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TMI Blog2019 (12) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It is submitted that it be so done now. 2. The learned Commissioner of Income Tax (Appeals) has erred in disallowing the appellant's claim of Rs. 5,36,79,690/- for deduction u/s. 36(l)(viii) following ITAT's order for A.Y. 2003-04. It is submitted that appellant has satisfied necessary conditions and learned Commissioner of Income Tax (Appeals) ought to have allowed the deduction as claimed. It is submitted that it be so held now. 3. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of Rs. 13,69,559/- being grant given by the appellant to Bangalore Urban and Rural District Coop Milk Producers Societies Union Ltd. and claimed as deductible expenditure u/s. 36(l)(xii) of the Income Tax Act. 3.1 In any event, the same is allowable on deduction u/s 36(l)(vii) being in the nature of bad debts written off or u/s. 37/28 of the Income Tax Act. It be so held now. 4. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance Rs. 2,32,10,571/- by applying section 14A following the appellate order for AY 2008-09. In the'' facts and circumstances of the case it is submitted that no disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26). The case was selected for scrutiny by issuing of notice u/s. 143(2) of the act on 28th August, 2010. The assessment u/s. 143(3) was completed on 4th Nov, 2011 and total income was determined at Rs. 52,61,12,195/- after making various additions mostly on the basis of preceding assessment year after following the decision of Income Tax Appellate Tribunal, the nature of additions are briefly discussed while adjudicating the different grounds of appeal filed by the assessee and Revenue as follows:- 5. Ground No.1 is of general nature and it does not require any adjudication and the same is dismissed Ground No. 2 (Disallowance of claim u/s. 36(1)(viii) of Rs. 5,36,79,690/-) 6. During assessment the assessing officer noticed that assessee has debited an amount of Rs. 5,36,79,690/- in the P & L being amount transferred to special reserves account. The assessee has claimed deduction u/s. 36(I)(viii) on the said amount transferred to special reserves. The assessee claimed that it is entitled for deduction of 20% on profit of long term financial activity as per section 36(1)(iii) of the Act. The assessing officer stated that the assessee had made the same claim for assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in providing long term finance for industrial and agricultural development or development of industrial facility and again it had no capital which is necessary to compute the aggregate of the amount to be carried to special reserve account as twice the amount of the paid up share capital and of the General reserve. The assessee failed to comply with these other conditions and therefore it would not be entitled the deduction. 10. We further observe that the decision of the Co-ordinate Bench for Asst. Year 2003-04 has been followed by the Tribunal for Asst. Year 2004-05 and 2007-08 in ITA Nos. 3200 & 3201/Ahd/2010. Respectfully following the decision of Co-ordinate Bench, we are of the view that the issue now stands decided against the assessee and therefore, we find no reason to interfere with the order of ld. CIT(A). We uphold the same. Accordingly, this ground of assessee is dismissed." Respectfully following the decision of Co-ordinate Bench as cited above, we do not find any reason to interfere in the order of ld. CIT(A). Therefore, this ground of appeal of the assessee is dismissed. Ground No. 3 (Disallowance of Rs. 13,69,559/- being grant given to Cooperative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for readjudication observing as under:- 15. The ground no.4 of the assessee is as under: "4. The Id.CIT(A) has erred in confirming the disallowance oj grant of Rs. 78,88,592/- given to various cooperative societies and other organizations as deductible expenditure u/s.36(l)(xii) of the IT Act. It is submitted that the amount represents an expenditure incurred by the appellant for the purpose of objects of the appellant and thereby fulfills all conditions of section 36(J)(xii) of the IT Act and accordingly it is entitled to deduction it's. 56(1 )(xiij. It is submitted that it be so held now "- 16. It was submitted by the learned AR of the assessee that in A.Y.2003-2004, the Tribunal had recalled the earlier order, and it was held that the grant is allowable as an expenditure under section 36(l)(xii) of the Act, and the matter was sent back to the AO for verification (j) whether the alleged non-refundable grants are given from grants received or not, and (ii) non-refundable grants sanctioned, are claimed as only when fund are already utilised/ fund utilisation report are received. He also submitted that under similar facts, in A.Y.2004-05, 2005-2006 and 2006-2007, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and identical facts for assessment year 2008-09 vide ITA No. 1049/Ahd/2012 has restricted the disallowance to the extent of Rs. 10 lacs as administrative expenditure. The relevant part of the above cited decision is reproduced as under:- "26. Further the interest expenditure incurred by the assessee during the year comprises interest paid to Government of India at Rs. 10.94 crores and interest paid to banks at Rs. 71.40 lacs. Taking both the facts together and also in view of various judicial pronouncements referred and relied by the assessee we find that assessee was having sufficient interest free funds and in order to cover the investments made which were approximately 40% of the total reserve and surplus held by the assessee at the close of the year and further Revenue has been unable to prove any nexus of flow of interest bearable funds to investments we find no reason to sustain the disallowance of Rs. 10,59,435/- u/s 14A of the Act emanating out of interest expenditure incurred by the assessee. 27. As far as disallowance of Rs. 2,53,16,471/- being 0.5% of average investments of Rs. 506.33 crores we observe that assessee was not taxable entity till Asst. Year 2002-03 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs being administrative expenditure incurred towards earning exempt income. Accordingly, the appeal of the assessee is partly allowed on this issue. Ground No. 5(Interest income of NKPDF project of Rs. 2,30,90,542/-) 15. The assessee has challenged the action of the assessing officer for taxing the interest earned on North Kerala Development Fund amounting to Rs. 2,30,90,542/-. The assessee claimed it was acting as Nodal Agency and interest income was diverted at source and did not belong to the assessee. The assessee has also contended that it receives such interest only under trust for and on behalf of donar and the assessee has neither any legal claim to retain such interest nor it has discretion towards use of such interest. 16. During the course of appellate proceedings before the ld. CIT(A), the ld. CIT(A) stated that ITAT Ahmedabad in the case of the assessee itself for assessment year 2003-04 vide ITA No. 310 ITR (80) 375 Ahmedabad held that such interest is accrued to the assessee. The similar addition made in assessment year 2004-05 and 2005-06 were also upheld by the ITAT. On perusal of the copy of agreement between the Government of Republic of India and Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heard rival contentions and perused the material on record. It is noticed that in assessment year 2007-08 vide ITA No. 3201/Ahd/2010 at para 29 of the order, the ITAT has adjudicated this issue against the assessee after following the decision of ITAT in the case of the assessee itself for assessment year 2003-04. Respectfully following the decision of Co-ordinate Bench on same issue and on similar fact, the appeal of the assessee is dismissed. 20. The solitary ground of appeal of the Revenue is against the decision of the Ld. CIT(A) in deleting the addition to the extent of Rs. 45,00,00,000/- being provision written back. 21. During the course of assessment on perusal of the P & L A/c, the assessing officer noticed that assessee has written back excess provision amounting to Rs. 45 crore claimed as deduction. The assessing officer was of the view that written back provision can only be claimed as a deduction if it is proved by the assessee that the provision made in the earlier year was disallowed and subject to tax. The assessing officer has also stated that assessee has not placed any evidence that the provision made in the earlier year was subject to tax. The provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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