward business loss or unabsorbed depreciation as per the books of account even though the debit balance in the profit and loss account was adjusted against the share premium account and revaluation reserve in pursuance to a scheme of compromise sanction by the Hon'ble High Courts of Orissa and Gujarat. The Ld. AR has submitted that the issue has been decided in the case of the appellant for the assessment years 2006-07 and 2007-08 by the Hon'ble ITAT A Bench, Kolkata in ITA No. 1470/Kol/2009 and ITA No.1275-1417/Kol/2010 . This issue has been discussed in detail in my order dated the 28th January, 2013 in the case of the appellant for the assessment year 2005-06 in appeal no 23/CCVI/ CIT(A) C-I/11-12. Following the decision, it is held that the adjustment of the debit balance in the profit and loss account with the share premium account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, both questions framed by us are answered in favour of assessee on the given facts and circumstances of the case. In view of the above facts and circumstances, we all this issue in favour of assessee and against Revenue. As the aforesaid order of the Co-ordinate Bench of this Tribunal is binding on us and therefore respectfully following the same, we do not find any infirmity in the order of Ld. CIT(A). We uphold the same. This ground of Revenue s appeal is dismissed. 35. Last ground in this appeal of Revenue is general in nature and does not call for any separate adjudication. 36. In the result, Revenue s appeal is dismissed. Coming to Revenue s appeal in ITA No.611/Kol/2013 for A.Y. 09-10 . 37. First issue raised by Revenue in this appeal is that Ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of ₹15,98,435/- u/s 40A(9) and 36(1) of the Income-tax Act on account of Staff Welfare Expenses. 38. The facts and issue are same as in I TA No. 610/Kol/2013 for A.Y. 2008-09 of Revenue s appeal, following our decision on this issue as embodied in para-13 of this order, hence, this ground of Revenue s appeal is dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest income of ₹2,42,95,577/- and ₹3,900/- respectively which was claimed as exempted u/s 10(34), 10(15) of the Act. The assessee has not disallowed any expense in relation to the aforesaid exempted income on the ground that no expense was incurred in connection with the aforesaid income. It was also submitted that the own fund was invested in the impugned assets and therefore no interest expense has been incurred. However, the AO disregarded the claim of assessee by observing that the decision for the purchase / sale and retention of investment are very crucial and top management is always involved in such decision making process. Therefore, the AO invoked the provisions of Rule 8D of the IT Rules, 1962 and accordingly made the disallowance as under:- Sl.No Rule Head of expense Amount (Rs) 1 8D(2)(i) Direct Expenses Nil 2 8D(2)(ii) Interest expense 60,20,220/- 3 8D(2)(iii) Indirect expense 1,42,36,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in shares and securities and also where receipt of interest was more than interest payment your kind attention is further drawn to the principles enunciated by Honble ITAT 'A' Bench, Kolkata in the case of Damodar Valley Corporation v. Addl. CIT (2016) 180 TT] 82 (Kol-A). The relevant portion of the aforesaid order is reproduced herewith for your kind perusal. - (underlined by us to lay emphasis) a) On availability of own funds with the assessee for making investments. (i) We also find that the assessee had got sufficient own funds to make these investments and the learned AO had not brought any nexus between the borrowed fund vis-a-vis the investments made by the assessee. Without doing the same, he cannot directly presume that the investments were made out of borrowed funds. If the actions of the learned AO and learned CIT(A) arc to be upheld, then no assessee could make any investments when there is a interest bearing loan to be repaid. The fact of making the investments has to be viewed from the point of commercial expediency and from the point of view of businessman and not from the viewpoint of the Revenue. It is well settled that businessman knows his inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the same. From the facts of the present case, it is noticed that the AO has not considered the claim of the assessee and straightaway embarked upon computing disallowance under r. 8D of the Rules on presuming the average value of investment at percent of the total value. In view of the above and respectfully following the Co-ordinate Bench decision in the case of 1.K. Investors (Bombay) Ltd., supra, we uphold the order of CIT(A). CIT vs. R.E.I. Agro Ltd. in G.A. 3022 of2013 in ITAT 161 of2013 dt.23rd December 2013 rendered by Calcutta High Court : The AO also disallowed the expenditure under s. 14A of the IT Act, 1961 without first recording that he was not satisfied with the correctness of the claim as regards the claim that no expenditure was made by the assessee. Challenging the order of the Tribunal, the present appeal has been filed. We have heard Mr. Bhowmik and are of the opinion that no point of law has been raised. Therefore, this appeal is dismissed. Hence, we hold that the action of the learned AO in directly embarking on r. 8D(2) of the Rules without recording any satisfaction as mandated in r. 8D(1) of the Rules is not appreciated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Circle - 1, Kolkata v. Teenlok Advisory Services Pvt. Ltd. (2016) 159 ITD 9911 71 taxmann.com 269 (Kol - Trib.) - in this case also it was held by the Hon'ble Tribunal, Kolkata 'A' Bench that disallowance under Rule 8D has to be computed by taking into consideration only those shares which had yielded dividend income in the year under consideration. 54. On the other hand, Ld. DR heavily relied on the order of Authorities Below and left the issue to the discretion of the Bench. 55. We have heard the rival contentions of both the parties and perused carefully considered the materials on record; including the judicial pronouncements cited and placed reliance upon. The issue in the instant case relates to the disallowance made by the lower authorities under the provisions of section 14A of the Act viz-a-viz rule 8D of Income Tax Rules 1962. The assessee has earned exempt income but no corresponding expense was disallowed by the assessee in relation to such income on the ground that no expenditure was incurred. Therefore the AO invoked the provisions of section 14A and rule 8D of Income Tax Rules for the purpose of the disallowance. In the instant case we find that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble from the facts of the case in hand. 55.1 We also find that it is the duty of the assessee to prove whether the borrowed fund has been used in the investment on the basis of documentary evidence as held by the jurisdictional High Court in the case of Dhanuka Sons Vs. CIT reported in 12 taxmann.com 227 wherein it was held as under : The mere fact that those shares were old ones and not acquired recently was immaterial. It was for the assessee to show the source of acquisition of those shares by production of materials that those shares were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of any loan. If those shares were purchased from the amount taken in loan, even for instance, five or ten years ago, it was for the assessee to show by the production of documentary evidence that such loaned amount had already been paid back and for the relevant assessment year, no interest was payable by the assessee for acquiring those old shares. In the absence of any such material placed by the assessee, the authorities below rightly held that proportionate amount should be disallowed having regard to the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of MAT in relation to exempted income we find that the disallowance needs to be made in terms of the clause (f) to the explanation 1 of the provisions of section 115JB of the Act. The provisions of the MAT are self contained code. Thus provisions of section 14A read with rule 8D are not applicable to expenses to be disallowed under clause (f) to the explanation 1 of section 115JB of the Act. In holding so we find support guidance from the judgment of Jurisdictional Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd . in G.A. No. 1501 of 2014 , ITAT 47 of 2014 wherein it was held as under:- We find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil . Such computation must be made by applying clause (f) of the Explanation 1 under section 115JB of the Act. We remand the mater for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannotbe made to se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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