2016 (3) TMI 1372 - AT - Income Tax

Disallowing lease equalization charges debited to the Profit Loss Account - HELD THAT - We find that an identical issue had come up in the earlier years, wherein this issue has been sent back by the Tribunal to the file of the AO 2013 (11) TMI 64 - ITAT MUMBAI Disallowing the claim of assessee u/s 35D - HELD THAT - In other years also, similar view has been taken by the Tribunal and this issue has been sent back to the file of the AO, therefore, in this year also, we find it appropriate to sent this issue back to the file of the AO and direct him to follow the directions given in the order of the Tribunal of earlier years and re-decide this issue after giving adequate opportunity of hearing to the assessee. Thus, this ground is allowed for statistical purposes. Allocation of interest attributable to earning income u/s 10(23G) - HELD THAT - We find that the issue involved in this year also requires re-look to ascertain the correct facts, and therefore, this issue is sent back to the file of AO. The AO is directed to follow the directions given in the order of the Tribunal of earlier years 2014 (12) TMI 881 - ITAT MUMBAI and he shall give adequate opportunity of hearing to the assessee to bring the correct facts on record. Allocation of administrative expenses attributable to earning income u/s. 10(23G) - HELD THAT - Issue involved in these grounds is identical to the issue involved in ground no.4 above. It is further noted by us that this issue has also been sent back by the Tribunal in the earlier year to the file of the AO for verification of facts. Therefore, respectfully following the order of the Tribunal of earlier years, we send this issue back to the file of the AO and direct him to follow the directions given in the order of the earlier years and re-decide this issue after giving adequate opportunity of hearing to the assessee. Thus, with these directions this issue is sent back to the file of the AO and these grounds may be treated as allowed for statistical purposes. Deduction u/s. 80M - HELD THAT - This issue has also been sent back by the Tribunal in A.Ys 1999-2000 to 2001-02 and also in A.Y 1998-99 for verifying the net worth of the assessee. Therefore, respectfully following the judgment of the Tribunal, we send this issue back to the file of the AO and direct him to follow the directions given in the orders of the Tribunal of earlier years and re-decide this issue after giving adequate opportunity of hearing to the assessee MAT Computation - Disallowance of provision for diminution in the value of the securities while computing the book profit u/s. 115JB - HELD THAT - No distinction has been made on facts by the parties, and therefore, respectfully following the judgment of the Tribunal in the earlier year, we send this issue back to the file of the AO and direct him to follow the directions of the Tribunal in its order given in the earlier year and re-decide this issue. Addition made on account of club expenses - HELD THAT - In this order 2015 (5) TMI 600 - ITAT MUMBAI the Tribunal has decided this issue in favour of the assessee in principle, but restored it back for the limited purpose of verification. Depreciation on leased assets - HELD THAT - Allowability of depreciation on leased assets has now been settled in favour of the assessee by the decision of the Hon ble Supreme Court in the case of ICDS Limited 2013 (1) TMI 344 - SUPREME COURT Addition made on account of provision for non-performing assets to the book profit u/s. 115JA - HELD THAT - We decide this issue against the assessee and in favour of the revenue and hold that the provision for non-performing assets, being a provision for diminution in the value of the asset, is required to be added to the book profits. Thus, these grounds are treated as allowed in favour of the revenue.

Summary

Issues Involved:
1. Disallowance of lease equalization charges.
2. Disallowance of claim u/s 35D.
3. Allocation of interest attributable to earning income u/s 10(23G).
4. Allocation of administrative expenses attributable to earning income u/s 10(23G).
5. Denial of deduction u/s 80M.
6. Disallowance of provision for diminution in the value of securities while computing book profit u/s 115JB.
7. Deletion of addition made on account of club expenses.
8. Allowing depreciation on leased assets.
9. Deletion of addition made on account of provision for non-performing assets to the book profit u/s 115JA.
10. Deletion of addition made on account of lease equalization reserve to book profit u/s 115JA.
11. Interest u/s 234D.

Detailed Analysis:

Disallowance of Lease Equalization Charges:
The assessee challenged the disallowance of lease equalization charges debited to the Profit & Loss Account, claiming it as an allowable deduction u/s 37(1) of the Income Tax Act. The Tribunal noted that this issue had been previously addressed in the assessee's favor for earlier assessment years. The Tribunal directed the AO to re-examine the issue, considering the difference between the annual lease charge and depreciation allowed under the Income Tax Act. This issue was restored to the AO for fresh consideration.

Disallowance of Claim u/s 35D:
The assessee contested the disallowance of Rs. 18,92,153/- claimed u/s 35D. The Tribunal observed that this issue had been remanded to the AO in earlier years to determine whether the assessee's activities amounted to an industrial undertaking. The Tribunal directed the AO to re-examine the issue following the directions from earlier orders, allowing the assessee an opportunity to present its case.

Allocation of Interest Attributable to Earning Income u/s 10(23G):
The assessee disputed the allocation of Rs. 32,32,00,000/- as interest attributable to earning income u/s 10(23G). The Tribunal noted that in previous years, the issue was remanded to the AO for verification of the assessee's net worth. The Tribunal directed the AO to re-examine the facts and verify the net worth, allowing the assessee to provide necessary details.

Allocation of Administrative Expenses Attributable to Earning Income u/s 10(23G):
The assessee challenged the allocation of Rs. 52,00,000/- as administrative expenses attributable to earning income u/s 10(23G). The Tribunal observed that this issue was similar to the interest allocation issue and had been remanded to the AO in earlier years. The Tribunal directed the AO to re-examine the issue following the directions from earlier orders.

Denial of Deduction u/s 80M:
The assessee contested the denial of deduction of Rs. 4.45 crores u/s 80M. The Tribunal noted that this issue had been remanded to the AO in earlier years to verify the net worth of the assessee. The Tribunal directed the AO to re-examine the issue following the directions from earlier orders, allowing the assessee an opportunity to present its case.

Disallowance of Provision for Diminution in the Value of Securities While Computing Book Profit u/s 115JB:
The assessee challenged the disallowance of Rs. 1,77,50,886/- for diminution in the value of securities while computing book profit u/s 115JB. The Tribunal observed that this issue had been remanded to the AO in earlier years to verify whether the securities formed part of the assessee's stock-in-trade. The Tribunal directed the AO to re-examine the issue following the directions from earlier orders.

Deletion of Addition Made on Account of Club Expenses:
The revenue challenged the deletion of Rs. 6,66,063/- on account of club expenses. The Tribunal observed that this issue had been decided in favor of the assessee in earlier years but remanded for verification of facts. The Tribunal directed the AO to verify the facts and re-examine the issue, allowing the assessee an opportunity to present its case.

Allowing Depreciation on Leased Assets:
The revenue contested the allowance of depreciation on leased assets. The Tribunal noted that this issue had been decided in favor of the assessee in earlier years, following the Supreme Court's decision in ICDS Limited. The Tribunal dismissed the revenue's grounds, upholding the allowance of depreciation.

Deletion of Addition Made on Account of Provision for Non-Performing Assets to the Book Profit u/s 115JA:
The revenue challenged the deletion of Rs. 9,36,22,902/- on account of provision for non-performing assets to the book profit u/s 115JA. The Tribunal noted that this issue had been decided against the assessee in earlier years, following the retrospective amendment to section 115JB. The Tribunal upheld the addition to the book profits.

Deletion of Addition Made on Account of Lease Equalization Reserve to Book Profit u/s 115JA:
The revenue contested the deletion of Rs. 88,69,66,465/- on account of lease equalization reserve to book profit u/s 115JA. The Tribunal observed inconsistencies in the CIT(A)'s order and noted that a similar issue was remanded to the AO in the assessee's appeal. The Tribunal directed the AO to re-examine the issue following the directions from the assessee's appeal.

Interest u/s 234D:
The revenue's ground regarding interest u/s 234D was dismissed as consequential.

Conclusion:
The assessee's appeal was allowed for statistical purposes, and the revenue's appeal was partly allowed for statistical purposes. The Tribunal directed the AO to re-examine several issues, allowing both parties an opportunity to present their cases and provide necessary details and evidence.