2012 (12) TMI 1044 - AT - Income Tax

Summary

Issues Involved:
1. Provision for Diminution in Value of Investment
2. Disallowance u/s 14A for Interest on Borrowings and Administrative Expenses
3. Disallowance of Bad Debts Written Off
4. Depreciation on Vehicles Given on Lease
5. Interest Charged u/s 234B, 234C, and 234D

Summary:

1. Provision for Diminution in Value of Investment:
For A.Y. 05-06, the assessee's ground regarding the provision for diminution in value of investment of Rs. 16,77,234/- was not pressed as the CIT(A) had rectified his order. For A.Y. 06-07, the issue of Rs. 47,95,000/- was set aside to the A.O. for verification, directing the A.O. to give a reasonable opportunity of being heard and allow the claim as per law.

2. Disallowance u/s 14A for Interest on Borrowings and Administrative Expenses:
For both A.Y. 05-06 and 06-07, the disallowance u/s 14A was contested. The A.O. had disallowed Rs. 4.47 crores and Rs. 5.22 crores respectively. The CIT(A) partly confirmed the addition, directing the A.O. to work out the interest on the excess investment over own funds. The Tribunal set aside the issue to the A.O. to follow the decision in the assessee's own case for A.Y. 01-02, allowing the appeal for statistical purposes. For administrative expenses, the Tribunal followed its earlier decision, disallowing 1% of the total claim, and set aside the issue to the A.O. for both assessment years.

3. Disallowance of Bad Debts Written Off:
For A.Y. 05-06, the A.O. disallowed Rs. 13,50,40,960/- as the assessee had not proved the debt became bad and did not fulfill the conditions u/s 36(2). The CIT(A) confirmed the addition. The Tribunal, following the Supreme Court decision in T.R.F. Ltd. vs. CIT, allowed the bad debts to the extent of Rs. 13,22,18,530/-, excluding the amount recovered in subsequent years. For A.Y. 06-07, the A.O. was directed to exclude Rs. 28,22,430/- from the income.

4. Depreciation on Vehicles Given on Lease:
For A.Y. 05-06 and 06-07, the A.O. disallowed higher depreciation on vehicles given on lease. The CIT(A) confirmed the addition, relying on the Bombay High Court decision in Kotak Mahindra Finance Ltd. vs. DCIT. The Tribunal, following its earlier decisions in the assessee's own case, allowed the appeal in favor of the assessee, dismissing the revenue's appeal.

5. Interest Charged u/s 234B, 234C, and 234D:
For both assessment years, the issue of charging interest u/s 234B, 234C, and 234D was deemed consequential. The A.O. was directed to take a decision as per law.

Conclusion:
The appeals for both assessment years were partly allowed, with several issues set aside to the A.O. for reconsideration and verification in line with earlier Tribunal decisions and legal precedents.