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2015 (7) TMI 1433 - AT - Income TaxAddition u/s 41 - Sales tax refund due to third parties which have also been paid to third parties but which has been treated as income in the hands of the Assessee - HELD THAT - Admittedly, the Assessee has received Sales tax refund in respect of Texmaco Cement plant which had been taken over by the Assessee in 1995. The refund relates to Sales tax excessively paid by Texmaco for the years 1985-86 to 1992-93. CIT(A) failed to appreciate that the Assessee has credited the account of Texmaco with the Sales tax refund as is evidenced in the paper book on 26.2.1998 i.e. during the relevant assessment year. Consequently, even assuming that the said amount is taken as income of the Assessee during the relevant assessment year, in view of the fact that the Assessee has transferred the amount to Texmaco, as it relates to Texmaco for a period which was before the date of taking over by the Assessee-company, the same would have to be netted off and there would be no income on this count in the hands of the Assessee. Thus the said amount cannot be treated as income of the Assessee insofar as the conditions prescribed u/s 41(1) are not applicable in the case of the said refund i.e. the Assessee has not claimed deduction of the said Sales tax and consequently, the refund of the same in the hands of the Assessee cannot be taxed by invoking the provisions of Sec. 41(1) - the amount having been transferred by the Assessee to Texmaco, the same is in no way even real income of the Assessee. In the circumstances, the addition as made by the AO and as confirmed by the ld. CIT(A) stands deleted. In the result, the appeal of the Assessee is allowed. Levy of interest u/s 234D - HELD THAT - Admittedly, in the present case the assessment year relates to 1998-99. The provisions of Sec. 234D was inserted w.e.f. 1.6.2003. The original assessment in the Assessee s case was completed on 29.3.2001 i.e. before the introduction of Sec. 234D. Consequently, we are of the view that the decision of the Hon'ble Supreme Court in the case of Reliance Energy Ltd. 2013 (10) TMI 280 - SUPREME COURT is squarely applicable and the ld. CIT(A) was right in deleting the levy of interest u/s 234D of the Act. Consequently, we find no reason to interfere with the finding of the ld. CIT(A) on this issue. In the result, the appeal of the Revenue is dismissed. Disallowance u/s 14A - HELD THAT - Admittedly, the Assessee has provided a calculation of the disallowance liable to be made u/s 14A before the ld. CIT(A) and the ld. CIT(A) has directed the AO to verify the computation made by the Assessee. We find that even the computation as made by the Assessee is erroneous. Consequently, the issue of Sec. 14A is restored to the file of the AO for re-adjudication. All the aspects in respect of the disallowance u/s 14A are left open. The Assessee shall be at liberty to raise all such defences against the disallowance u/s 14A which shall be adjudicated by the AO. Consequently, ground no. 1 of the Assessee s appeal stands allowed for statistical purpose. Nature of loss - loss on the sale of Fertilizer companies Government of India Special Bonds - action of the ld. CIT(A) directing the AO to allow real loss on the ground that the loss on sale of the bonds was a capital loss - HELD THAT - Admittedly, these bonds are not shown as investments by the Assessee in its books of accounts. These are shown as current assets. These bonds have been received by the Assessee in the course of its business and consequently we are of the view that the finding of the ld. CIT(A) directing the AO to allow the real loss is on the right footing and does not call for any interference. In the result, the appeal of the Revenue stands dismissed.
Issues Involved:
1. Addition of Sales Tax Refund as Income 2. Levy of Interest under Section 234D 3. Disallowance of Expenditure under Section 14A 4. Diminution in Value of Government of India Fertilizer Bonds 5. Disallowance of Interest Expenditure 6. Disallowance of Expenses Incurred Towards Feasibility Study Report 7. Setting off Loss on Sale of Preference Shares 8. Granting of Short TDS Credit 9. Re-opening of Assessment Issue-wise Detailed Analysis: 1. Addition of Sales Tax Refund as Income: The Assessee challenged the addition of Rs. 92,43,000/- as income under Section 41 of the Act. The Assessee argued that this amount was a Sales tax refund related to Texmaco, a company taken over by the Assessee, and had been credited to Texmaco's account. The Tribunal found that the refund related to a period before the Assessee took over Texmaco and the Assessee had transferred the amount to Texmaco. Therefore, the conditions prescribed under Section 41(1) were not applicable, and the amount could not be treated as the Assessee's income. The addition was deleted, and the Assessee's appeal was allowed. 2. Levy of Interest under Section 234D: The Revenue challenged the deletion of interest levied under Section 234D. The Tribunal noted that Section 234D was inserted w.e.f. 1.6.2003, and the original assessment was completed on 29.3.2001, before the introduction of Section 234D. Referring to the Supreme Court decision in Reliance Energy Ltd., the Tribunal upheld the deletion of interest, dismissing the Revenue's appeal. 3. Disallowance of Expenditure under Section 14A: Several appeals involved the disallowance of expenditure under Section 14A. The Tribunal restored these issues to the file of the AO for re-adjudication, considering recent judicial decisions. The Assessee's appeals on this ground were partly allowed for statistical purposes. 4. Diminution in Value of Government of India Fertilizer Bonds: The Assessee and Revenue had conflicting views on the loss on sale of fertilizer bonds. The Tribunal found that these bonds were shown as current assets and received in the course of business, not as investments. Therefore, the loss was to be treated as a business loss, and the Tribunal upheld the CIT(A)'s direction to allow the real loss. The Revenue's appeals were dismissed. 5. Disallowance of Interest Expenditure: The Assessee's appeal challenging the disallowance of interest expenditure was dismissed as the ground had not been pressed before the CIT(A) and could not be raised before the Tribunal. 6. Disallowance of Expenses Incurred Towards Feasibility Study Report: The Assessee's appeal on this ground was dismissed as the issue was withdrawn before the CIT(A) and could not be raised before the Tribunal. 7. Setting off Loss on Sale of Preference Shares: The Assessee's appeal on setting off the loss on the sale of preference shares was dismissed as the issue was withdrawn before the CIT(A) and could not be raised before the Tribunal. 8. Granting of Short TDS Credit: The issue of short TDS credit was restored to the file of the AO for verification. The Assessee was given liberty to produce evidence, and if found correct, credit was to be granted. The Assessee's appeals on this ground were partly allowed for statistical purposes. 9. Re-opening of Assessment: The Assessee's challenge to the re-opening of assessment was dismissed as the issue was withdrawn before the CIT(A) and could not be raised before the Tribunal. Conclusion: - Assessee's appeals on the addition of Sales tax refund, and disallowance under Section 14A were partly allowed. - Revenue's appeals on the levy of interest under Section 234D and loss on sale of fertilizer bonds were dismissed. - Issues withdrawn before the CIT(A) could not be raised before the Tribunal. - Short TDS credit issues were restored to the AO for verification. - The appeals and cross-objections were disposed of accordingly.
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