2019 (11) TMI 1368 - AT - Income Tax

Disallowance of the claim of the depreciation in respect of residential properties - 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? - HELD THAT - We have observed that the Tribunal while disposing off appeal for the A.Y. 2005-06 to A.Y. 2007-08 2019 (4) TMI 1809 - ITAT MUMBAI directed the Assessing Officer to allow the depreciation as claimed by the assessee on residential premises however it is also directed to verify the fact as to whether deduction U/s.24(a) was claimed by the assessee or not and if it is claimed the same is to be disallowed. As the facts being identical respectfully following the said decision we direct the Assessing Officer to carry out similar exercise as directed by the Tribunal in the order for the A.Y. 2005-06 to A.Y. 2007-08 and decide accordingly. Disallowance of amortization of premium paid on leasehold land - HELD THAT - As decided in own case 2019 (4) TMI 1809 - ITAT MUMBAI amortization of lease premium over the lease period was capital in nature and hence not allowable to the assessee. The ground of assessee s appeal stands dismissed. Disallowance u/s. 14A r.w.s 8D(2)(iii) - HELD THAT - As decided in own case we restore this issue to the file of the Assessing Officer to follow the directions of the Tribunal for the A.Y. 2004-05 to 2007-08 2019 (4) TMI 1809 - ITAT MUMBAI and recompute the disallowance in accordance with the directions therein. We also direct the Assessing Officer to recompute the disallowance keeping in view the decision of the special bench of Delhi in the case of ACIT v. Vireet Investments Private Limited 2017 (6) TMI 1124 - ITAT DELHI Disallowance of lease equalization charges - HELD THAT - As decided in own case only real income i.e. finance income should be taxed for the purpose of Income Tax which can be arrive only after applying such method which is prescribed in the guidance note. Therefore we are of the considered view that prima-facie the issue is settled by the decision of the Hon ble Supreme Court however consistent with view taken by the Co-ordinate Bench for earlier years we restore this issue to the file of the AO and direct him to decide computation of lease equalisation reserve in accordance with the direction of Hon ble Supreme Court in the case of Virtual Soft Systems Ltd. 2018 (4) TMI 1472 - SUPREME COURT Disallowance of depreciation on toll road - HELD THAT - As decided in own case as already directed the Ld. AO to tax the estimated income from the toll road as a logical consequence the assessee becomes entitled to claim the depreciation on the toll road. After considering the cited decisions relied upon by respective representative we find that since the assessee is not the owner of the toll road depreciation thereupon could not be allowed to him. However depreciation on the same as intangible assets being any other business or commercial rights of similar nature as per Section 32 would be available to the assessee in terms of decision of Special Bench of the Tribunal Hyderabad rendered in Progressive Constructions Ltd. Vs. ACIT 2017 (3) TMI 1167 - ITAT HYDERABAD Respectfully following the cited decision we direct so. The Ld. AO is directed to re-compute the same and grant depreciation thereupon as intangible assets. Addition based on the information of AIR transaction - HELD THAT - This matter has to go back to the Assessing Officer in view of the submission that the assessee has not entered into any transaction in respect of the addition made to the extent of Rs..2.41 Crores. Thus we restore this issue to the file of the Assessing Officer with a direction to Assessing Officer to furnish necessary information to the assessee so as to reconcile the transactions by the assessee. The Assessing Officer shall provide complete details in respect of the transactions for the purpose of the reconciliation by the assessee. Disallowance of interest on loan given to IL FS Employees Welfare Trust - HELD THAT - It is the finding of the Ld. CIT(A) 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 of the Ld. CIT(A) hence the action of the Ld.CIT(A) is sustained. Ground raised by the assessee is rejected. Software development expenditure - allowable revenue expenditure No disallowance u/s. 40(a)(ia) for short deduction of TDS - See M/S. SK. TEKRIWAL 2011 (10) TMI 10 - ITAT KOLKATA Disallowance of claim for deduction u/s. 36(1)(viii) - HELD THAT - As per sec.36(l)(viii) the appellant is eligible if it fulfills two conditions i.e. one is appellant should be specified entity and 2nd condition is extend loans for infrastructural facilities for a long term basis i.e. above 5 years. I had examined appellant s detailed submissions produced before me alongwith the loans extended by the appellant. The appellant had advanced loans for infrastructural facilities to group entities which are developing the infrastructural facilities in separate company. This separate company formed as group entity develops infrastructural facility and income from this accrues to this group entities. The appellant s extended loan for development of infrastructural facilities on long term basis which is the 2nd condition which appellant has to fulfill to claim sec.36(l)(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).

Summary

Issues Involved:
1. Disallowance of Depreciation on Residential Properties
2. Disallowance of Amortization of Premium Paid on Leasehold Land
3. Disallowance under Section 14A
4. Disallowance of Lease Equalization Charges
5. Disallowance of Depreciation on Toll Road
6. Addition of Notional Interest Income from Toll Road
7. Disallowance under Section 14A while Computing Book Profits under Section 115JB
8. Levy of Interest under Sections 234B and 234D
9. Addition based on AIR Transactions
10. Disallowance of Interest on Loan to IL&FS Employees Welfare Trust
11. Disallowance of Software Development Expenditure
12. Disallowance of Payments to Clubs
13. Disallowance under Section 40(a)(ia) for Short Deduction of TDS
14. Disallowance of Deduction under Section 36(1)(viii)
15. Adjustment of Lease Equalization Reserve while Computing Book Profits under Section 115JB

Detailed Analysis:

1. Disallowance of Depreciation on Residential Properties:
The Tribunal allowed the assessee's claim for depreciation on residential properties, following its own decisions for previous assessment years (A.Y. 2004-05 to 2007-08). The Tribunal directed the Assessing Officer to verify if the assessee claimed standard deduction under Section 24(a) and to disallow depreciation if such deduction was claimed.

2. Disallowance of Amortization of Premium Paid on Leasehold Land:
The Tribunal upheld the disallowance of amortization of premium paid on leasehold land as capital in nature, following its own decisions for previous years (A.Y. 2004-05 to 2007-08).

3. Disallowance under Section 14A:
The Tribunal restored the issue to the Assessing Officer to re-compute the disallowance under Section 14A, considering the principles laid down in previous decisions and the Special Bench decision in ACIT v. Vireet Investments Private Limited.

4. Disallowance of Lease Equalization Charges:
The Tribunal restored the issue to the Assessing Officer to decide afresh, considering the method prescribed by the ICAI and the decision of the Hon'ble Supreme Court in the case of Virtual Soft Systems Ltd.

5. Disallowance of Depreciation on Toll Road:
The Tribunal directed the Assessing Officer to allow depreciation on the toll road as intangible assets, following its own decisions for previous years.

6. Addition of Notional Interest Income from Toll Road:
The Tribunal restored the issue to the Assessing Officer to follow the directions given in previous years (A.Y. 2004-05 to 2007-08) and decide accordingly.

7. Disallowance under Section 14A while Computing Book Profits under Section 115JB:
The Tribunal directed the Assessing Officer to re-compute the disallowance under Section 14A while computing book profits under Section 115JB, following the Special Bench decision in ACIT v. Vireet Investments Private Limited.

8. Levy of Interest under Sections 234B and 234D:
The Tribunal held that the levy of interest under Sections 234B and 234D is consequential and restored the issue to the Assessing Officer to decide in accordance with law.

9. Addition based on AIR Transactions:
The Tribunal restored the issue to the Assessing Officer for verification, directing the Assessing Officer to provide necessary information to the assessee for reconciliation of transactions.

10. Disallowance of Interest on Loan to IL&FS Employees Welfare Trust:
The Tribunal upheld the disallowance to the extent of Rs. 11 Crores, as the assessee could not substantiate that the loan was for business purposes.

11. Disallowance of Software Development Expenditure:
The Tribunal upheld the decision of the CIT(A) allowing the software development expenditure as revenue in nature, following its own decisions for previous years.

12. Disallowance of Payments to Clubs:
The Tribunal directed the Assessing Officer to delete the disallowance of payments to clubs, following the decision of the Hon'ble Bombay High Court in the assessee's own case for A.Y. 1997-98.

13. Disallowance under Section 40(a)(ia) for Short Deduction of TDS:
The Tribunal held that there cannot be any disallowance under Section 40(a)(ia) for short deduction of TDS, following the decision of the Calcutta High Court in the case of CIT v. S.K. Tekriwal.

14. Disallowance of Deduction under Section 36(1)(viii):
The Tribunal upheld the decision of the CIT(A) allowing the deduction under Section 36(1)(viii), as the assessee fulfilled the conditions of the section.

15. Adjustment of Lease Equalization Reserve while Computing Book Profits under Section 115JB:
The Tribunal restored the issue to the Assessing Officer to re-compute the book profits, following the directions given in previous years and the decision of the Hon'ble Supreme Court in the case of Virtual Soft Systems Ltd.

Conclusion:
The Tribunal's judgment addressed multiple issues raised by both the assessee and the revenue, providing clear directions to the Assessing Officer for re-computation and verification in accordance with previous decisions and relevant judicial precedents. The appeals were partly allowed, with several issues restored to the Assessing Officer for fresh adjudication.