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2015 (1) TMI 1499 - AT - Income TaxEffect of filing of revised return - Disallowing additional loss to be carried forward on account of revised return - as alleged revised return was not filed within time allowed u/s 139(3) - HELD THAT - The Hon ble Allahabad High Court in the case of Dhamapur Sugar Mills vs. CIT 1972 (3) TMI 16 - ALLAHABAD HIGH COURT held that the income tax act contemplates, the filing by the assessee of a correct and complete return of income. The law gives him a right to substitute and bring on record a correct and complete return of income, if he discovers any omission or wrong statement in the return originally filed by him. The law cannot contemplate making of assessment, on the basis of a return, which even the assessee claims contains a wrong statement. When the assessee files a revised return , he admits that the original return filed by him was not correct or complete and substitutes the same by a revised return which according to him is correct and complete. The effective return for the purpose of assessment is thus the return which is ultimately filed by the assessee, on the basis of which he wants his income to be assessed. DR could not cite any contrary judgment on this issue. Thus we hold that the findings of the first appellate authority that the return filed u/s 139(5) of the Act is not as per the provisions of law, for the reason that the mistakes were not inadvertent is bad in law. We also observe that, the AO has processed the revised return u/s 143(1)(a). The revised return has not been rejected by him. Under these circumstances, it is not appropriate for the CIT(A) to hold otherwise. Right of the assessee to carry forward of loss - As relying on Periyar District Co-operative Milk Producers Union Ltd. case 2004 (2) TMI 58 - MADRAS HIGH COURT we allow the ground of the assessee by holding that the assessee can file a revised return claiming a higher amount of loss u/s 139(3) of the Act. Amount eligible for deduction u/s 80M - reducing notional interest expenditure from the dividend for calculation of deduction u/s 80M - HELD THAT - A perusal of the chart demonstrates that the annual internal accruals are much higher than the investments made during that particular year. Under these circumstances the presumption is that the investments have been made from internal accruals and that no borrowed funds have been made for these investments. As decided in HDFC BANK LTD. 2014 (8) TMI 119 - BOMBAY HIGH COURT ) as relying on RELIANCE UTILITIES POWER LTD. 2009 (1) TMI 4 - BOMBAY HIGH COURT as assessee s capital, profit reserves, surplus and current account deposits were higher than the investments in the tax free securities it would have to be presumed that the investments made by the assessee would be out of interest free funds available with the assessee. Disallowance of deduction of provisions for doubtful debts - HELD THAT - After considering rival submissions we find that the issue is covered against the assessee by the judgment of Southern Technologies Limited 2010 (1) TMI 5 - SUPREME COURT Respectfully following the same this ground of the assessee is dismissed. Disallowance of adhoc interest out of total interest paid during the year, on account of interest free loans, given to companies - AR contended that the assessee is a financial service company and in order to promote its business further, it had to undertake the entire gamut of financial services, and hence this subsidiary companies are formed, as the existing regulations required separate companies to be set up for this purpose - HELD THAT - As the propositions based on which we had decided ground No. 3 of the assessee are applicable to the facts of the ground also. The assessee has led evidence to prove his case and hence the decision of the Jurisdictional High Court in the case of Motor General Finance Ltd. 2001 (12) TMI 62 - DELHI HIGH COURT is not applicable as the facts are different. Thus respectfully following the preposition laid down in Reliance Utilities and Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT and the propositions laid down in the case of CIT vs. Bharti Televenture Ltd. 2011 (1) TMI 326 - DELHI HIGH COURT we allow this ground of the assessee. Nature of expenditure - Disallowance of a claim of interest and old expenses as claimed as incurred during the year, but had been disclosed as deferred revenue expenditure in the books of the assessee - HELD THAT - As the expenditure in question is undisputedly in the revenue field we apply the principles laid down in SBI Cards Payment Services 2015 (1) TMI 202 - DELHI HIGH COURT and allow the claim of the assessee. Depreciation in respect of commercial vehicles given on lease - Claim denied on the ground that the assessee is not engaged in the business running trucks on hire - HELD THAT - Admittedly this issue is covered in favour of the assessee by the decision of Tribunal in the assessee s own case for the asstt. 2007 (7) TMI 343 - ITAT DELHI-D The prepositions laid down by the Tribunal in these decisions, are in consonance with, the propositions laid by the Jurisdictional High Court in the case of CIT vs. MGF (India) Ltd 2006 (7) TMI 125 - DELHI HIGH COURT and M/s. ICDS vs. CIT 2013 (1) TMI 344 - SUPREME COURT Disallowance of depreciation on assets which are purchased and leased back - HELD THAT - Out of the six sale and lease back transaction, except in the case of PSEB and Oswal Sugars Ltd., the AO disallowed the depreciation by questioning the commercial expediency of the transaction. This ground of disallowances is not legally correct. When the genuineness of the transaction is not doubted, disallowance of depreciation is not warranted. The AO does not have the jurisdiction to question commercial expediencies and that too is in a transaction between unrelated parties. The assessee had filed a valuation report in support of his claim for deduction. The AO without considering the same, rejected the claim of the assessee. Such an act is against the prepositions laid down in the case of Ashwin Vanaspati Industries 2002 (1) TMI 40 - GUJARAT HIGH COURT . Disallowance of the claim with regard to exclusion from income of principal amount recovered on lease transactions which were earlier considered as finance transactions by the AO - HELD THAT - In the earlier asstt. years, the assessee had offered to tax, the lease rental received, including the principal portion, by treating the transactions in question as lease transactions. Lease transactions were considered as finance transactions by the AO and the depreciation claimed was disallowed. Consequently the principal portion of the lease transactions, which were offered to tax had to be reversed. The assessee s claim is that such consequential benefit has to be allowed. The Ld. Counsel submitted that, he is not pressing this ground of appeal. In view of our decision in ground No. 8 where we accepted this claim of the assessee that these transactions are lease transactions. In the result this ground is dismissed. Finding of FAA that certain disallowance made by the AO and challenged by the assessee before it are not arising from the asstt. order - CIT(A) had held that the issue have not been discussed by the AO and do not emanate from in the asstt. order for the year under consideration. He dismissed the same - HELD THAT - CIT(A) should have considered the claim of the assessee on merits. Hence we set aside the order to the file of the first appellate authority for fresh adjudication, on merit
Issues Involved:
1. Disallowance of additional loss to be carried forward. 2. Reduction of notional interest expenditure from dividend for calculation of deduction u/s 80M. 3. Disallowance of provision for doubtful debts. 4. Disallowance of adhoc interest on account of interest-free loans given to companies. 5. Disallowance of claim of interest and old expenses. 6. Restriction of claim of depreciation on commercial vehicles given on lease. 7. Disallowance of depreciation on assets purchased and leased back. 8. Exclusion from income of principal amount recovered on lease transactions. 9. Non-adjudication of certain disallowances by the first appellate authority. Detailed Analysis: 1. Disallowance of Additional Loss to be Carried Forward: The CIT(A) disallowed the additional loss of Rs. 89,76,975/- to be carried forward on the ground that the revised return was not filed within the time allowed u/s 139(3). The assessee argued that the revised return was filed as per Section 139 of the Income Tax Act. The Tribunal referenced the Allahabad High Court's decision in Dhamapur Sugar Mills vs. CIT, which allows for the filing of a correct and complete return if an omission or wrong statement is discovered. The Tribunal held that the revised return should be considered valid and allowed the additional loss to be carried forward. 2. Reduction of Notional Interest Expenditure from Dividend for Calculation of Deduction u/s 80M: The AO reduced notional interest from the dividend income for calculating the deduction u/s 80M. The assessee argued that expenses should be allowed on an actual basis and that investments were made from internal accruals. The Tribunal found that the internal accruals were higher than the investments and followed the Bombay High Court's decision in HDFC Bank Ltd., which presumes investments were made from interest-free funds. The Tribunal allowed the assessee's claim. 3. Disallowance of Provision for Doubtful Debts: The Tribunal found that the issue was covered against the assessee by the Supreme Court's judgment in Southern Technologies Limited vs. CIT and dismissed this ground. 4. Disallowance of Adhoc Interest on Account of Interest-Free Loans Given to Companies: The AO disallowed Rs. 20 lacs of interest paid, arguing that loans were given to subsidiaries without business interest. The Tribunal found that the assessee had sufficient internal accruals and followed the Bombay High Court's decision in Reliance Utilities and Power Ltd., allowing the assessee's claim. 5. Disallowance of Claim of Interest and Old Expenses: The AO disallowed Rs. 88,11,147/- of deferred revenue expenditure. The Tribunal referenced the Delhi High Court's decision in CIT vs. SBI Cards & Payment Services Pvt. Ltd., which states that there is no concept of deferred revenue expenditure under the Income Tax Act. The Tribunal allowed the assessee's claim. 6. Restriction of Claim of Depreciation on Commercial Vehicles Given on Lease: The first appellate authority restricted the depreciation claim to 25% instead of 40%. The Tribunal followed its own decision in the assessee's case for earlier years and allowed the claim of 40% depreciation. 7. Disallowance of Depreciation on Assets Purchased and Leased Back: The AO disallowed depreciation on assets purchased from and leased back to the same parties, arguing the transactions were finance transactions. The Tribunal found the transactions genuine and followed the Delhi High Court's decision in CIT vs. Cosmos Films Ltd., allowing the depreciation claim. 8. Exclusion from Income of Principal Amount Recovered on Lease Transactions: The Tribunal dismissed this ground as the assessee's claim that these transactions were lease transactions was accepted in ground No. 7. 9. Non-Adjudication of Certain Disallowances by the First Appellate Authority: The CIT(A) did not adjudicate certain disallowances, stating they did not arise from the assessment order. The Tribunal referenced the Supreme Court's decision in Jute Corporation of India Ltd. and directed the CIT(A) to adjudicate these claims on merits. Conclusion: The Tribunal allowed various claims of the assessee, including the carry forward of additional loss, deduction u/s 80M without notional interest reduction, and depreciation on commercial vehicles and assets purchased and leased back. It dismissed the provision for doubtful debts and directed the first appellate authority to adjudicate certain disallowances on merits. The appeals were allowed in part.
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