9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (1) TMI 561 - AT - Income TaxGrant of depreciation - written value of block of assets as per books of account of the assets taken over from the demerged company v/s written down value as per the provisions of Income Tax Act of the transferred assets of the demerged company adopted by the lower authorities - whether CIT(A) erred in holding that amendment in Explanation 2B to section 43(6) of the Act by Finance Act, 2003 with effect from assessment year 2004-05 will have retrospective effect and will also apply to a demerger in assessment year 2003-04? - Held that - The explanations 2A and 2B were inserted by Finance Act, 1999 w.e.f. 01.04.2000. The relevant words under clause 2A were written down value of the block of assets of the demerged company whereas the corresponding relevant words under clause 2B were the value of assets as appearing in the books of accounts . However, a subsequent amendment was made vide Finance Act, 2000 w.e.f. the same date i.e. 01.04.2000 vide which the words the value of the assets as appearing in the books of account were substituted with the words written down value of the transferred assets as appearing in the books of account . However, immediately, before these provisions come into operation, an amendment was brought out in explanation 2B and the relevant words were substituted with written down value of the transferred assets . However, the other relevant words as appearing in the books of account were not omitted. If we take the contention of the assessee as correct, then in that event there would not have been any impact or change in the interpretation of the relevant provisions even after the amendment made by Finance Act, 2000. whatever rights had accrued to the assessee in view of the ambiguity in the provisions at the time of their insertion vide Finance Act, 1999, the same had been taken away/clarified immediately by removing the ambiguity through amendment made vide Finance Act, 2000. Hence no hesitation to hold that the proposition laid therein cannot be applied to the facts and circumstances of the case in hand. - Decided against the assessee. Non chargeability of interest under section 234B of the Act - Held that - Now the law has been settled that the levy of interest under section 234B is mandatory. - Decided against the assessee. Irrecoverable inter corporate deposits written off - CIT deleted disallowance - Held that - finance business of the demerged company was further carried over by the assessee company, though, it was not the exclusive business but one of the business activities of the resulting company. The condition of passing the entry through P&L account is not mandatory in case of money lent in the business of money lending even as per the provisions of section 36(2)(i) of the Act. Thus infirmity in the order of the Ld. CIT(A) on this issue and the same is accordingly upheld. - Decided against revenue.
Issues Involved:
1. Grant of depreciation under section 43(6) of the Income Tax Act. 2. Non-chargeability of interest under section 234B of the Income Tax Act. 3. Disallowance of irrecoverable inter-corporate deposits written off. Issue-wise Detailed Analysis: 1. Grant of Depreciation under Section 43(6) of the Income Tax Act: The primary issue raised by the assessee pertains to the interpretation and applicability of Explanation 2B to section 43(6) of the Income Tax Act for the assessment year 2003-04. The assessee contended that the written down value (WDV) of the block of assets should be taken as per the books of accounts of the demerged company, Godrej Appliances Limited, immediately before the demerger. The assessee claimed depreciation of Rs. 65,90,99,922/- based on this interpretation. The Assessing Officer (AO) disagreed, stating that the WDV should be as per the provisions of the Income Tax Act, not the book value. The AO allowed depreciation of Rs. 39,75,12,704/-, arguing that the demerger should be tax neutral and should not provide any undue benefit to the assessee. The AO's stance was that the WDV of the assets transferred should be considered for computing depreciation under section 32 of the Act. Upon appeal, the CIT(A) upheld the AO's decision, referencing a similar case involving Godrej Industries Ltd., where the ITAT had decided against the assessee. The CIT(A) observed that the amendment made to Explanation 2B by the Finance Act, 2003, effective from 1st April 2004, was prospective and did not apply to the assessment year 2003-04. The Tribunal agreed with the lower authorities, stating that the amendment made by the Finance Act, 2003, was clarificatory and curative in nature, not affecting any substantive rights of the assessee. The Tribunal emphasized that the WDV of the transferred assets should be as per the Income Tax Act for the resulting company. The Tribunal also noted that the amendment removed ambiguity and was not intended to provide any new rights to the revenue or take away any rights from the assessee. 2. Non-Chargeability of Interest under Section 234B of the Income Tax Act: The assessee also contested the chargeability of interest under section 234B of the Act. The Tribunal noted that the levy of interest under section 234B is mandatory and consequential. Therefore, these grounds were decided against the assessee. 3. Disallowance of Irrecoverable Inter-Corporate Deposits Written Off: The Revenue appealed against the CIT(A)'s decision to delete the disallowance made by the AO on account of irrecoverable inter-corporate deposits written off. The assessee had written off inter-corporate deposits of Rs. 41,00,000/- placed with Godrej Hi-care Ltd. The AO disallowed the claim, stating that the bad debts could only be allowed if the debt had passed through the trading/P&L account of the company. The CIT(A) allowed the claim, noting that the demerged company, Godrej Capital Ltd., was in the business of lending money, and the interest income from these loans was assessed as business income. The CIT(A) held that the claim was allowable as a bad debt under section 36(1)(vii) read with section 36(2) of the Act, even if the debts were not passed through the P&L account. The Tribunal upheld the CIT(A)'s decision, agreeing that the finance business of the demerged company was carried over by the assessee company. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal. Conclusion: The appeals filed by the assessee and the Revenue were dismissed. The Tribunal upheld the lower authorities' decisions regarding the grant of depreciation and the chargeability of interest under section 234B. The Tribunal also upheld the CIT(A)'s decision to allow the write-off of irrecoverable inter-corporate deposits. The order was pronounced in the open court on 31.12.2014.
|
