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2016 (2) TMI 1299 - AT - Income TaxAddition on account of notional income under the head Income from House Property - HELD THAT - It is admitted before us that fact and circumstances of the issue involved is identical to earlier years. A perusal of order passed by the jurisdictional high court revels that the notional addition has been deleted by their Lordships 2010 (11) TMI 798 - DELHI HIGH COURT - Respectfully following the decision of jurisdictional high court above ground No.1 of the Revenue appeal is dismissed. Disallowance of interest expenditure claimed by the assessee - as claimed by the assessee that during the year under consideration no interest cost was debited as expenditure in the Profit Loss Account and hence there was no such claim made in the return of income. - HELD THAT - CIT-A correctly find that during the FY relevant to the AY under consideration, the appellant company has not paid any interest to the banks as stated by the ld. AO. The finance charges debited to the profit loss a/c pertains to various services extended by the bankers to the appellant company. In such circumstances, no disallowance on account of advances made was liable to be made - After careful consideration of the issue we do not find any infirmity in the view adopted by CIT(A) in deleting the addition - Decided in favour of assessee. Addition on account of extra depreciation claimed on computer peripherals - Case records show that during the year under consideration assessee has claimed depreciation on computer peripherals at the rate of 60%, however, this was restricted by the Ld. AO to the rate of 15% - HELD THAT - CIT(A) has deleted the disallowance by following the decision of Hon'ble Delhi High Court in the case of BSES Yamuna Power Ltd. 2010 (8) TMI 58 - DELHI HIGH COURT . After careful consideration of the case records we find no reason not to uphold the view taken by CIT(A) by following decision of jurisdictional high court noted above. As such ground No.3 of Revenue Appeal is also dismissed. Disallowance u/s 14A read with Rule 8D - HELD THAT - We principally agree with the said contention of the assessee. The AO should have first examined the books of accounts of the assessee and only thereafter if he was not satisfied with the claimed by the assessee that it had not incurred any expenditure for the purpose of any exempt income that he could have invoked provisions of Rule 8D. In the instant case Ld. AO has failed to adopt this mandatory procedure. It is also seen that even the assessee has not been able to substantiate its claim before the lower authority. In our considered opinion this issue requires fresh examination at the end of the AO. Accordingly we set aside the order of Ld. CIT(A) on this issue and direct the AO to examine this issue afresh in light of discussions made. Disallowance on account of license fees paid by the assessee to New Delhi Municipal Corporation (NDMC) - HELD THAT - As exonerates the claim made by the assessee. As per interim order dated 06th February 2002 assessee has been making payments to NDMC from FY 2001-02 onwards. For all these years i.e FYs 2001-02 FY 2013-14 even after payment of ₹ 75 lakhs per month initially and ₹ 1 crore per month thereafter the final liability determined in year 2015 was much more. Contingency if at all during FYs 2001-02 to 2013-14 was vis a vis ₹ 150.09 cr which finally became determinable in year 2015. However for the year under consideration the payment of ₹ 12 cr was a confirmed liability, which NDMC accepts as not being subject to further litigation before Delhi High Court. Considering the peculiar facts of the present case we therefore hold that the appellant was entitled to claim deduction of ₹ 12 crores paid by it to NDMC as License Fees under License Deed dated 14th July 1984. Decisions relied upon by the Ld AO in his order of assessment are also not relevant since these are decisions wherein certain provisions made in books of accounts were sought to be claimed as a deduction, per contrary this is a case where liability actually being discharged is being claimed as deduction. We accordingly hold that appellant merits succeeding in its claim. Reopening of assessment u/s 147 - HELD THAT - Facts relied upon by the Ld AO in support of his reasons to belief i.e note no. 2(iii) was duly considered by him during the course of original assessment. No fresh facts have also come to the knowledge of Ld AO justifying a fresh initiation of action u/s 147 of the Act. It is trite law that when a specific query raised by the AO is replied to by the assessee during the course of original assessment then it cannot be said that there is any failure or omission attributable to the assessee. As relying on HARYANA ACRYLIC MANUFACTURING COMPANY VERSUS COMMISSIONER OF INCOME-TAX IV AND ANOTHER 2008 (11) TMI 2 - DELHI HIGH COURT we concur with the submission made by the appellant that the assumption of jurisdiction u/s 147 of the Act in this instant case by issuance of notice u/s 148 dated 26th February 2010 is bad in law
Issues Involved:
1. Deletion of addition on account of notional income from house property. 2. Deletion of disallowance of interest on loan and advances. 3. Deletion of addition on account of extra depreciation claimed on computer peripherals. 4. Disallowance under Section 14A read with Rule 8D. 5. Disallowance of license fee paid to NDMC. 6. Levy of interest under Sections 234B and 234D. 7. Validity of reassessment proceedings under Section 147. Detailed Analysis: 1. Deletion of Addition on Account of Notional Income from House Property: The revenue was aggrieved by the deletion of an addition of Rs. 6,96,49,795/- on account of notional income under the head "Income from House Property." The AO had made this addition based on the annual letting value of the West Tower, which was sub-licensed by the assessee. The CIT(A) deleted this addition following the Tribunal's order for earlier assessment years, which was upheld by the jurisdictional High Court. The Tribunal noted that the facts and circumstances were identical to earlier years and followed the High Court's decision, dismissing the revenue's appeal. 2. Deletion of Disallowance of Interest on Loan and Advances: The AO disallowed Rs. 7,33,602/- on account of interest expenditure, observing that the assessee charged lower interest from M/s Pure Drinks Ltd. while paying higher interest to banks. The CIT(A) deleted this disallowance, noting that the finance charges debited to the Profit & Loss Account did not include interest cost. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the view adopted. 3. Deletion of Addition on Account of Extra Depreciation Claimed on Computer Peripherals: The AO restricted the depreciation on computer peripherals to 15% instead of the claimed 60%. The CIT(A) deleted this disallowance, following the Delhi High Court's decision in BSES Yamuna Power Ltd. The Tribunal upheld the CIT(A)'s decision, noting the jurisdictional High Court's consistent view in similar cases. 4. Disallowance under Section 14A Read with Rule 8D: The AO disallowed Rs. 9,43,232/- under Section 14A read with Rule 8D for earning exempt income. The CIT(A) confirmed this disallowance. The Tribunal agreed with the assessee's contention that the AO did not record dissatisfaction with the assessee's claim of not incurring any expenditure for earning exempt income. The Tribunal set aside the CIT(A)'s order and directed the AO to examine the issue afresh. 5. Disallowance of License Fee Paid to NDMC: The AO disallowed Rs. 12,00,00,000/- paid to NDMC as license fee, treating it as a contingent liability. The CIT(A) upheld this disallowance, noting the absence of a valid agreement between the assessee and NDMC. The Tribunal, however, found that the payment was made under the High Court's interim order and was not contingent. The Tribunal allowed the assessee's claim, noting the consistent allowance of similar claims in earlier years and subsequent assessments. 6. Levy of Interest under Sections 234B and 234D: The levy of interest under Sections 234B and 234D was held to be consequential, requiring no separate adjudication. 7. Validity of Reassessment Proceedings under Section 147: The reassessment proceedings for AY 2003-04 were challenged on the grounds of change of opinion and absence of failure to disclose material facts. The Tribunal found that the issue of license fee was already examined during the original assessment. The reassessment was held to be based on a change of opinion, rendering it invalid. The Tribunal allowed the assessee's appeal, setting aside the reassessment proceedings. Conclusion: - Appeals by revenue in ITA Nos. 1107/Del/2012 and 218/Del/2013 were dismissed. - Appeal by assessee in ITA No. 787/Del/2012 was partly allowed for statistical purposes. - Appeals by assessee in ITA Nos. 386/Del/2013 and 771/Del/2012 were allowed.
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