TMI Blog2019 (12) TMI 1499X X X X Extracts X X X X X X X X Extracts X X X X ..... icer to carry out similar exercise as directed Disallowance of amortization of premium paid on leasehold land has been decided in favour of the Revenue in own case in [ 2019 (11) TMI 1368 - ITAT MUMBAI ] for the A.Y. 2008-09 and A.Y. 2009-10 . Disallowance of depreciation on toll road - Addition made towards notional interest in respect of toll road from Madhya Pradesh State Industrial Development Corporation - HELD THAT:- We restore this matter to the file of the Assessing Officer with a direction to decide the issue following the directions of the Tribunal for the A.Y. 2005-06 to 2007-08. [ 2019 (4) TMI 1809 - ITAT MUMBAI ] This ground is allowed for statistical purpose. Disallowance of interest on loan given to IL FS employee welfare trust - HELD THAT:- We observe that this issue has been decided by the Tribunal for the A.Y. 2009-10 [ 2019 (11) TMI 1368 - ITAT MUMBAI ] held that the assessee has not proved that the loan is given for the purpose of business of the assessee. Even before us the assessee could not substantiate that the loan has been given for the purpose of business of the assessee. In the circumstances, we are not inclined the disturb the finding o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Member And Shri G. Manjunatha, Hon'ble Accountant Member For the Assessee : Shri Sandeep Bhalla For the Department : Shri Awangshi Gimson ORDER PER C.N. PRASAD (JM) 1. These cross appeals are filed by the assessee and revenue against different orders of the Learned Commissioner of Income Tax (Appeals) 21, Mumbai [hereinafter in short Ld.CIT(A) ] dated 25.09.2014 and 05.08.2014 for the A.Y. 2010-11 and A.Y. 2011-12 respectively. 2. First we take up the appeal of the assessee in ITA.No.7092/Mum/2014 for the A.Y. 2010-11. 3. The assessee in its appeal raised the following grounds: - 1. On the facts circumstances of the case the Learned Commr. of Income Tax (Appeals) has erred in confirming the disallowance of the claim of the depreciation of ₹ 13,70,093/- in respect of residential properties. On the facts and circumstances of the case the appellant prays that the disallowance of depreciation of ₹ 13,70,093/- is not justified and the said disallowance may be deleted. 2. The Learned Commr. of Income Tax (Appeals) has erred in disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces to show that the appellant has offered the income twice. The conclusion reached by the Learned Commr. of Income Tax (Appeals) is contrary to the facts. 8. On the facts circumstances of the case the Learned Commr. of Income tax (Appeals) has erred in rejecting the claim of the appellant of ₹ 2.09 crores for deduction u/s. 36(1)(vii) of Income Tax Act, 1961. The appellant prays that the claim of deduction of ₹ 2.09 crores may be accepted. 9. On the facts circumstances of the case the appellant denies the liability of payment of interest u/s 234B. On the facts circumstances of the case the appellant submit that levy of interest u/s 234B is not justified and may be deleted. 4. At the outset, Ld. Counsel for the assessee submits that ground No.1 of grounds of appeal relating to disallowance of depreciation on residential properties was held in favour of the assessee by the Tribunal for the A.Y. 2004-05 to A.Y. 2007-08. It is further submitted that consequential order was passed by the Assessing Officer for the A.Y. 2004-05 vide order dated 31.12.2018 allowing depreciation. It is also submitted that identical issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otwithstanding the fact that the income from certain property was offered under the head income from house property . However, when the Bench has posed specific question to the Ld. AR for the assessee to the effect that whether the assessee has claimed standard deduction as provided u/s 24(a) of the Act or not in respect of income from house property in addition to depreciation and other maintenance expenses claimed, the Ld. AR for the assessee, fairly accepted that this aspect has not been examined by the authorities below and also there is no finding from the Tribunal in the earlier years. Therefore, the issue may be set-aside to the file of the AO for verification of facts with regard to standard deduction claimed u/s 24(a) of the Act and further if at all the assessee has claimed deduction u/s 24(a) of the Act, it amounts to double deduction and the same may be directed to be disallowed. Therefore, consistent with view taken by the Co-ordinate Bench for earlier years, we direct the AO to allow depreciation as claimed by the assessee on residential premises, but verify the fact with regard to deduction claimed u/s 24(a) in the light of our discussions given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed. We also observe that the Tribunal has taken similar view in ITA.No. 3785 3786/Mum/2013 for the A.Y. 2008-09 and A.Y. 2009-10 by order dated 28.11.2019. Facts being identical following the said decision we dismiss the ground raised by the assessee. 11. Ground No. 3 of grounds of appeal is relating to disallowance of depreciation on toll road. The Ld. Counsel for the assessee submitted that this issue has been decided in favour of the assessee by the Tribunal for the A.Y. 2004-05 to A.Y. 2007-08. It is also submitted that the Assessing Officer while passing the consequential order allowed depreciation for the A.Y. 2004-05 vide order dated 31.12.2018. On a perusal of the order of the Tribunal we find that this issue has been decided in favour of the assessee by the Tribunal for the A.Y. 2004-05 at Para No. 11.22 observing as under: 11.12. Since, we have already directed the Ld. Assessing Officer. to tax the estimated income from the toll road, as a logical consequence, the assessee becomes entitled to claim the depreciation on the on the toll road. After considering the cited decisions relied upon by respective representative, we find that since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain right to claim the same particularly when the payment is backed by the guarantee of the state government. There is no dispute as to the fact that the assessee has unfettered right to claim the same from the government agency and only the quantification thereof is in dispute. The contention of the Ld. AR is that since the government agency has agitated the same before higher authorities, the same has not yet attained finality. However, whatever the case may be, the assessee following mercantile system of accounting is obliged to offer the same to tax in view of crystallization thereof by Appellate Tribunal. 11.11 Therefore, on the facts and circumstances, we restore the matter back to the file of Ld. AO with a direction to estimate the income on the basis of latest decision of the Appellate Tribunal or any higher authority, as the case may be. The assessee is directed to substantiate his claim in this regard forthwith failing which the Ld. AO shall be at liberty to decide the same on the basis of material available on record. 11.12 Since, we have already directed the Ld. AO to tax the estimated income from the toll road, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 31.12.2018 for the A.Y. 2004-05 restricting addition only to the amount awarded by arbitrator of Arbitration Tribunal and granted relief for the balance amount. 26. On a perusal of the order of the Tribunal we find that this issue was also considered by the Tribunal in Para No. 11.11 for the A.Y. 2004-05 and for the A.Y. 2005-06 to A.Y. 2007-08 and restored to the file of the Assessing Officer as extracted above. Thus, respectfully following the said decision, we restore this issue to the file of the Assessing Officer with a direction to follow the order the Tribunal for the A.Y. 2004-05 and for the A.Y. 2005-06 to A.Y. 2007-08 and decide accordingly. This ground is allowed for statistical purpose. 16. Following the said order, we restore this issue to the file of the Assessing Officer with a direction to decide the issue keeping in view the directions of the Tribunal for the A.Y. 2004-05 to A.Y. 2007-08 and decide accordingly. This ground is allowed for statistical purpose. 17. Ld. Counsel for the assessee submitted that Ground No.5 of grounds of appeal is relating to disallowance U/s. 14A r.w.s 8D(2)(iii) of I.T. Rules in respect of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments for the purpose of Section 14A disallowance. The Ld. AR has provided before us detailed working of adjusted investments in the light of his contentions. Also, we note that in the preceding paragraph, we have already restored the matter back to the file of AO to find out the closing stock valuation of the securities held as stock in trade and the income of which has been offered under the head business income. Therefore, in the light of these facts / observations, we remit the matter back to the file of AO to re-compute the said disallowance qua interest and administrative expenses after properly appreciating the capital structure of the assessee. The assessee is also directed to substantiate its claim forthwith in the light of our observations before the lower authorities, falling which the authorities shall be at liberty to decide the same on the basis of available material on record. The assessee s grounds of appeals stand allowed for statistical purposes. 14. Similarly, the Tribunal for the A.Y. 2005-06 to A.Y. 2007-08 in ITA.Nos. 3339/Mum/2011, ITA.No. 3340/Mum/2011 and 3341/Mum/2011 dated 30.04.2019 at Para No. 19 held as under: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the special bench of Delhi in the case of ACIT v. Vireet Investments Private Limited [165 ITD 27]. This ground is allowed for statistical purpose. 19. Following the said order, we restore this issue to the file of the Assessing Officer who shall pass order keeping in view of above directions of the Tribunal for the A.Y. 2004-05 to 2007-08 and A.Y.2008-09 A.Y. 2009-10. 20. Ground No.6 of grounds of appeal is relating to disallowance of interest on loan given to IL FS employee welfare trust. We observe that this issue has been decided by the Tribunal for the A.Y. 2009-10 in ITA.No. 3786/Mum/2013 dated 28.11.2019 observing as under: - 41. Ground No .6 of the grounds of appeal is relating to disallowance of interest on loan given to IL FS Employees Welfare Trust. Briefly stated the facts are that, while completing the assessment Assessing Officer noticed that during the year under consideration assessee has given interest free loans to IL FS Employees Welfare Trust. The Assessing Officer is of the view that the loan given is for non-business purposes and taking note of the fact that the assessee is having mixed funds i.e., borrowed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the loan is given for the purpose of business of the assessee. Even before us the assessee could not substantiate that the loan has been given for the purpose of business of the assessee. In the circumstances, we are not inclined the disturb the finding of the Ld. CIT(A) hence, the action of the Ld.CIT(A) is sustained. Ground raised by the assessee is rejected. 21. Facts being identical following the order of the Tribunal, we sustain the order of the Ld.CIT(A) and reject the ground raised by the assessee. 22. Ground No. 7 of grounds of appeal of the assessee is in respect of double addition to income to the extent of ₹.13.75 Crores. 23. Learned Counsel for the assessee submitted that IL FS the assessee is 100% beneficiary of few Trusts created under Indian Trust Act. For the purpose of Income Tax, all income earned by such trusts are offered for tax by the assessee in the same year in which such trust earns the income in the respective income head Income from Pass Thru Trust/Share of Income as Beneficiary Trust . It is however submitted that assessee has offered this income twice in the case of Two Pass thru Trusts. The reason for the same are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for tax and hence there is an excess income offered for tax amounting ₹.4.37 Crores and requested to allow reduction from taxable income of ₹.4.37 Crores offered excess for IL FS Investment Trust-V. 26. Ld. Counsel for the assessee further submitted that the Ld.CIT(A) failed to consider these submissions. Ld. Counsel for the assessee invited our attention to income and expenditure account for the year ended 31.03.2010 and submitted that net surplus for the year ended 31.03.2010 was only ₹.10.18 Crores whereas the assessee has considered earning available for appropriation at ₹.19.56 crores as income of the current assessment year which includes brought forward earning of ₹.9.37 crores for the year ended 31.03.2009. Therefore, it is submitted that there is double addition due to inadvertence of the assessee offering excess income to tax. 27. Ld. DR has no serious objection in sending matter for verification by the Assessing Officer. 28. On hearing both the sides and considering the submissions as well as the evidences produced before us, we are inclined to restore this issue to the file of the Assessing Officer with a direction to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f depreciation of ₹ 1,94,497/- be allowed. 3. On the facts and circumstances of the case the appellant submits that they have not received any income in respect of the Toll Road and the matter is in dispute. The Learned Commr. of Income Tax (Appeals) has erred in directing the Learned Assessing Officer to estimate the interest income due from MPSIDC. The appellant prays that they are not entitled to and have not received any interest income from MPSIDC and hence the direction of the Learned Commr. of Income Tax (Appeals) to tax the estimated interest income may be set aside. 4. The Learned A.O. has erred in disallowing the sum of ₹ 6.56 crores being the administrative / establishment expenses attributable to earning exempt income u/s 10 of Income Tax Act, 1961. On the facts circumstances of the case the appellant submit that the disallowance of ₹ 6.56 crores being the administrative / establishment expenses is not justified and the said disallowance may be deleted. 5. On the facts circumstances of the case the Learned Commr. of Income Tax (Appeals) has erred in confirming the disallowance of interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39. Ground No. 6 of grounds of appeal is relating to levy of interest u/s.234B of the Act and this ground is only consequential and need not be adjudicated. 40. Now we take up the appeal of the revenue in ITA.No. 7284/Mum/2014 for the A.Y. 2010-11. 41. Revenue has raised following grounds in its appeal: - 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition to Income from house property Of ₹ 30,96,000/- without appreciating the fact that this is assessable as income from house property. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance made u/s 14A r.w.r. 8D of the IT rules amounting to ₹ 140,71,97,021/- and in directing the AO to restrict the disallowance to 0.5% of average investment only without appreciating the fact that the formula of disallowance under rule 8D is an inalienable part of sec. 14A and once it is invoked the AO can not deviate from that formula and that the Rule 8D is applicable from AY 2008-09 onwards. 2.1 On the facts and in the circumstances of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of Hon'ble IT AT Delhi in the case of Sony India Pvt. LTd Vs. Addl CIT, 56 DTR 156. 42. Ground No. 2 of Grounds of appeal of the Revenue is relating to disallowance u/s. 14A r.w. Rule 8D of the Act. This ground which is similar to Ground No. 5 in the appeal of the assessee for the A.Y. 2010-11 has been decided while disposing off the appeal and the decision taken therein shall apply mutatis mutandis for this appeal also. Since we have decided this issue by restoring the ground to the file of the Assessing Officer this ground is also restored to the file of the Assessing Officer. We order accordingly. 43. Ground No.3 of grounds of appeal relates to disallowance of software development expenditure. Ld. Counsel for the assessee submits that this issue has been decided in favour of the assessee by the Tribunal at Para No. 20.2 for the A.Y. 2004-05. Similarly, Tribunal for the A.Ys.2005-06 to 2007-08 in ITA.Nos. 3165/Mum/2017, ITA.No. 3339/Mum/2011, ITA.No. 3340/Mum/2011 and ITA.No. 3341/Mum/2011 dated 30.04.2019 at Para Nos. 60 and 61 decided the issue in favour of the assessee. 44. On the other hand, Ld. DR strongly supported the orders of the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are primarily revenue in nature and the Ld. AO disallowed the same on mere presumption. However, Ld. CIT(A) examined the same and provided relief to the assessee after appreciating the material and therefore, we find no reason to interfere with the same. The revenue s ground of appeal stands dismissed. 61. In view of the matter and consistent with view taken by the Co-ordinate Bench, we do not find any infirmity in the findings of the Ld. CIT(A) and hence, we are inclined to upheld the findings of the ld. CIT(A) and reject the ground taken by the Revenue. 46. We observe that Tribunal has taken similar view for the A.Ys.2008-09 and 2009-10 in ITA.No. 3700 3699 /Mum/2013 dated 28.11.2019. No distinguishable facts have been brought to our notice. Thus respectfully following the said decision, we uphold the order of the Ld. CIT(A) and reject the ground raised by the revenue. 47. Ground No. 4 of Grounds of appeal of the revenue is relating to addition of notional interest income in respect of toll road from Madhya Pradesh State Industrial Development Corporation. This ground which is identical to Ground No. 4 in the appeal of the assessee for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the said decision of the Tribunal in assessee s own case we direct the Assessing Officer to delete the disallowance made towards payments to clubs. This ground is allowed. 52. Ground No.6 of grounds of appeal relates to disallowance of claim for deduction U/s. 36(1)(viii) of the Act. Learned Counsel for the assessee submitted that identical issue has been heard by the Tribunal for the A.Y.2008-09 to 2009-10 and the decision taken therein may be applied for the Assessment Years 2010-11 2011-12 as facts being identical. 53. Ld. DR vehemently supported the orders of the Assessing Officer. 54. We observe that the Tribunal had decided this identical issue while disposing of the appeal for the A.Ys. 2008-09 and 2009-10 in ITA.No. 3700 3699/Mum/2013 dated 28.11.2019 observing as under: - 68. Briefly stated the facts are that, Assessing Officer while completing the assessment denied deduction claimed U/s. 36(1)(viii) observing as under: 17.1 During the assessment proceedings, it was noticed that me assessing was claiming deduction u/s.36(1)(viii) of the Act of ₹ 63000000/-. It was further noticed from the annual report, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.1. The facts of the case were that the A.O. has disallowed the claim of the appellant u/s.36(l)(viii) for ₹ 6,30,00,000/- as the appellant is not advancing any loans for long term finance and appellant is not only managing its investment in group companies. As appellant is not providing long term finance for infrastructure projects, the A.O. had disallowed the claim of the appellant. 13.2. During appellate proceedings, the appellant submitted as under: Ground No. 6 deals with the rejection of the claim of the appellant of deduction u/s.36(l)(viii) (amounting to ₹ 6,30,00,000/-) on the inference that the company after the reorganization has become a non-banking non-finance company and after the reorganization, the assessee is only engaged in managing its investments in group entities''. It is submitted that the inference of the Hon'ble AO is erroneous. Even after the reorganization, the company is engaged in the business of granting of loans to all its infrastructure and other group companies and it continues to be a Finance Company as stipulated by the RBI and continues to be under the direct supervision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii). As appellant is fulfilling the condition of specified entity and extending the loan for infrastructural facilities though they are group companies which are themselves developing infrastructural facilities, the appellant is eligible for deduction u/s.36(l)(viii). Hence this ground of appeal is allowed. 72. On a careful perusal of the order of the Ld.CIT(A), we do not see any infirmity in the order of the Ld.CIT(A). The findings of the Ld.CIT(A) are on consideration of evidences produced by the assessee and therefore, no inference is called for especially when these finding of the Ld.CIT(A) were not rebutted with evidences. Thus, we sustained the order of the Ld.CIT(A) and reject the ground raised by the Revenue. 55. Respectfully following the above said decision of the Tribunal, we sustain the order of the Ld.CIT(A) and reject the ground raised by the revenue. 56. Ground No. 7 of grounds of appeal of the revenue relates to difference in AIR data. 57. Assessing Officer in the Assessment Order observed that assessee has not explained the transactions and accordingly made addition u/s.69/69B/69C of the Act. On appeal the Ld.CIT(A) dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the facts and circumstances of the case. The appellant had installed ERP accounting software for the business which is directly helpful for the appellant's conducting of the business. The appellant accounting purpose for the depreciation of the software as per Rule 5 Part D(i) w.r.t. 02.04.2005, 60% depreciation is provided for the software. Hence, A.O. is directed to allow depreciation @ 60%. These grounds of appeal are allowed. I have considered the facts and circumstances of the case. Printers, scanners, card readers, finger scan readers are Peripherals which are used as part of computers. In Income-tax Act under Rule 5 Appendix 1 w.r.t. 02.04.2005 it has allowed {60% of depreciation for computer software. Further in the case of Dy. CIT V. Datacraft India Ltd 133 TTJ 377 (Mumbai Special Bench) it is held that peripherals of computers are also part of computers and are eligible for depreciation @ 60% . Following the above decision and in view of the clear mention of the depreciation for computer software at 60%, the A.O. is directed to allow claim of the appellant. These grounds of appeal are allowed. 64. We see no good re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 1 of Grounds of appeal of the revenue for the A.Y.2011-12 is relating to disallowance u/s. 14A of the Act. This ground is similar to Ground No. 2 in the appeal of the revenue for the A.Y.2010-11 and it has been decided while disposing off the appeal. The decision taken therein shall apply mutatis mutandis for this appeal also. We order accordingly. 68. Ground No. 2 of Grounds of appeal of the revenue for the A.Y.2011-12 is relating to disallowance of software development expenditure. This ground is similar to Ground No. 3 in the appeal of the revenue for the A.Y. 2010-11 and it has been decided while disposing off the appeal. The decision taken therein shall apply mutatis mutandis for this appeal also. We order accordingly. 69. Ground No. 3 of Grounds of appeal of the revenue for the A.Y.2011-12 is relating to addition of notional interest income in respect of toll road from Madhya Pradesh State Industrial Development corporation. This ground is similar to Ground No. 4 in the appeal of the revenue for the A.Y. 2010-11 and it has been decided while disposing off the appeal. The decision taken therein shall apply mutatis mutandis for this appeal also. We order ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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