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2017 (7) TMI 1302

..... extent of confirmation of the addition partly merely because reconciliation in these accounts with respect to the live connections are pending. The observation of the CIT(A) is also not correct that assessee submitted that this amount is under reconciliation and to that extent such credits are not fully explained. Before him assessee submitted that it is under reconciliation. Further when the character of deposit is determined, looking to the nature of operation geographically as well as large subscriber’s base, it is not correct to hold that pending reconciliation the deposit become income of the assessee. In view of this we set aside this issue back to the file of the Assessing Officer to give proper opportunity to the assessee to provide reconciliation of the same and then if the amounts are not at all identifiable with respect to the customers then to that extent addition may be restricted. - Decided in favour of assessee for statistical purposes. Disallowance u/s 14A - HELD THAT:- The factual finding of the ld. CIT(A) that the assessee has not borrowed any loans and therefore no interest has been paid on account of such borrowings could be controverted by the ld. DR. We .....

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..... policy adopted by the assessee in our opinion are in line with the AS notified by ICAI, and this fact has also not been controverted by the A.O. It is an accepted fact that revenue cannot pick and choose and make additions or disallowances in part. In detailed reasoning given by the CIT(A) on this issue, we do not find any infirmity in his order on this issue. - Revenue appeal dismissed. - ITA No. 6786, 6787/Del/2013, 147, 148/Del/2014 AY: 2009-10 - 31-7-2017 - Shri R.K. Panda And Shri Kuldip Singh, JJ. Assessee by: Shri Ved Jain, Adv. And Sh.Ashish Goel, C.A. Revenue by: Shri Shravan Gotru, Sr.D.R. ORDER R.K. Panda, These are Cross appeals for Assessment Years 2008-09 and 2009-10 and are directed against the separate orders dated 30th October,2013 of the Ld. CIT(A)-LTU, New Delhi. Since common grounds are involved, therefore, these were heard together and are being disposed of by this common order for the sake of convenience. ITA No.6786/Del/2013 (By assessee) : 2. The grounds raised by the assessee are as follows : 1. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in confirming proportionate disallowance of interest in respect of s .....

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..... addition in respect of such security deposit u/s 68 was deleted. Only an amount of Rs.l,27,69,83,720 in respect of which the appellant company could not reconcile the information with respect to the specific customers, was held as unexplained and the addition in respect of which was confirmed. The interest on such deposit alone was disallowed by the CIT(A). On careful consideration of the submissions given by the appellant. I find that the Ld. AD has taken wrong figures of ₹ 29.48 million as interest paid on customer's deposits as the correct, figures for interest on such security deposit is ₹ 15.82 million. In view of the appellate order for AY 2006-07 dated 22.05.2013, out of the total interest expense of ₹ 15.82 claimed by the appellant in respect of the security deposits, the interest expenses in the ratio of ₹ 1,27,69,83,720 (held as unexplained) to ₹ 11,59,32,90,000/- (which represents total amount of security deposit) amounting to ₹ 17,42,542/- may alone need to be disallowed. The Ld. AO is directed to recompute the disallowance accordingly. The appellant gets relief in respect of the balance amount. 4.1. Aggrieved with such order of t .....

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..... . It also submitted as per annexure 3 details with regard to current status of live connections and amount of outstaying security deposit. Before him the assessee also submitted that trial balance, nature of deposits, deposit refund account and details of deposit adjustments. Such furnishing of details have been mentioned by the ld CIT(A) in para 5.2.4 to 5.2.6 in his order. On submission of this information the ld CIT(A) obtained the remand report from Assessing Officer and after obtaining rejoinder has held that the deposits held by the assessee are in the character of custodial as it has to refund it as soon as services are terminated. He further Page 18 of 19 observed that the deposit outstanding is decreasing gradually and therefore held that it does not partake the character of trading liability as there is obligation to repay the same. He further held that the appellant does not enjoy complete dominion over this deposit as it does not own it. However, he confirmed the addition to the extent of ₹ 127.69 crores and deleted the addition of ₹ 1031.62 crores. The reason given by him for confirming the amount is that these could not be reconciled with the respect to th .....

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..... xempt u/s 10 of the I.T. Act, 1961. The A.O. asked the assessee to explain as to why disallowance under Rule 8D should not be made. The reply of the assessee that no expenses were actually incurred in relation to such exempt dividend income was rejected by the A.O., on the ground that in making investment of ₹ 7,644 million, the assessee had used borrowed funds, on which interest expenses of about ₹ 28 million were incurred. The A.O. also held that the assessee s borrowings were not entirely used for business purposes and the assessee has not kept books separately so as to work out the expenses incurred for earning the exempt dividend income. In view of this, he invoked the provision of Rule 8D and made disallowance of ₹ 1,23,20,000/-. 8.2. In appeal the Ld. CIT(A) deleted the addition made by the AO by observing as under : 6.2 Regarding the Ground No.2 of the appeal relating to disallowance u/s 14A, which was made by the d. AO by resorting to the provisions of Rule 8D, I find that the appellant had earned dividend income of ₹ 1.71 crores during the year. During the year, the total revenue of the appellant company was to the tune of ₹ 5329.93 crores fr .....

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..... and therefore no interest has been paid on account of such borrowings could be controverted by the ld. DR. We find the interest expenditure incurred by the assessee company is on account of interest paid on security deposits received from the customers, interest on GPF and interest paid to the Municipal Authorities, Mumbai. We further find from the various details furnished by the assessee in the paper book that sufficient funds are available with the assessee which are much more than the investments made during the year. Therefore in view of the decision of Hon ble Mumbai High Court in the case of CIT vs. HDFC Bank Ltd. in ITA 330/2012 order dated 23rd July, 2014, the decision of Hon ble Punjab & Haryana High Court in the case of CIT vs. Max India Ltd. in ITA 186/2013 order dated 6th September, 2016 and the decision of the Delhi Bench of the Tribunal in the case of Gagan Goyal vs. JCIT in ITA No.1514/Del/15 order dt. 2nd August, 2016, the order of Ld. CIT(A) in our opinion is fully justified. Ld. D.R. could not distinguish the decision of Hon ble Delhi High Court in the case of Maxopp Investments (supra) which has been relied upon by the Ld. CIT(A). Since the Ld. CIT(A) has gi .....

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..... nd already decided by the Tribunal, therefore, respectfully following the decision of the Tribunal in assessee s own case for A.Y. 2006-07 and in absence of any contrary material brought to our notice, we find no infirmity in the order of the Ld. CIT(A) on this issue. Accordingly, the same is upheld and the ground raised by the Revenue on this issue is dismissed. 12. Ground of appeal No.3 by revenue reads as under : 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of ₹ 37,30,000/- made on account of understatement of income due to changes in the accounting policy. 12.1. Facts of the case, in brief, are that the A.O. during the course of assessment proceedings observed that in the notes to accounts attached with the audit report, the auditor has reported that the assessee has changed its accounting policy for allocation of overheads and for the intangible assets which had resulted in understatement of profits by ₹ 1.11 and ₹ 2.62 million, respectively. The reply of the assessee that such changes were carried out in line with the accounting policy was not accepted by the A.O. on the ground that the assess .....

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..... ed by the A.O. It is an accepted fact that revenue cannot pick and choose and make additions or disallowances in part. In view of the above and in view of the detailed reasoning given by the CIT(A) on this issue, we do not find any infirmity in his order on this issue. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed. ITA No.6787/Del/2013 (by Assessee) for A.Y. 2009-10 : 14. The grounds raised by the assessee are as under : 1. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in confirming proportionate disallowance of interest in respect of security deposit of ₹ 127,69,83,720/-. 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in ignoring the fact that the assessee being a Public Sector Company, the entire security deposit held by it is of the customers and the interest thereon cannot be disallowed merely on the surmise that security deposit is an unexplained deposit. 3. The appellant craves leave to add, amend or alter any of the grounds of appeal. 15. After hearing both sides, we find the above Grounds are identical to the grounds of appeal no.1 .....

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