9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (4) TMI 1559 - AT - Income TaxEligibility of revised return u/s 139(5) - time limit to file revised return - whether return null and void since assessee company has filed return of income u/s 139(1) but filed the return of loss u/s 139(3) - as assessee company filed the original return of income u/s 139(1) with a taxable income and revised it to a loss return and the same can be possible u/s 139(3) but not u/s 139(5) rws 139(1) - HELD THAT - In the present case, the original return was filed on 30.09.2009 i.e. within the time available u/s 139 (1) and the revised return was filed on 28.12.2010 i.e. within the time available u/s 139 (5). We hold that revised return is valid but carry forward of loss is rejected in view of the submission of the learned AR of the assessee. Additional grounds stand partly allowed. Reduction in turnover - assessee is following Percentage of Completion Method (POCM) - HELD THAT - Having accepted that the revised return is valid subject to the rider that carry forward of loss, if any, is not allowable, it is proper to examine the veracity of the assessee s claim in the revised P/L Account in respect of reduction in turnover but as per the assessment order, this claim was summarily rejected by the A.O. with the observation that the assessee is following Percentage of Completion Method (POCM) and the income shown in the original return is in line with POCM without giving any specific finding about the claim of the assessee that the turnover shown in the revised return is by following correct POCM. Hence, we restore the matter back to the A.O. for a fresh decision by way of a speaking order as to what should be the turnover of the present year as per correct POCM and AS 7 if found applicable. Disallowance u/s 14A - HELD THAT - As in the present year, Rule 8D is applicable. As per this rule, if the A.O. can show direct nexus between interest expenditure and investment in shares than entire such interest has to be disallowed. Similarly, if the assessee can show that part of whole interest is relatable to earning of taxable income than such interest expenditure cannot be considered for Rule 8D. But the remaining interest expenditure has to be proportionately disallowed as per Rule 8D. Learned CIT (A) in Para 4.6 has held that substantial portion of interest is on bank overdrafts, debentures and other bank charges and these cannot be stated as being not relatable to the business income - merely because an interest is relatable to the business income is not sufficient to take it out from the applicability of Rule 8D - it has to be shown that it is fully relatable to earning of taxable income. The finding of CIT (A) does not say that this is fully relatable to earning of taxable income. Hence, on this aspect, the order of CIT (A) is reversed and that of the A.O. is restored. Ground No. 3 is allowed. Regarding Ground No. 4, we find that in Para 4.7 of his order, learned CIT (A) has asked the A.O. to recomputed the disallowance under Rule 8 D (2) (iii) after considering the correct figures as per balance Sheet. In our considered opinion, there is no infirmity in this direction of CIT (A). Therefore, Ground 4 is rejected. Disallowance of interest u/s 36 (1) (iii) - interest free advances to sister concern - sufficiency of own funds - HELD THAT - As own interest free funds on both these dates i.e. 31.03.2009 and 31.03.2008 is in excess of interest free advances and by respectfully following the tribunal order cited by the learned AR of the assessee having been rendered in the case of M/s Kems Auto Components Ltd. 2016 (9) TMI 1606 - ITAT BANGALORE and the Judgment of Reliance Utilities Power Ltd. ( 2009 (1) TMI 4 - BOMBAY HIGH COURT we decline to interfere in the order of CIT (A) on this issue. These grounds are rejected.
Issues Involved
1. Validity of the revised return filed under Section 139(5). 2. Deletion of addition made by the AO on account of low contract revenue. 3. Re-computation of disallowance under Rule 8D(2)(iii) of the IT rules. 4. Deletion of disallowance of interest under Section 36(1)(iii). Detailed Analysis 1. Validity of the Revised Return Filed Under Section 139(5): The Revenue argued that the revised return filed by the assessee should be treated as null and void, citing the case of Karnataka Forest Development Corp. Ltd. The Revenue contended that the assessee filed the original return under Section 139(1) but revised it to a loss return, which should only be permissible under Section 139(3). The Tribunal noted that the original return was filed within the time allowed under Section 139(1) and the revised return was filed within the time allowed under Section 139(5). The Tribunal held that the revised return is valid but rejected the carry forward of loss, noting that the assessee was not serious about it as the period of 8 years had expired. 2. Deletion of Addition Made by the AO on Account of Low Contract Revenue: The Revenue challenged the deletion of an addition of ?29,00,71,247 made by the AO due to low contract revenue. The Tribunal found that the reduction in turnover was only 6.96% and not 750% as claimed by the Revenue. The Tribunal restored the matter back to the AO for a fresh decision by way of a speaking order to determine the correct turnover for the year as per the Percentage of Completion Method (POCM) and AS-7, if applicable. 3. Re-computation of Disallowance Under Rule 8D(2)(iii) of the IT Rules: The Revenue contended that the CIT(A) erred in directing the AO to recompute the disallowance under Rule 8D(2)(iii). The Tribunal found that the CIT(A) had correctly directed the AO to recompute the disallowance after considering the correct figures as per the balance sheet. The Tribunal upheld the CIT(A)'s direction on this issue. 4. Deletion of Disallowance of Interest Under Section 36(1)(iii): The Revenue argued that the CIT(A) erred in deleting the disallowance of interest amounting to ?23,25,95,267 under Section 36(1)(iii). The Tribunal noted that the assessee's own interest-free funds on both 31.03.2009 and 31.03.2008 were in excess of the interest-free advances given to sister concerns. Citing the Tribunal's earlier decision in the case of M/s Kems Auto Components Ltd. vs. DCIT and the judgment of the Hon'ble Bombay High Court in CIT vs. Reliance Utilities & Power Ltd., the Tribunal upheld the CIT(A)'s deletion of the disallowance. Conclusion The Tribunal partly allowed the Revenue's appeal, validating the revised return but rejecting the carry forward of loss, and restored the issue of low contract revenue back to the AO for a fresh decision. The Tribunal upheld the CIT(A)'s directions regarding the re-computation of disallowance under Rule 8D(2)(iii) and the deletion of interest disallowance under Section 36(1)(iii).
|
