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2019 (6) TMI 1644 - AT - Income TaxCorrect head of income - income from sale of shares held as investment - business income or capital gain - HELD THAT - The Tribunal in appeal by the assessee in 2018 (12) TMI 1325 - ITAT PUNE held that the income from sale of shares as capital gains. Both the sides are unanimous in stating that the accounting treatment of shares in the books of assessee and other relevant facts in the assessment year under appeal are identical to the facts in assessment year 2006-07. Thus in view of the aforesaid decision of Co-ordinate Bench we hold that the income from sale of shares held as investment by the assessee has to be treated as capital gains. Disallowance of claim of deduction u/s. 80IA(4) - assessee had installed wind mill and claimed deduction on the income from wind mill - HELD THAT - Co-ordinate Bench of Tribunal in assessee s own case in 2018 (12) TMI 1325 - ITAT PUNE after placing reliance on the decision rendered in the case of ACIT Vs. RDS Construction Co. 2018 (4) TMI 1627 - ITAT PUNE held that the assessee is eligible to claim deduction u/s. 80IA(4) of the Act. Respectfully following the decision of Co-ordinate Bench the findings of Commissioner of Income Tax (Appeals) on this issue are reversed and ground No. 2 of the appeal is allowed. Disallowance of expenditure claimed by the assessee as repairs and maintenance - HELD THAT - A perusal of documents on record show that the expenditure incurred by the assessee is purely on account of repairs. The expenditure clearly falls within the domain of current repairs within the meaning of section 30 of the Act. Expenditure on repairs of compound wall - The addition has been made merely for the reason that in R.A. bill it has been mentioned Construction of compound wall . The contention of the assessee is that it is repair of existing compound wall. The lower authorities have observed that the assessee has failed to bring on record any documentary evidence to substantiate prior existence of compound wall. Before us also the assessee has not placed on record any documentary evidence to show existence of compound wall. In the absence of complete relevant information we deem it appropriate to restore this issue to the file of Assessing Officer for the limited purpose to ascertain from documentary evidence regarding existence of compound wall. If the assessee is able to show that the wall was in existence prior to the date of repairs the expenditure has to be allowed as revenue in nature. Disallowing expenditure is on account of installation of DG set civil work fabrication and carpentry - contention of the assessee is that the assessee had purchased new DG set for which civil work was required to be carried out for the installation. The expenditure incurred on foundation of DG set is purely revenue in nature as no enduring benefit would accrue to the assessee and no new asset has come into existence. Therefore the addition on account of foundation of DG set is held to be on revenue account. Disallowance u/s 14A r.w.r. 8D - no suo-moto disallowance made by assessee - HELD THAT - We find that the disallowance has been made under the provisions of Rule 8D(2)(iii). Undisputedly the assessee has earned dividend income and no suo-moto disallowance has been made by assessee in respect of exempt income earned. Assessing Officer while invoking the provisions of Rule 8D has not made any disallowance in respect of interest expenditure. Therefore the contention of assessee that own interest free funds of the assessee are much more than the investment made would not have any bearing in respect of disallowance made under Rule 8D(2)(iii). Accordingly ground of the appeal is without merit and hence dismissed. Set off of losses arising from business of wind mill - HELD THAT - A perusal of impugned order shows that the Commissioner of Income Tax (Appeals) while upholding the findings of Assessing Officer has not given specific findings on the issue of claim of deduction. Even the Assessing Officer while passing assessment order has given cryptic findings for disallowing the loss while computing the assessee s claim of deduction u/s. 80IA. We are of considered view that this issue needs revisit to the file of Assessing Officer. The Assessing Officer shall decide this issue de novo after affording reasonable opportunity of hearing to the assessee in accordance with law. Addition of written off bad debts - AO disallowed the entire amount primarily on the ground that the assessee has not shown the debts as irrecoverable - HELD THAT - As decided in case of TRF Ltd. 2010 (2) TMI 211 - SUPREME COURT it is a well settled law that the assessee need not established that the debt has in fact become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of assessee. It is not disputed by the Department that the amounts written off as bad debts were duly reflected in the books of assessee in the past and they were written off during the assessment year under appeal. Thus in view of law laid down by the Hon ble Apex Court we find merit in the contentions of assessee. - Decided in favour of assessee.
Issues Involved:
1. Nature of income from the sale of shares. 2. Disallowance of deduction under section 80IA. 3. Disallowance of expenditure on repairs and maintenance. 4. Disallowance under section 14A. 5. Disallowance of bad debts written off. Issue-wise Detailed Analysis: 1. Nature of Income from Sale of Shares: The primary issue was whether the income from the sale of shares should be treated as business income or capital gains. The assessee contended that the shares were held as investments, and hence, the income should be treated as capital gains. The Tribunal noted that in the previous assessment year (2006-07), the same issue was adjudicated in favor of the assessee, where the income from the sale of shares was treated as capital gains. The Tribunal reiterated that there is no legal bar on the conversion of stock-in-trade to investments and vice versa, as long as the pattern is maintained consistently. Hence, the income from the sale of shares was to be treated as capital gains, reversing the findings of the lower authorities. 2. Disallowance of Deduction under Section 80IA: The assessee claimed a deduction under section 80IA for profits from the windmill business. The Assessing Officer disallowed the claim on the grounds that prior year losses from the eligible business had to be considered while computing the current year's income. The Tribunal referred to its earlier decision in the assessee's case for the assessment year 2006-07, where it was held that the assessee is eligible for the deduction under section 80IA. The Tribunal reversed the findings of the Commissioner of Income Tax (Appeals) and allowed the claim for deduction under section 80IA. 3. Disallowance of Expenditure on Repairs and Maintenance: The assessee incurred expenses on repairs and maintenance, including re-roofing with polycarbonate sheets, repairing a compound wall, and installation of a DG set. The Tribunal held that the re-roofing expenditure was of a revenue nature as no new asset of enduring benefit was created. However, the issue of the compound wall repair was remanded back to the Assessing Officer to verify the existence of the wall prior to repairs. The expenditure on the foundation of the DG set was deemed revenue in nature, as it did not result in a new asset. Thus, the Tribunal partly allowed the assessee's claim on this issue. 4. Disallowance under Section 14A: The Tribunal addressed the disallowance under section 14A concerning the expenditure incurred to earn exempt income (dividends). For the assessment year 2008-09, the Tribunal upheld the disallowance made under Rule 8D(2)(iii), noting that the assessee had not made any suo-moto disallowance. The Tribunal dismissed the assessee's contention that sufficient interest-free funds were available, as the disallowance was not related to interest expenditure. Similarly, for the assessment years 2010-11 and 2011-12, the Tribunal upheld the disallowance under section 14A, affirming that the Assessing Officer had recorded the necessary satisfaction before making the disallowance. 5. Disallowance of Bad Debts Written Off: The assessee claimed a deduction for bad debts written off, which the Assessing Officer disallowed on the grounds that the debts were not shown as irrecoverable. The Tribunal referred to the Supreme Court's decision in TRF Ltd. vs. CIT, which established that it is sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee. The Tribunal found that the amounts written off were reflected in the books for several years and reversed the disallowance, allowing the assessee's claim for bad debts. Conclusion: The appeals were partly allowed, with the Tribunal providing relief on several key issues, including the treatment of income from the sale of shares as capital gains, the allowance of deductions under section 80IA, and the recognition of certain expenditures as revenue in nature. However, disallowances under section 14A were upheld, and the issue of the compound wall repair was remanded for further verification.
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