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2021 (7) TMI 1389 - AT - Income TaxIncome from other sources - Interest earned on FD made out of unutilised grants - HELD THAT - As decided in own case 2021 (6) TMI 212 - ITAT MUMBAI Government directive which has been relied upon by him is duly applicable for the current assessment year. As per the said direction the interest on unutilised grant has to be treated a part of the grant itself. Hence it cannot be subject to tax by the Revenue. Disallowance revenue grant received by the assessee company - HELD THAT - We noted that this revenue grant in aid is already covered by Tribunal s decision in assessee s own case 2021 (6) TMI 212 - ITAT MUMBAI for earlier assessment years. The facts being similar and Revenue now before us could not point out any different in facts or legal position. Nothing contrary was brought to our notice we uphold the order of CIT(A). This issue of Revenue s appeal is dismissed. Bad debts written off disallowed - HELD THAT - DR could not controvert the finding of CIT(A) but argued that the assessee has made mere provision for bad debts which is not deductible and for this she relied on the assessment order. Before us assessee stated one fact that the assessee has obliterated the provision that bad debts in the books of accounts by reducing the same from balance of debtors and had shown the net balance of debtors on the asset side of the balance sheet. He stated that the issue is squarely covered by the decision Vijaya Bank 2010 (4) TMI 46 - SUPREME COURT and also Jain insurance corporation of India 2000 (9) TMI 13 - BOMBAY HIGH COURT wherein it is observed that writing off is a technical term and means raising a debit entry to the P L Account and the corresponding credit may be given either to debtors or to reserve for bad debts. Further the court has observed that where the assessee has debited P L account and has credited reserve for bad debts the same would be sufficient for claiming deduction under section 36(1)(vii) of the Act.This issue of Revenue s appeal is dismissed. Employees contribution to provident fund beyond due date of respective statute - HELD THAT - As decided in SALZGITTER HYDRAULICS PRIVATE LIMITED 2021 (6) TMI 1059 - ITAT HYDERABAD provident fund contribution received from employees deposited by assessee before the due date of filing of return under section 139(1) of the Act but after the due date prescribed in the relevant statute of provident Fund Act is to be allowed despite the fact that legislation has not only incorporated necessary amendment in section 36(1)(va) of the Act by inserting explanation 2 as well as explanation 5 to section 43B vide Finance Act 2021 with effect from 01.04.2021 wherein it is clarified that the provisions of section shall not apply and shall be deemed to have been applied to a sum received by assessee from any of his employees covered by section 2(24)(x) of the Act because this explanations are prospective and not retrospective. We are of the view that the legislative amendments incorporated in section 36(1)(va) and 43B of the Act by the Finance Act 2021 by inserting explanation 2 and explanation 5 to the respective provisions are prospective in application with effect from 01.04.2021. Hence we find no infirmity in the order of Commissioner of Income Tax (Appeals). Hence the appeal of the Revenue is dismissed. Penalty u/s 271(1)(c) - addition of interest on unutilized grant in aid - HELD THAT - As quantum addition is deleted hence the penalty will not survive. Therefore CIT(A) has rightly deleted the penalty and we confirm the same. The appeal of Revenue is dismissed.
Issues Involved:
1. Deletion of disallowance of interest credited to grant in aid. 2. Deletion of disallowance of revenue grant for publicity. 3. Deletion of disallowance of bad debts written off. 4. Deletion of disallowance of employees' contribution to provident fund beyond the due date. 5. Deletion of penalty levied under section 271(1)(c) related to interest on grant in aid. 6. Deletion of addition of interest income from fixed deposits made from grant in aid. Issue-wise Detailed Analysis: 1. Deletion of Disallowance of Interest Credited to Grant in Aid: The first issue concerns the deletion of the disallowance made by the Assessing Officer (AO) by treating the interest credited to the grant in aid as income chargeable to tax under the head "income from other sources." The CIT(A) deleted the addition, relying on the order for AY 2007-08, where it was held that the interest earned on FDs made out of unutilized grants cannot be treated as income. The Tribunal upheld the CIT(A)'s order, stating that the interest on unutilized grant is to be treated as part of the grant itself and thus not taxable. This decision was supported by various case laws and the principle of consistency. 2. Deletion of Disallowance of Revenue Grant for Publicity: The second issue pertains to the deletion of disallowance of ?9,02,84,251/- related to the revenue grant for publicity. The CIT(A) ruled in favor of the assessee, following the decision for AY 2007-08. The Tribunal upheld this decision, emphasizing the principle of consistency and noting that the accounting policy for revenue grants, which had been accepted in previous years, was followed. The unspent amount of the grant, which is to be used for publicity, cannot be considered as income. 3. Deletion of Disallowance of Bad Debts Written Off: The third issue involves the deletion of disallowance of ?4,99,08,222/- related to bad debts written off. The CIT(A) deleted the disallowance, relying on the Supreme Court decision in TRF Ltd. vs. CIT, which held that the mere write-off of the debt in the books of accounts suffices for claiming deduction of bad debts. The Tribunal confirmed this decision, noting that the assessee had obliterated the provision for bad debts in the books by reducing the balance of debtors. 4. Deletion of Disallowance of Employees' Contribution to Provident Fund Beyond Due Date: The fourth issue is about the deletion of disallowance of ?11,03,233/- related to employees' contribution to the provident fund paid beyond the due date prescribed under the Provident Fund Act. The CIT(A) allowed the claim, subject to verification that the payments were made before the due date of filing the return. The Tribunal upheld this decision, noting that the legislative amendments in section 36(1)(va) and 43B of the Act by the Finance Act, 2021, are prospective and not retrospective. 5. Deletion of Penalty Levied Under Section 271(1)(c) Related to Interest on Grant in Aid: The fifth issue concerns the deletion of penalty levied under section 271(1)(c) related to interest on grant in aid amounting to ?25,44,62,706/-. The CIT(A) deleted the penalty, and the Tribunal confirmed this decision, noting that the quantum addition of interest on unutilized grant in aid, in respect of which the penalty was levied, was already deleted. 6. Deletion of Addition of Interest Income from Fixed Deposits Made from Grant in Aid: The sixth issue involves the deletion of the addition of ?55,27,38,082/- on account of interest earned from fixed deposits made from grant in aid. The CIT(A) deleted the addition, following the decision for AY 2007-08. The Tribunal upheld this decision, noting that the facts and circumstances were identical to those in the earlier years and that the interest on unutilized grant is to be treated as part of the grant itself and thus not taxable. Conclusion: In conclusion, the Tribunal upheld the CIT(A)'s decisions on all issues, emphasizing the principles of consistency, reliance on judicial precedents, and the specific facts and circumstances of the case. The appeals of the Revenue were dismissed.
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