TMI Blog2018 (9) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfaction has been recorded, and therefore, we hold that no disallowance u/s.14A should be made. The other plea taken by the parties before us, are not discussed, because at the threshold we have held that no disallowance should be made. Income on account of reversal of income as per RBI guide lines - Held that:- this issue has been discussed by the Tribunal in assessee s own case for the Assessment Year 1999-00 in the case of its sister concern which has been confirmed by the Hon'ble Delhi High Court also. The ld. CIT (A) has held that since the issue is now settled by the Hon'ble Jurisdictional High Court in the case of the assessee and on the similar facts, he deleted the addition. - Revenue appeal dismissed. - I.T.As. No.761 & 762/DEL/2016 - - - Dated:- 11-6-2018 - Shri Amit Shukla, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Appellant : Shri S.S. Rana, CIT-DR For the Respondent : Shri Suchit Jolly, Adv. ORDER PER AMIT SHUKLA, J.M.: The aforesaid appeals have been filed by the Revenue against the common order dated 05.11.2015, passed by ld. CIT (Appeals)-XV, Delhi for the Assessment Years 2008-09 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. In the revised computation, assessee made a claim whereby it was contended that the debentures issue expenses and discount on commercial paper should be allowed in full in the year in which they are incurred. However, the learned Assessing Officer, relying upon the judgment of Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation vs. CIT, reported in 225 ITR 802 (SC) held that the concept of deferred revenue expenditure has been given a legal sanctity. Thus, following the judgment of Hon'ble Supreme Court, he disallowed the claim of entire expenditure made in this year. 4. Before the ld. CIT (A), the assessee submitted that the decision of the Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation (supra) was distinguishable on facts and in fact the assessee s case is squarely covered by the judgment of Hon'ble Jurisdictional High Court in the case of CIT vs. Panacea Biotech Ltd. [ITAs No.22 24/2002 (Del.)] which was identical on facts. It was submitted that though under the Companies Act in the books of account the debenture issue expenses and discount on commercial paper were treated as def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure as deferred revenue expenditure, and therefore, in view of the decision of Hon'ble Apex Court in the case of Madras Industrial Corporation (supra), the expenditure so deferred proportionately for various years cannot be claimed in this year. We find that this precise issue has come up for consideration before the Tribunal in Assessment Year 2000-01, ITAs No.2897 2807/Del/2007 and Assessment Year 2001-02, ITAs No.2808 and 2898/Del/2007), the Tribunal after referring to various decision including that of Hon'ble Jurisdictional High Court in the case of CIT vs. Panacea Biotech Ltd. (supra) and catena of other decisions had allowed the said claim u/s.37 in the year in which such expenditure has incurred. Apart from that, we find that the Hon'ble Apex Court in the subsequent judgment in the case of Taparia Tools Ltd. vs. JCIT, reported in (2015) 372 ITR 605, held that the assessee is entitled to claim the entire expenditure in the year in which it has been incurred. The Hon'ble Apex Court had also explained the judgment in the case of Madras Industrial Investment Corporation (supra) by observing and holding as under: 16) Judgment in Madras I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a very distorted picture of the profits of a particular year. Thus in the case of Hindustan Aluminium Corporation Ltd. vs. CIT, (1982) 30 CTR (Cal) 363: (1983) 144 ITR 474 (Cal) the Calcutta High Court upheld the claim of the assessee to spread out a lump sum payment to secure technical assistance and training over a number of years and allowed a proportionate deduction in the accounting year in question. 16. Issuing debentures at a discount is another such instance where, although the assessee has incurred the liability to pay the discount in the year of issue of debentures, the payment is to secure a benefit over a number of years. There is a continuing benefit to the business of the company over the entire period. The liability should, therefore, be spread over the period of the debentures. 17) Thus, the first thing which is to be noticed is that though the entire expenditure was incurred in that year, it was the assessee who wanted the spread over. The Court was conscious of the principle that normally revenue expenditure is to be allowed in the same year in which it is incurred, but at the instance of the assessee, who wanted spreading over, the Court agreed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 36(1)(iii) of the Act. Once a return in that manner was filed, the AO was bound to carry out the assessment by applying the provisions of that Act and not to go beyond the said return. There is no estoppel against the Statute and the Act enables and entitles the assessee to claim the entire expenditure in the manner it is claimed. 6. The aforesaid judgment clearly clinches the issue wherein it has been held that if the revenue expenditure has been incurred in a particular year then same has to be allowed in that year itself, if the assessee has claimed the expenditure in that year and Revenue cannot deny the same. Thus, in view of earlier year precedence in assessee s own case by the Tribunal and also respectfully following the ratio laid down by the Hon'ble Apex Court in the case of Taparia Tools Ltd. (supra), we decide this issue in favour of the assessee and accordingly ground no.1 is treated as dismissed. 7. Now coming to the issue of disallowance u/s.14A, the facts in brief are that the assessee has earned dividend income of ₹ 72,61,069/- which was claimed as exempt and not chargeable to tax. In response to the show cause notice as to why expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he earlier years also disallowance on account of interest expenditure has been deleted. Ld. CIT (A) after detailed discussion noted that the investment in the units of mutual fund was made on the last date of the financial year and no dividend income has been earned and therefore, there is no question of incurring any expenditure. Apart from that assessee had sufficient interest free fund available for making investment in shares and mutual fund for earning the dividend income. The Assessing Officer has not recorded the satisfaction with sufficient cause/reason by rejecting the claim of the assessee before making the disallowance u/s.14A and he has made only general observation about the applicability by provision of Section 14A. Again following the earlier year order of the Tribunal in the Assessment Year 2000-01, wherein it was held that dividend received from the group companies where the investment was made as strategic investment and not for the purpose of earning dividend, therefore, no expenditure should be attributed. Following the same, he reiterated disallowance made by the Assessing Officer. 10. Before us, the ld. CIT-DR submitted that now in view of the latest deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of earning of dividend income. The Assessing Officer without going into the merit of such a claim as was required by him in terms of subsection (2) and sub-section (3) of Section 14A, that is, the Assessing Officer has to first examine the accounts of the assessee and if he is not satisfied with firstly, the correctness of assessee s claim of expenditure; or secondly, the claim made by the assessee that no expenditure has been incurred. Similar stipulation has been laid down under Rule 8D (1) also and once these mandatory conditions are satisfied then only he can proceed to apply formula Rule 8D. If he does not complies with such mandatory requirement, then he cannot proceed to make disallowance. Hon'ble Supreme Court in the case of Godrej Boyce Manufacturing Ltd. (supra) has upheld the said proposition in the following manner:- Sub-sections (2) and (3) of section 14A of the Act read with rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, then only he can proceed with making of the disallowance. Here in this case, as discussed above, no such satisfaction has been recorded, and therefore, we hold that no disallowance u/s.14A should be made. The other plea taken by the parties before us, are not discussed, because at the threshold we have held that no disallowance should be made. 15. Lastly, with regard to the issue of deletion of addition of ₹ 6,60,185/- on account of reversal of income as per RBI guidelines, the Assessing Officer held that the reversal of income made by the assessee is against the principle of mercantile system of accounting and held that ITAT Special Bench in the case of New India Industries Ltd. vs. ACIT wherein it was held that RBI Guidelines cannot overruled statutory provision of law, added the same to the income of the assessee. 16. Before the ld. CIT(A), it was submitted that this issue has been discussed by the Tribunal in assessee s own case for the Assessment Year 1999-00 in the case of its sister concern which has been confirmed by the Hon'ble Delhi High Court also. The ld. CIT (A) has held that since the issue is now settled by the Hon'ble Jurisdictional High C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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