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2015 (7) TMI 248 - AT - Income TaxDisallowance of bad debts and advances written off - Held that - Since the facts before us are also similar to the facts in the assessment year 2006-07 wherein held that the submissions and evidences placed by the assessee before the authorities below, viz., both the Assessing Officer and learned CIT (Appeals) have not been considered properly in the light of the principles laid down in the decisions of the Hon ble Apex Court in the case of TRF Ltd. (2010 (2) TMI 211 - SUPREME COURT ) and Rallis India Ltd. (2010 (3) TMI 164 - BOMBAY HIGH COURT). We are of the view that it was essential for the Assessing Officer to consider the submissions and evidences placed on record by the assessee both in respect of write off of bad debts and write off of advances and find that he has not done so. In this factual matrix, we are of the opinion that it would be in the interest of equity and justice that it is absolutely necessary for the Assessing Officer to re-examine all the facts of the matter regarding the assessee s claims for write off of bad debts and write off of advances so that there is clarity while deciding the issue, we remand this issue also to the file of the AO with similar directions for de novo consideration of the issue after giving the assessee a fair opportunity of hearing. - Decided in favour of assessee. Disallowance of interest u/s 14A read with rule 8D - Held that - In cases where there has been substantial investment for strategic purposes wherein the intention has been the expansion and support of the assessee s business, and not for the purpose of earning dividend, the provisions of section 14A of the Act ought not to have been invoked even if such expansion has occurred out of interest bearing borrowed funds. Ruling to this effect has been rendered by the Hon ble Karnataka High Court in the case of CCI Ltd. (2012 (4) TMI 282 - KARNATAKA HIGH COURT ) relied on by the assessee. This is the proposition put forth in this case by the assessee, apart from its averments that its own funds are more than the investment in equities. We also find that the Assessing Officer has not considered the above arguments of the assessee and his finding that the assessee s net worth is negative suffers from lack of factual clarity, as the assessee s averments to the contrary are that its net worth is positive at ₹ 896 Crores. In view of the fact that the orders of the authorities below suffer from nonconsideration of arguments, details and evidences put forth by the assessee, we, in the interest of equity and justice, set aside the disallowance under section 14A of the Act and restore the matter to the file of the Assessing Officer with the direction to consider the matter afresh in detail - Decided in favour of assessee for statistical purposes. Disallowance of set off of brought forward business loss - Held that - This issue is consequential to the findings of the AO on the first two issues i.e. bad debts and advances written off and disallowance u/s 14A of the Act read with rule 8D of the Rules. Further, the grounds relating to interest u/s 234C and 234D are also consequential in nature. Therefore, these grounds also set aside to the file of the AO for de novo consideration and for giving consequential effect, if any, to the assessee.- Decided in favour of assessee for statistical purposes. Disallowance of foreign exchange loss - CIT(A) deleted the addition - Held that - As decided in the assessee s own case for Assessment Year 2005-06 the assessee has been able to establish its working capital requirements as was not related as otherwise noted by the Assessing Officer claimed as interest on forward contracts for investment in shares of companies which investment increased from ₹ 102 crores to ₹ 380 crores. Justifiably the learned counsel pointed out the issue in accordance with the provisions of section 43A distinguishing the capital / revenue nature imbibed therein to result in consideration thereof as were claimed by the assessee before the authorities below. The assessee himself rendered income on gain from exchange fluctuation on identical nature of revenue from loans remaining unpaid. The same is to be allowed on the facts and circumstances of the case. Thus we uphold the action of the learned CIT(A) in deleting the disallowance of foreign exchange loss - Decided against revenue.
Issues Involved:
1. Disallowance of Bad Debts and Advances Written Off 2. Disallowance under Section 14A read with Rule 8D 3. Set Off of Brought Forward Business Loss 4. Disallowance of Foreign Exchange Fluctuation Loss Detailed Analysis: 1. Disallowance of Bad Debts and Advances Written Off: The Assessing Officer (AO) disallowed bad debts and advances written off due to insufficient evidence provided by the assessee. The Tribunal referenced a prior decision in the assessee's own case for the assessment year 2006-07, where similar disallowances were deleted. The Tribunal noted that the AO had not properly considered the submissions and evidences provided by the assessee. Consequently, the Tribunal remanded the issue back to the AO for re-examination, emphasizing the need to consider the principles laid down by the Hon'ble Apex Court in the case of TRF Ltd. and the decision of the co-ordinate bench in the assessee's own case for the assessment year 2005-06. The Tribunal directed the AO to provide the assessee with an adequate opportunity to present details and evidence. 2. Disallowance under Section 14A read with Rule 8D: The AO made disallowances under Section 14A read with Rule 8D for interest on borrowed capital related to investments in equity. The Tribunal referenced its order for the assessment year 2006-07, where the matter was remitted to the AO for reconsideration. The Tribunal noted that the AO had not properly considered the arguments and evidence provided by the assessee, including the contention that investments were made for strategic business purposes rather than for earning exempt income. The Tribunal directed the AO to re-examine the issue, taking into account the assessee's submissions and the judicial pronouncements cited, and to provide the assessee with an adequate opportunity to present details and evidence. 3. Set Off of Brought Forward Business Loss: The issue of set off of brought forward business loss was deemed consequential to the findings on the issues of bad debts and advances written off and disallowance under Section 14A. The Tribunal remanded this issue back to the AO for de novo consideration, directing the AO to give consequential effect based on the findings on the aforementioned issues. 4. Disallowance of Foreign Exchange Fluctuation Loss: The Tribunal considered the departmental appeal against the order of the CIT(A) deleting the disallowance of foreign exchange fluctuation loss. The Tribunal referenced its decision in the assessee's own case for the assessment year 2006-07, where it upheld the CIT(A)'s action in deleting the disallowance. The Tribunal found that the foreign exchange loss was incurred as a business loss related to working capital requirements, and therefore, it was allowable. Consequently, the Tribunal dismissed the revenue's appeal on this issue. Conclusion: The Tribunal allowed the assessee's appeals for the assessment years 2007-08, 2008-09, and 2009-10 for statistical purposes, remanding the issues back to the AO for reconsideration. The Tribunal dismissed the revenue's appeal for the assessment year 2008-09 and treated the revenue's appeal for the assessment year 2009-10 as allowed for statistical purposes.
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