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2015 (12) TMI 1532 - AT - Income TaxDeduction under section 36(1)(vii) in respect of provisions for bad and doubtful debts - Held that - The SC in the case of Vijya Bank vs. CIT 2010 (4) TMI 46 - SUPREME COURT has held that the provision for bad and doubtful debts is allowable as deduction in as much as what is necessary is to write off to P & L A/c and it is not necessary to credit the debtors account. Thus we deem it appropriate to remit this issue back to the Assessing Officer for deciding afresh in the light of the decision rendered above - Decided in favour of assessee for statistical purposes. Exemption under section 10(33) in respect of dividend income on Master shares and other units of Unit Trust of India ( UTI) - Held that - The dividend received on various units of UTI by the assessee cannot be equated with the dividend earned on shares of a company. Accordingly this ground of appeal of the assessee is dismissed. Computation of relief under Section 80HHC - Held that - The issue has already decided against the assessee by the Tribunal in the assessment year 1997-98 Amount received as rent from Sai Service has been reduced twice - said amount has been shown twice in miscellaneous income and as well as separately as rent from Sai Service - Held that - We deem it appropriate to remit this issue back to Assessing Officer for limited purpose of verification. If the amount has been deducted twice the necessary correction may be carried out to deduct the aforesaid amount only once Addition of interest income paid to Incometax Department - Held that - The issue relating to interest income paid to the Department has been decided against the assessee by the Tribunal in assessee s own case for previous assessemnt year Deduction under Section 37(1) of the Act in respect of lump sum know how fees - Held that - In view of introduction of provisions of section 35AB of the Act which were inserted by the Finance Act 1985 w.e.f. 01.04.1986 we are of the view that in cases of payment of lump sum consideration for acquiring technical know-how the provisions of section 35AB of the Act are attracted and the expenditure is not allowable under section 37(1) of the Act which is general provision and specifically excludes expenditure covered under sections 30 to 36 of the Act. Consequently the said expenditure is to be amortized under section 35AB of the Act and cannot be allowed as a deduction in the year in which the liability to pay the said amount accrues. The Hon ble Supreme Court in Drilcos (India) (P.) Ltd. Vs. CIT (supra) had held that after insertion of section 35AB of the Act where the expenditure is to be used in business of assessee section 35AB of the Act would come into play and the provisions of section 37(1) of the Act are not applicable for units established prior to 01.04.1998.Following the same parity of reasoning we hold that provisions of section 35AB of the Act are to be applied to the lump sum consideration paid for acquisition of technical know-how by the assessee. Deduction under Section 37(1) of the Act on account of exchange fluctuation loss - Held that - We are of the view that if the exchange fluctuation loss has been wrongly computed the same has to be reworked. We deem it appropriate to restore this issue back to the file of Assessing Officer for re-computing exchange fluctuation loss and arrive at the correct amount of deduction u/s. 37(1) of the Act.
Issues Involved:
1. Deduction under section 36(1)(vii) for provisions of bad and doubtful debts. 2. Exemption under section 10(33) for dividend income on Master shares and other units of UTI. 3. Computation of relief under Section 80HHC. 4. Addition of interest income paid to Income-tax Department. 5. Deduction under Section 37(1) for lump sum know-how fees. 6. Deduction under Section 37(1) for exchange fluctuation loss. Detailed Analysis: 1. Deduction under section 36(1)(vii) for provisions of bad and doubtful debts: The assessee claimed a provision of Rs. 3,83,94,000 for bad and doubtful debts, which was disallowed by the CIT(A). The assessee argued that the provision was tax-deductible, citing the Supreme Court's decision in Vijaya Bank Vs. Commissioner of Income Tax, which held that mere reduction in loans and advances or debtors to the extent of the provision is sufficient to constitute a write-off. The Tribunal remitted the issue back to the Assessing Officer for fresh consideration in light of the Supreme Court's decision. 2. Exemption under section 10(33) for dividend income on Master shares and other units of UTI: The assessee claimed exemption for Rs. 19,24,960 received as dividend income on UTI units under section 10(33). The CIT(A) rejected this claim, stating that such dividends are not exempt as UTI units are not shares. The Tribunal upheld the CIT(A)'s decision, referencing a previous Tribunal order which held that only 40% deduction should be allowed for such dividend income, not 100%. 3. Computation of relief under Section 80HHC: The assessee contended that interest income and dividend income should be considered as "Profits and Gains of Business or Profession" for Section 80HHC purposes. The CIT(A) rejected this claim. The Tribunal noted that similar issues had been decided against the assessee in a prior case (ITA No. 525/PN/2003 for AY 1997-98). Regarding the claim that rent received from Sai Service was deducted twice, the Tribunal remitted this specific issue back to the Assessing Officer for verification and correction if necessary. 4. Addition of interest income paid to Income-tax Department: The assessee argued that a loss of Rs. 9,24,983 (difference between interest paid on income tax and interest granted on income-tax refund) should be determined under "Income from other Sources" and set-off against business income. The Tribunal dismissed this ground, following its earlier decision in the assessee's own case for AY 1996-97. 5. Deduction under Section 37(1) for lump sum know-how fees: The assessee claimed deduction for technical know-how fees under Section 37(1). The CIT(A) held that such expenses are capital in nature and covered by Section 35AB, allowing only 1/6th of the second installment and disallowing the third installment due to non-deduction of TDS. The Tribunal upheld the CIT(A)'s decision, referencing its prior ruling that Section 35AB applies to lump sum payments for technical know-how, and that the assessee is entitled to deduction on the full amount under Section 35AB. 6. Deduction under Section 37(1) for exchange fluctuation loss: The assessee claimed an exchange fluctuation loss of Rs. 51,72,003 under Section 37(1). The Tribunal remitted this issue back to the Assessing Officer for re-computation, instructing to correctly compute the exchange fluctuation loss and determine the appropriate deduction. Conclusion: The Tribunal partly accepted the appeal, remitting some issues back to the Assessing Officer for re-evaluation and dismissing others based on prior rulings. The final order was pronounced on December 11, 2015.
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