TMI Blog2016 (2) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of prior period expenditure - Held that:- We restore the matter to the file of the Assessing Officer and direct the assessee to furnish complete details of prior period expenses and explain the crystallization of the expenses in the year under consideration. The Assessing Officer is directed to examine the issue afresh. Disallowance of depreciation on estimated increase in cost of properties on account of stamp duty - Held that:- In the facts of the case the actual cost of the properties acquired on the basis of agreements can’t include the stamp duty or registration charges estimated at the rate of ten percent as same have not been expended or laid out during the year, accordingly, no depreciation on estimated stamp duty or registration charges can be allowed. In case of properties acquired on agreement, the assessee has treated its transfer as completed and the cost till the transfer of property is the actual cost for the purpose of block of assets. If the assessee incurs any cost subsequent to the completion of transfer of property, whether it is for stamp duty or registration charges, it will be an addition to the asset when actually incurred. The stamp duty and regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooking of expenditure related to forward contract - Held that:- In the year under consideration, the assessee changed the method of charging of expenditure due to incorrect understanding of the guidelines of the ICAI, and in view of subsequent clarification , again in subsequent year, the assessee resorted to the old practice of spreading of expenses over the period of contract. The income has to be accrued as per the provisions of the Income-tax Act and there was no change of provisions in this regard for the year under consideration, and thus the action of the assessee in reducing the income by ₹ 1.25 crores was not justified. In our opinion, the ld CIT(A) has rightly sustained the disallowance Non considering the mistakes or omissions in the revised return of income filed by the assessee - Held that:- In the case of the assessee the facts whether the change in income or expenditure was on account of change in method of accounting or otherwise is not clear from the facts brought on record by the lower authorities, and thus, we feel it appropriate to restore the matter back to the file of the ld Assessing Officer and decide the issue in accordance to the law. The ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fact and in law by not deleting the addition made by Learned Assessing Officer an amount of ₹ 3,27,500/- being disallowance u/s 14A of the Act. 6) The learned Commissioner of Income Tax(Appeals) has erred in fact and in law by not deleting the addition made by learned Assessing Officer an amount of ₹ 27,06,74,237/- being revenue de-recognition in the accounts. 7) The learned Commissioner of Income Tax(Appeals) has erred in fact and in law by not deleting the addition made by learned Assessing Officer an amount of ₹ 4,30,19,888/- being income on account of wrong appropriation. 8) The learned Commissioner of Income Tax(Appeals) has erred in fact and in law by not deleting the addition made by learned Assessing Officer an amount of ₹ 1.25 Crores on account of Change in method of Accounting. 9) The learned Commissioner of Income Tax(Appeals) has not considered the submission that the mistakes were found after filing of the original return and these mistakes are covered u/s 139(5) of the act. 10) That the appellant craves to add, delete or modify any grounds of appeal at time of hearing. 4. The facts in brief are that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02-03 and 2003-04, he added administrative charges at the rate of 1.5 percent. of the project cost of ₹ 10.5 crores amounting to ₹ 15.75 lakhs to the income of the assessee. The learned Commissioner of Income Tax (Appeals) following the decision of ld. Commissioner of Income Tax (Appeals) in assessment year 2004-05, upheld the addition of ₹ 15.75 lakhs. 5.1 Before us, the learned Authorized Representative ( in short AR) submitted that this issue travelled to the Hon ble High Court in assessment year 2002-03 and the Hon ble High Court in judgement dated 27.10.2014 in ITA No. 339/2004, decided the issue in favour of the assessee. He further submitted that as there was no accrual of income, the Government of India had not agreed to pay any overhead expenses or administrative charges at the rate of 1.5 percent. in respect of residential quarters at Andrews Ganj Complex , New Delhi. The ld AR further submitted that the issue being duly covered in favour of the assessee, the addition made by the Assessing Officer be deleted. 5.2 The learned Commissioner of Income-tax (Departmental Representative) [ in short CIT(DR) ], on the other hand, requested to restore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant-assesee had never received 1.5% administrative expenses in respect of the residential quarters in Andrews Ganj project. Clearly, therefore, the stand of the appellant-assessee that the notes of the meeting held on 7th September, 1995 related to the development of community centre complex at Andres Ganj, New Delhi and not to residential quarters is correct. The aforesaid document has been misread. There was no accrual of income in case the Government of India had not agreed to pay any overhead expenses or administrative charges @ 1.5% in respect of residential quarters at Andrews Ganj Complex, New Delhi. 11. The question of law is accordingly answered in favor of the appellantassessee and against the Revenue. Addition of ₹ 35,57,615/- is deleted. The appeal is disposed of. In facts of the case, there is no order as to costs. 5.4 During the year under consideration, the assessee has executed work of ₹ 10.50 crores in respect of Andew Ganj project , but there are no specific findings of authorities below that the work executed was related to community centre or towards residential project. If the work executed is not in respect of Community Centre, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2002-03, wherein the Tribunal has held as under: 10. We have carefully considered the submission of both the sides and perused the material placed before us. It is a settled law that when the assessee is following mercantile system of accounting, the prior period expenses can be allowed in the subsequent year in which such expenses have crystallized. However, we find that none of the lower authorities had examined this aspect. In fact, the assessee has also not given complete details of the prior period expenses and has not explained how such expenses have crystallized during the accounting year relevant to the assessment year under consideration. In view of the above, we set aside the orders of lower authorities on this point and restore the matter to the file of the Assessing Officer. We direct the assessee to furnish complete details of prior period expenses of ₹ 1,45,000/- and also explain how the same have crystallized during the accounting year relevant to assessment year under appeal. Thereafter, the Assessing Officer will examine the issue afresh in accordance with law and will pass a speaking order thereon. 6.4 Respectfully, following the above decision, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A) submitted that the charges on which the depreciation has been claimed are in the nature of cost of improvement to the property and should be considered for depreciation at the time of payment only. 7.3 We have heard the rival submissions and perused the material on record. The assessee has placed reliance on the judgment of Rotork Controls India (P.) Ltd. Vs. Commissioner of Income Tax (supra). In that case the assessee made a provision on account of warranty claims likely to arise on the sales effected by the assessee and to cover up that expenditure. The claim was allowed by the Hon ble Court following matching concept of income and expenditure, according to which, if revenue is recognized , the cost incurred to earn that revenue including warranty costs has to be fully accounted for. The obligation of provision in that case was as a result of past events of claims. In the case of present assessee, the estimation is not as result of any past historical events. Thus, according to us the ratio of the said judgements is not applicable to the facts of the assessee. In the case of the assessee, claim of depreciation on the value of properties has been duly allowed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset. The written down value has been defined in section 43(6) of the Act as under: 43(6) written down value means- (a) in the case of assets acquired in the previous year, the actual cost to the assessee; (b) in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed to him under this Act, or under the Indian Income-tax Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any executive orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force: 7.5 Further, the actual cost has been defined in section 43(1) of the Act as under: 43. In sections 28 to 41 and in this section, unless the context otherwise requires- (1) actual cost means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority: 7.6 Thus, the dispute finally left with us for determination is whether estimated stamp duty or registration not paid during the year can be part of actual cost or not. The ordinary dictionary mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, term loans etc., and therefore he held the expenses as capital in nature being for the purpose of extension of business of the assessee, in view of the judgment of the Hon ble Supreme Court in the case of Brooke Bond India Vs. Commissioner of Income Tax, (1997) 225 ITR 798, and therefore not allowable. Before the learned Commissioner of Income Tax (Appeals), the assessee claimed that it was a non-banking financial institution engaged in providing long term finances for housing projects and urban development and for this purpose, the assessee raised funds by way of issue of bonds, debenture, deposits, loans in advance from various sources and agencies. However, learned Commissioner of Income Tax (Appeals) following the decision of learned Commissioner of Income Tax (Appeals) in assessment year 2004-05 sustained disallowance of ₹ 3,07,77,527/- as under: I have gone through the assessment order and the written submission of the appellant and the case law cited. The ITAT for the A/Y 1996-97, set aside the issue to the file of AO with a direction to examine whether assessee s case is covered by the provision of Section 35D or not. If the case is not covered by section 35D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dividend income of ₹ 13,10,000/- was claimed as exempt by the assessee, however, no expenses corresponding of the same was disallowed by the assessee under Section 14A of the Act. The explanation of the assessee was that no expenses were incurred actually for earning the income, was not accepted by the ld. Assessing Officer and he disallowed 25% of the dividend income of ₹ 13,10,000/-, which amounts to ₹ 3,27,500/-. The learned Commissioner of Income Tax (Appeals) following the decision of ld CIT(A) in assessment year 2004-05 in the assessee s own case, sustained the addition. 9.1 The ld. AR submitted that in assessment years 2004-05 and 2005-06, no dissatisfaction as to the correctness of the claim of the assessee was recorded by the ld. Assessing Officer and therefore, ad-hoc disallowance of twenty five percent of the expenses by the ld. Assessing Officer was not justified. He further submitted that the issue in assessment years 2002-03 and 2003-04 has been restored to the Assessing Officer by the Tribunal following the decision of Jurisdictional High Court in the case of Maxopp Investment Ltd. and Ors. Vs. Commissioner of Income Tax, 347 ITR 272. 9.2 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rning the exempt income is estimated at 25% of the exempt income. In this regard, reliance is placed on the decision of the Hon ble Supreme Court in the case of United General Trust Pvt. Ltd. (1993) 200 ITR 488. Here, 25% of dividend income of ₹ 13,10,000/- is disallowed under Section 14A and is added to the declared income. Since the assessee has filed incorrect particular of its income, penalty proceedings under Section 271(1)(c) have been initiated separately. (Addition of ₹ 3,27,500) 9.4 Once, the condition of dissatisfaction is fulfilled; the issue left before us is to decide the quantum of disallowance. We have seen that in assessment years 2002-03 and 2003-04 the matter has been restored to the ld. Assessing Officer by the Tribunal following the decision of Jurisdictional High Court in the case of Maxopp Investment Ltd. and Ors. Vs. Commissioner of Income Tax (supra). Accordingly for the year under consideration also, we restore the matter to the file of the Assessing Officer for adjudication with the direction to decide the issue in view of the judgement of Jurisdictional High Court in the case of Maxopp Investment Ltd. and Ors. Vs. Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 2006-07 and 2007- 08, the Assessing Officer has disallowed 100% of deduction claimed against interest de-recognized, however, the ld Commissioner of Income Tax (Appeals) has restricted the disallowance to 50% and in assessment years 2008-09 and 2009-10, the Assessing Officer made 100% disallowance on such interest derecognized and the Commissioner of Income Tax (Appeals) has also upheld the entire disallowance made by the Assessing Officer. 10.2 The ld. AR further submitted that this was not a case where the interest was not recognized, or not credited but it was claimed as deduction as per the guidelines of the National Housing Banks. Further, he submitted that the assessee was following consistent method of accounting and something which is not accrued cannot be brought to the tax by the tax authorities. He further submitted that Rule 6EB has been framed as per the old guidelines of the National Housing Banks, where interest in respect of NPAs more than 180 days, was to be de-recognized. Though, the National Housing Banks has issued new guidelines for de-recognizing the interest from NPAs for more than 90 days, however, no corresponding amendment has been carried out by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On perusal of the clause (b) of the section we notice that the assessee was having an option of recognizing the interest income on accrual or cash basis from prescribed category of nonperforming assets (bad and doubtful debt). This category was prescribed by the CBDT in rules 6EB of the Income-tax Rules, having regards to the guidelines issued by the National Housing bank in relation to such debts. Till assessment year the 2004-05, the debts or loan where interest was not received for a period more than 180 days used to be treated as prescribed category of assets under Rule 6EB of the Rules, as per guidelines of NHB. But with effect from AY 2005-06, the NHB revised its norms of period of days to 90 but the period as per Rule 6EB remained un-amended to 180 days. Further, we find that the judgment of the Hon ble Karnataka High Court in the case of Canfin Homes Ltd. (supra) was in respect of assessment year 1996-97, which was prior to the introduction of Rule 6EB, but, in subsequent decision in the case of Urban Cooperative Bank Ltd. (supra), the Hon ble Karnataka High Court has upheld the judgment of Canfins Homes Ltd (supra). But we find that in the judgement of Urban Cooperative Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so different. Therefore it cannot be said that the rule making authority under the Act has to automatically follow the guidelines of NHB as they exist from time to time. In that view of the matter, we cannot agree with the submission of the learned counsel for the Assessee, that the guidelines issued by the NHB, has to be read as part of Sec.43D of the Act. We cannot also agree that the expression Having regard to used in Sec.43D of the Act, means that the rule making authority should amend the rules as and when the guidelines of NHB are revised or that we have to read the guidelines of NHB as part of Sec.43D of the Act. 16. We have also considered the decisions relied upon by the learned counsel for the Assessee. In the case of Dellhi Farming and Construction (P) Ltd.(supra) and RajeshKumar and others (supra), the expression having regard to was considered to have a broader meaning because of the discretion inherently necessary in discharge of the power. In fact the decisions seem to suggest that the rule making authority in the present case, need not be bound by the guidelines of NHB and can take into other considerations while prescribing, what are the criteria for det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een a surrender of income which in theory may have accrued but in the reality of the situation, no income had resulted because the income did not really accrue. (3) Where a debt has become bad, deduction in compliance with the provisions of the Act should be claimed and allowed. (4) Where the Act applies, the concept of real income should not be so read as to defeat the provisions of the Act. (5) If there is any diversion of income at source under any statute or by overriding title, then there is no income to the assessee. (6) The conduct of the parties in treating the income in a particular manner is material evidence of the fact whether income has accrued or not. (7) Mere improbability of recovery, where the conduct of the assessee is unequivocal, cannot be treated as evidence of the fact that income has not resulted or accrued to the assessee. After debiting the debtor's account and not reversing that entry-but taking the interest merely in suspense account cannot be such evidence to show that no real income has accrued to the assessee or been treated as such by the assessee. (8) The concept of real income is certainly applicable in judging whether there has been income or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1984, under which the Central Board of Direct Taxes decided that interest in respect of doubtful debts credited to suspense account by the banking companies will be subjected to tax but interest charged in an account where there has been no recovery for three consecutive accounting years will not be subjected to tax in the fourth year and onwards. However, if there is any recovery in the fourth year or later the actual amount recovered only will be subjected to tax in the respective years. This procedure was to apply to the assessment year 1979-80 and onwards. The Board's Instruction No. 1186, dated June 20, 1978, was modified to this extent . The same circular further clarified that up to the assessment year 1978-79 the taxability of interest on doubtful debts credited to suspense account will be decided in the light of the Board's earlier circular dated October 6, 1952, as the said circular was withdrawn only in June, 1978. The new procedure under the circular of October 9, 1984, will be applicable for and from the assessment year 1979- 80. The Hon ble Supreme Court held as follows: Section 119(1) of the Income-tax Act, 1961, provides that, the Central Board of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities. The question whether interest earned, on what have come to be known as sticky loans, can be considered as income or not until actual realisation, is a question which may arise before several Income-tax Officers exercising jurisdiction in different parts of the country. Under the accounting practice, interest which is transferred to the suspense account and not brought to the profit and loss account of the company is not treated as income. The question whether in a given case such accrual of interest is doubtful or not, may also be problematic. If, therefore, the Board has considered it necessary to lay down a general test for deciding what is a doubtful debt, and directed that all Income-tax Officers should treat such amounts as not forming part of the income of the assessee until realised, this direction by way of a circular cannot be considered as travelling beyond the powers of the Board under section 119 of the Income-tax Act. Such a circular is binding under section 119. The circular of October 9, 1984, therefore, provides a test for recognising whether a claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese were in the nature of concessions which could always be prospectively withdrawn. The court also observed that the circulars cannot detract from the Act. The decision of the Constitution Bench of this court in Navnit Lal (C.) Javeri v. K.K. Sen, AAC [1965] 56 ITR 198, or the subsequent decision in K.P. Varghese v. ITO [1981] 131 ITR 597 (SC), also do not appear to have been pointed out to the court. Since the later circular of October 9, 1984, was not pointed out to the court, the court naturally proceeded on the assumption that the benefit granted under the earlier circular was no longer available to the assessee and those circulars could not be resorted to for the purpose of overcoming the provisions of the Act. Interestingly, the concurring judgment of the second judge has not dealt with this question at all but has decided the matter on the basis of other provisions of law. The said circulars under section 119 of the Income-tax Act were not placed before the court in the correct perspective because the later circular continuing certain benefits to the assessees was overlooked and the withdrawn circular was looked upon as in conflict with law. Such circulars, however, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Delhi High Court in the case of Vasisth Chay Vyapar Ltd. (supra) and the Hon ble Madras High Court in the case of Elgi Finance Ltd. (supra). In the case of Vasisth Chay Vyapar Ltd.(supra), the Assessee was a non-banking finance company bound by the provisions of the Reserve Bank of India Act, 1934. In compliance with the Directions issued by the RBI under the RBI Act, 1934, it did not recognise interest on intercorporate deposit as income. The Hon ble Delhi High Court held that interest income does not accrue and the action of the Assessee was correct. To the same effect is the decision of the Hon ble Madras High Court in the case of Elgi Finance Ltd. (supra). The Hon ble Delhi High Court considered the decision of the Hon ble Supreme Court in the case of Southern Technologies Ltd. (supra) and explained that the case decided by the Hon ble Supreme Court involved a case where provision on account of Non-Performing assets was claimed as a deduction, which was held by the Court to be not allowable. The Hon ble Court found that a deduction claimed under the Act had to satisfy the conditions laid down under the Act and prudential norms of RBI will not override the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnologies (supra) alone will apply. We therefore reject the contention raised on behalf of the learned counsel for the Assessee. For the reasons stated above, we uphold the order of CIT(A) and dismiss the appeal by the Assessee. 10.6 The above decision has been further followed by the Tribunal in the case of that assessee for AY 2007-08 and AY 2008-09 in ITA No I.T.A. No.5295/Mum/2010 and I.T.A. No.7590/Mum/2010 respectively. 10.7 The issue in present case is identical to the case cited above and thus we uphold the finding of the ld CIT(A) that the assessee is entitled to deduction as per Rule 6EB of the IT Rules only, but we have seen that the computation was not provided by the assessee during assessment , the ld Assessing Officer computed the disallowance on estimate basis only, thus , we restore the matter to the ld Assessing officer to compute the deduction strictly as per Rule 6EB of IT Rules and allow the deduction accordingly. The ground of the assessee is allowed for statistical purpose only. 11. Ground no. 7 is in respect of addition made by the Assessing Officer of ₹ 4,30,19,888/- being the income on account of wrong appropriation. The ld. Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 377. 11.2 On the other hand, the learned CIT (DR) submitted that the dispute arose due to the treatment of recovery amount by the agencies. He further submitted that the assessee had not made any claim of bad debts under Section 36(1)(viiia) of the Act in respect of the principal written off. He further relied on the order of the lower authorities. 11.3 We have heard the rival submissions and perused the material on record. In the case of B. Dalmia Cements Ltd. (supra) the Hon ble Court has held that reasonableness of expenditure has to judged from the point of view of the businessman and not the Revenue. Further, in the case of EKL Appliances (supra), the Hon ble Court has held that the Tax department cannot dictate to the taxpayer whether or not to incur expenditure. In the case of S A Builders Ltd (supra) also the Hon ble Suprme Court affirming the view in the case of B Dalmia Cements Ltd (supra) held that the IT authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act and they must not look at the matter from their own viewpoint but that of a prudent businessman. We fully endorse the above view of the Hon ble Courts. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of accounting. 12.1 Before the Commissioner of Income Tax (Appeals) the assessee submitted that the changes in the accounting policy was made in order to comply with the clarification issued by the ICAI, however, subsequently observed that the clarification was not applicable to the company, the company itself reverted back to its original accounting for the expenses on this count in the year of maturity of the contract from the year 2006-07, however, the learned Commissioner of Income Tax (Appeals) was not convinced with the arguments of the assessee and concurred with the findings of the Assessing Officer and sustained the addition. 12.2 Learned Authorized Representative submitted that in the financial year 2003-04 as per the accounting standard, the expenditure arising out of the contract was to be spread over the period of contract, whereas in assessment year 2004-05, the expenditure was claimed at the time of closing of the contract and from the year 2006-07 onward again the assessee adopted the spread over of the expenditure over a period of the contract. The learned Authorized Representative submitted that the Assessing Officer has not properly appreciated the articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the revision was on account of certain expenses or revenue crystallizing the relevant year. He further submitted that this was only revenue in nature. If the assessee is not allowed certain income or expenses in the current year, then he would be entitled for the same for another year. He further relied on the decision of the ITAT, Mumbai in the case of Lok Housing Construction Ltd. Vs. Asstt. Commissioner of Income Tax, (2012) 27 taxmann.com 15 (Mumbai Trib.) and the decision of Gujarat High Court in the case of Commissioner of Income Tax Vs. Gujarat Industrial Development Corporation, (2013) 32 taxmann.com 255 (Gujarat). 13.2 On the other hand, the learned CIT (DR) submitted that there was no omission or mistake in the original return and the said changes were not fulfilling the requirement of omission and that was due to change of opinion, he further distinguished the judgment relied upon by the learned Authorized Representative of the assessee. 13.3 We have heard the rival submissions of the parties and perused the material on record. In the cases of Lok Housing Construction Ltd. Vs. Asstt. Commissioner of Income Tax, (supra) cited, the assessee found th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s operations. This meant that the assessee would show a loss of ₹ 4,01,290 instead of ₹ 3,00,369 declared with the return filed initially. 11. In Ram Luxman Sugar Mills Ltd. (supra), the Allahabad High Court accepted the contention of the assessee that there could be a change in the method of valuing the opening stock and the closing stock in the same financial year provided there was a good enough reason for it. However, the Allahabad High Court was not dealing with a case of a revised return. Under these circumstances, we are of the view that the decision of Ram Luxman Sugar Mills Ltd. (supra) is not applicable to the facts of the present case. 12. Insofar as the decision in K.G. Khosla Co. (P) Ltd. (supra) is concerned, this Court concluded that there was no question of law that had arisen because of the change in the method of valuation of the opening stock as well as the closing stock. Again, this was not a case concerning a revised return having been filed by the assessee. 13. Insofar as the decision in CIT vs. Carborandum Universal Ltd. (1984) 39 CTR (Mad) 272 : (1984) 149 ITR 759 (Mad) is concerned, that was a case where a revised return was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, submitted that the fact needs to be ascertained whether the interest was actually paid in the subsequent year or not. 14.2 We have heard the rival submissions and perused the material on record. The relevant para of the decisions of the ITAT, Delhi Bench in the assessee s own case passed for the assessment year 2000-01 is reproduced as under: 4.1 In so far as the question whether the assessee was a debtor of the Government of India for an amount lying as balance in surplus funds account is concerned, it has already been held that the assessee is a debtor to the Government to the extent of credit in the account. It also transpires from the correspondence that the assessee may become liable to pay interest, possibly based upon the rate of interest offered by State Bank of Indian on the deposits for the period of 180 to 365 days. However, no final decision about the rate of interest has been taken by the Government of India. A unilateral offer to pay the interest as above, does not lead to fastening of a fixed and ascertained liability on the assessee. The assessee is following mercantile system of accounting and in any case, being a company, it is obliged to follow the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Ministry also. This liability cannot be said to be unascertained liability simply because the Ministry was also to take a final view on the project and the interest rate at a future date. Thus, while the Assessing Officer could have estimated the liability on the basis of the correspondence, he could not have disallowed the whole of the liability. From the correspondence between the assessee and the Government, it is clear that the assessee had offered to pay interest @ 7.5%. Therefore, the liability is not going to be lower than the liability to be computed by the assessee in the books of account. Even if it is so happens, then, the excess provision made could be brought to tax u/s 41(1) in the year in which the rate is finally fixed. Coming to the decisions relied upon by the revenue, we tend to agree with the learned counsel that the ratio of the decision in the case of Madhav Prasad Jatia (supra) is not applicable because in that case the loan was taken for the purpose of making a donation. In the case of Bazpur Cooperative Sugar Ltd. (supra), there was no stipulation regarding return of money to the members as the amount was to be utilized for converting partly paid-u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment Year 2005-06, we accordingly, following our finding in relevant paragraphs, restore the matter to the ld. AO for determination of issue in dispute in accordance to the judgment of Maxopp investment Ltd. (supra). 19. Accordingly, the appeal is allowed for statistical purposes. ITA No. 1168/Del/2012 for AY : 2007-08 20. Grounds no. 1 to 4, 6 and 7 raised by the assessee in ITA No. 1168/Del/2012 are identical to grounds no. 1 to 4, 6 and 7 raised by the assessee in ITA No.1166/Del/2012 for assessment year 2005-06 except change of amount, and thus following our findings in forgoing paragraphs of ITA No.1166/Del/2012, we decide the grounds No. 1 to 4, 6 and 7 of the appeal of the assessee accordingly. 21. In grounds No. 5 of appeal, the assessee has raised disallowance of expenses under section 14A of the Act. The issue in dispute being identical to the issue raised in ground No. 5 of the appeal of the assessee in ITA No. 1167/Del/2012 for AY 2006-07, it was heard alongwith that ground, and thus, we decide accordingly and restore the matter back to the ld AO for determination of disallowance in accordance with the law laid down by the Hon ble High Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Joint Investment Pvt. Ltd. Vs. CIT (supra), the Hon ble jurisdictional High Court has held as under: 9. In the present case, the AO has not firstly disclosed why the appellant/assessee s claim for attributing ₹ 2,97,440/- as a disallowance under Section 14A had to be rejected. Taikisha says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee s claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT (A) and the ITAT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is ₹ 48,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum, i.e., ₹ 52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure incurred by the assessee in relation to the tax ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed subject to verification by the Assessing Officer. 27.1 We have heard the rival submissions and perused the material on record. As the issues is of the verification, whether the income corresponding to the tax deducted were shown in the return of income then the Assessing Officer is bound to allow the TDS credit claimed by the assessee, therefore, we restore the matter to the file of Assessing Officer for verification of the claim of the assessee in accordance with law. Needless to say, that the assessee will be given opportunity of hearing. 28. In ground no. 8, the assessee submitted that the benefit of Incremental Special Reserve had been allowed on additions/disallowances. The learned Authorized Representative submitted that the claim of deduction under Section 36(1)(viiia) of the Act would also increase in account of the addition made by the authorities. He further submitted that the Commissioner of Income Tax (Appeals) has not given any findings on this issue. 28.1 On the other hand, the learned CIT (DR) submitted that no claim was made before the Assessing Officer by the assessee and, therefore, the assessee is not entitled for enhanced deduction. 28.2 We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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