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TMI Blog2018 (5) TMI 1761X X X X Extracts X X X X X X X X Extracts X X X X ..... the sake of convenience. ITA No.4392/Del/2011 (A.Y. 2008-09) : 2. Ground No. 1 raised by the Revenue being general in nature is dismissed. 2.2 Ground No. 2 by the Revenue reads as under :- "The ld. CIT (A) has erred in law and on facts in directing the AO to consider the 'rigs' as 'qualifying ship' under section 115VD of the Income Tax Act and allow the assessee for exercising option for Tonnage Tax Scheme under section 115VP/115VR of the Income Tax Act, 1961 without considering the fact that the assessee's ship is actually an "Offshore installation" and benefit under the aforesaid provisions is specifically not meant for "Offshore installations" and also that the registration under Merchant Shipping Act, 1958 as a ship is not relevant in this case;" 2.3 Facts of the case, in brief, are that the assessee company is engaged in the business of shipping and port infra-structure. It filed its return of income on 30th September, 2008 declaring total income of Rs. 6,14,03,560/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee opted for Tonnage Tax Scheme under the provisions of section 115VP / 115VR of the Income Tax Act. He rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the appellant's own case for A.Y. 2006-07 reported in (2010) 35 SOT 285 (Delhi). The Hon'ble ITAT has also referred to the decision of the Hon'ble Delhi High Court reported in (2008) 214 CTR 227(Delhi) while disposing that appeal. In that decision Hon'ble Delhi High Court in the context of claim under section 33AC of the Act held that the drilling rig, placed on a vessel described as a barge which could be moved out from place to place for offshore drilling is a ship and the claim u/s 33AC has to be allowed. 3.1 As the facts and circumstances of the case are pari materia with the case of the appellant for A.Y.(s) 2006-07 & 2007-08, respectfully following the orders of the Hon'ble ITAT in the appellant's own case for A.Y.(s) 2006-07 & 2007-08 and also following the order of my predecessor-in-office for A.Y. 2006-07 & my own order for A.Y. 2007-08, this ground of appeal is allowed. The A.O. is directed to allow the appellant's claim for tonnage tax scheme in terms of section l15VP read with section 115 VR accordingly. As a result, ground of appeal No.l is allowed." 2.5 Aggrieved with such order of the learned CIT (Appeals) the Revenue is in appeal before the Tribunal. 2.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at : 3.1 That the assessee failed to explain the difference with supporting evidence before the AO during the assessment proceedings; 3.2 That the clarification and documents furnished before the CIT (Appeals) were not verified by the AO." 3.1 Facts of the case, in brief, are that during the course of assessment proceedings the Assessing Officer observed that during the year assessee has shown income from operation in respect of its drilling division at Rs. 46,89,26,670/- whereas as per TDS certificates issued by HPCL and ONGC the assessee has received income to the tune of Rs. 66,06,07,459/-. Thus there is a difference of Rs. 19,16,80,789/- which the assessee has not offered for taxation during the year. Rejecting the explanation given by the assessee the Assessing Officer made addition of Rs. 19,16,80,789/- u/s 69 of the I.T. Act, 1961. 3.2 Before the learned CIT (Appeals) the assessee filed detailed explanation regarding such difference based on which the learned CIT (Appeals) called for a remand report from the Assessing Officer. After considering the same, the CIT (Appeals) deleted the addition made by the Assessing Officer by observing as under :- "5.4 After having co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in 31.03.2007. In this account relevant for the period 01.04.2007 to 31.03.2008 the amount brought as opening balance of Rs. 17.98 crores against which adjustment of transfer entry mentioned as depicted under the ledger account of operating income/charges. This was adjusted in this account along with certain other entries. This amount of Rs. 17.98 Crores and other entries were adjusted in order to comply with the settlement agreement (placed in the paper book at Pages 72-76). According to the settlement agreement, US $ 50,46,487 less Rs. 10,00,000/- was payable to the appellant. Due to this Rs. 19,27,49,529/- was declared as income as depicted in the "Operating incomes/charges". The relevant voucher is placed at Page 77 of the paper book filed on behalf of the appellant. A chart of "Details of ONGC's balance" was also placed in the paper book at page 78 of the paper book filed on behalf of the appellant. This relates to opening balances outstanding from FY 2001-02 to 2007-08 in both the accounts of ONGC. After adjusting debits, transfers and receipt the closing balance in both these accounts have been depicted from FY 2001-02 to 2006-07 there were outstanding balances declare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d deduction of Rs. 10,69,874/- against fluctuation in the value of US Dollar. I do not find any infirmity in maintaining these accounts or declaring the profits as per the books of account. The operating income was shown by the appellant truly and correctly. The confusion was because of adjusting old outstanding balances of ONGC in order to make those accounts Nil which was otherwise available as deduction under section 36(1)(vii) as bad debts. Since, the amount of Rs. 19,27,49,529/- was not raised in the bills but was received as per settlement agreement and the same was adjusted against the outstanding balance of ONGC which was already declared as income and so eligible for deduction under the Act. 5.9 The AR of the appellant has drawn my attention to the decision of the Special Bench of the Hon'ble ITAT in DCIT vs. Oman International Bank 2006- TIOL-118-ITAT-MUM-SB: (2006) 100 ITD 285(Mum)(SB): (2006) 102 TTJ 207 (Mum)(SB) and recent decision of the Hon'ble Supreme Court in the case of M/s Vijaya Bank Vs. CIT reported in 2010-TIOL-31-SC-IT: 323 ITR 166(SC): 231 CTR 209(SC) wherein the Hon'ble Supreme Court has held that in order to claim the amount as bad debt afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we do not find any infirmity in the order of the learned CIT (Appeals) deleting the addition. Accordingly the same is dismissed. 4. Ground of appeal No. 4 reads as under :- "On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) has erred in deleting the addition of Rs. 64,60,281/- made by the AO on account of amounts written off." 4.1 Facts of the case, in brief, are that the Assessing Officer observed that the assessee has debited an amount of Rs. 64,60,281/- on account of "amount written off" under the head "General expenses". From the details furnished by the assessee he noted that the parties against whom assessee has written off the amount are still alive and belong to sound party. It is not a case where non realisation is due to the party absconding or non-traceability. According to him, for any debt to become bad, it is imperative that it should really become nonrecoverable i.e. either the debtor is incapable of paying or non-traceable etc. As these conditions are not at all satisfied and since the assessee has never made any provision in the previous years and also the fact that assessee is having business relationship with these part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in subsequent years there were no such business relationship continued with M/s Frontier Drilling as evident from the various documents and in view of the Arbitration award. 6.5 Another reason given by the AO that assessee has never made any provision in the previous year is found to be incorrect in view of the latest decision of the Hon'ble Supreme Court in the matter of M/s. Vijaya Bank (Supra) where the Hon'ble supreme court has clarified that such provision was required before 01-04-1989 but after the amendment when explanation was brought to section 36 (l)(vii) mere provision for bad debt would not be entitled to deduction and so assessee has to make debit entry to the P & L Account and corresponding credit entry to the asset account like sundry debtor account then only it would constitute a write off of an actual debt. 6.6 In view of the discussion made above and after examining the relevant documents, I find that the appellant has correctly made a claim of write off of Rs. 64,60,281/- in the account of "Short & Excess" which was clubbed later under the "General Expenses" and claimed in the Profit & Loss account. Therefore, the Assessing Officer is directed to allow the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s amended by the Finance Act, 2010 w.e.f. 1-4-2010 to be effective in A.Y.2008-09 as well." 5.4 Aggrieved with such order of ld. CIT(A), the Revenue is in appeal before the Tribunal. 5.5 After hearing both the sides, we do not find any infirmity in the order of the ld. CIT(A) deleting the disallowance. The Co-ordinate Benches of the Tribunal are consistently taking the view that the amendment brought in by the Finance Act, 2010 to the provisions of section 40(a)(ia) w.e.f. 01.04.2010 are clarificating in nature and are applicable to earlier years as well. It is accordingly being held that no disallowance is called for when the assessee makes the deposit of TDS before the due date of filing of the return. Since the order of ld. CIT(A) is in line with the view taken by the Co-ordinate Benches of the Tribunal, therefore, we do not find any infirmity in the same. Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed. ITA No. 5915/Del/2013 - [Assessment Year : 2009-10] : 6. Ground No. 1 by the Revenue reads as under :- "Whether on the facts and circumstances of the case, the learned CIT (Appeals) erred in deleting addition of Rs. 6,39,83,177/- by bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT (Appeals). Various decisions were also brought to the notice of the learned CIT (Appeals) to the proposition that in the absence of finding by the Assessing Officer of incurring any expenditure for earning the exempt income as against no expenditure incurred by the assessee, disallowance under section 14A of the Act cannot be made. 7.3 Based on the arguments advanced by the assessee and relying on various decisions the learned CIT (Appeals) deleted the disallowance made by the Assessing Officer on the ground that the AO has mechanically applied the provisions of Rule 8D without going into the facts of the case that no expenditure has been incurred for earning the dividend income. He further held that when the assessee is entitled for tonnage tax benefit, therefore, whatever amount is computed as disallowance under section 14A, the same may be taken into account while working benefit of tonnage tax scheme as the exempted income would be enhanced accordingly. The relevant paras of the order of the learned CIT (Appeals) read as under :- "4.9 I have gone through the record and perused the material available on record. I find that AR has produced a copy of the Hon'ble Delhi Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Rs. 2,40,33,196/- on the ground that TDS amounting to Rs. 12,11,222/- on various expenses amounting to Rs. 2,40,33,196/- has been deposited in the assessment year 2010-11 which is beyond the prescribed time limit in violation of provisions of section 194C of the Income Tax Act. Therefore, applying the provisions of section 40(a)(ia) the Assessing Officer made an addition of Rs. 2,40,33,196/-. 9.2 Before the learned CIT (Appeals) it was argued that all the payments were made before the due date of filing of the return. The decision of the Hon'ble Kolkata High Court in the case of CIT Vs. Virgin Creation in ITA No. 3200/2011 has relied upon wherein it has been held that as per the amendment made with effect from 1.04.2010 the TDS deposited before the due date of filing will be sufficient to claim such expenses. Alternatively, it was argued that since profit of the assessee is exempt under section 115VF, therefore, even if the amount is disallowed the profit will be enhanced to that extent and the assessee will be getting tonnage tax benefit under section 115VF of the Act. 9.3 Based on the arguments advanced by the assessee and following the decision of Hon'ble Kolkata High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings observed that assessee has claimed depreciation amounting to Rs. 44,04,775/- being 40% of the WDV. He, therefore, asked the assessee to explain why depreciation should not be disallowed since the aircraft is not in use. The assessee admitted that the aircraft is presently not running and also not fetching any income and the same is kept for sale, but no buyer is available. In view of the above and observing that the aircraft is currently not in use, the Assessing Officer disallowed the claim of depreciation of Rs. 44,04,775/-. 10.2 In appeal the learned CIT (Appeals) directed the Assessing Officer to delete the addition by observing as under :- "7.1 I have carefully considered the written submission on behalf of the appellant and finding of the assessing officer in assessment order. I find that section 32 of the Act deals with depreciation. There is requirement that the assets should be owned and used for the wholly or partly by the assessee for the purpose of the business or profession. This section 32 was substituted by the Finance (No 2) Act, 1998 w.e.f. 01-04-1999. However, the concept of Block of asset was introduced w.e.f. 01-04-1988. This concept was discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... running the airline and thereafter has leased the aircrafts to M/s Jagson Airlines Ltd who also used these aircrafts for the so many years continuously, thus their subsequent use is immaterial under the existing laws. 7.2 The appellant has relied upon the judgment of CIT Vs Oswal Agro Mills Ltd. I find that this jurisdictional high court decision squarely applicable on the facts of the present case. I find force in the contention of the appellant that the asset is under "Block of Assets" and was used in earlier years, its subsequent use has no relevance under amended law under IT provisions. Since Assessing Officer himself in Assessment Year 2005-06 has found that the asset was used and allowed the depreciation on the direction of the Hon'ble High Court. I do not find any reason for making this disallowance from year to year once the issue has been examined by the AO himself. The subsequent AO should not agitate the issue again and again once their predecessor has decided the issue as per directions of the Hon'ble Delhi High Court. 7.3 In view of the above discussion the Assessing Officer is directed to allow the entire depreciation on aircraft as claimed by the appellant. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Ltd. Since M/s. Jagson Airlines Ltd. suffered huge losses, therefore, in order to run this company the assessee company has advanced interest free loan to M/s. Jagson Airlines Ltd. It was submitted that out of three aircrafts of the airlines, two aircrafts were owned by the assessee company. In order to safeguard the interest of the assessee it was necessary to feed this company also. It was accordingly argued that the advance given by the assessee company was based purely on commercial expediency. The assessee further submitted that prior to taking loans from the bank for purchase of the vessels by the assessee company which had already advanced Rs. 21,17,41,988.05 to M/s. Jagson Airlines Ltd. out of the interest free funds and reserves available with the assessee. During the impugned assessment year the assessee had advanced only Rs. 5,21,27,291/- that too was given out of the profit of Rs. 38.97 crores earned during the year. It was submitted that in the past no such disallowance was made. Therefore, in view of the decision of Hon'ble Supreme Court in the case of Radhaswami Satsang Vs. CIT reported in 193 ITR 321 (SC), no disallowance should be made following the rule of cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record some material to show nexus between interest free advance and interest bearing loans was not at all discharged by the Assessing Officer. Moreover, there is a business expediency and interest of the assessee company in M/s. Jagson Airlines Ltd due to which loans were given by the assessee company. Therefore, in my considered opinion, the disallowance was made by the Assessing Officer was on a wrong footing and unsustainable. 3.5 The decision relied upon by the appellant company also support the case of the assessee. In the case of CIT Vs. Reliance Utilities and Power Ltd 2009- TIOL-27-HC-MUM-IT where it was held that "if there are funds available both interest free and overdraft / or loan taken, then a presumption would arise that investment would be out of the interest free fund generated or available with the company, if the interest free funds are sufficient to meet the investments. In the instant case, it is not the case of the assessee that interest expenditure should be allowed for interest free advance to its sister concerns were out of commercial expediency. Rather the case of the assessee is that the entire loan funds on which the expenditure of interest was incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the learned Departmental Representative. Therefore, in view of the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (supra) where it has been held that if the interest free funds are sufficient to make the investment the presumption would arise that investment would be out of interest free funds generated or available with the company if the funds are both interest free and interest bearing funds. It is also an admitted fact that the assessee company had already advanced Rs. 21,17,41,988.5 prior to taking loan for purchase of vessels and assessee company has advanced interest free loan of Rs. 5,21,27,291/- during the year whereas it has earned profit of Rs. 38,97,52,337/- during the year. In view of the above and in view of the detailed reasoning given by the learned CIT (Appeals) we find no infirmity in his order. Accordingly the same is upheld and the ground raised by the Revenue is dismissed. 13. Ground of appeal No. 2 by the Revenue reads as under :- "Whether on the facts and circumstances of the case, the learned CIT (Appeals) erred in deleting disallowance of the Rs. 13,83,209/- under section 14A rw Rule 8D (iii)?" ..... X X X X Extracts X X X X X X X X Extracts X X X X
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