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2017 (1) TMI 614 - AT - Income TaxAddition made on account of claim of reduction in value of investment as business loss which was stock-in-trade - Held that - We find from the above facts that the assessee held these securities as current investments as stock-in-trade and, therefore, provisions made for depreciation in the value of securities as allowable as deduction and this supports by the following facts - i) Securities are purchased and sold in the course of carrying on business of the assessee. Securities are held for trading as is evident from the sale made in the subsequent year as explained. ii) The treatment of securities is same in the subsequent years. The appellants have prepared the accounts on an accrual basis of accounting complying with the prescribed accounting standards as certified by the auditors. iii) As per the RBI prudential norms read with AS 13, current investments are stated at carrying value as at the year and at lower of the cost and market value. iv) Such valuation of closing stock of securities is as per section 145 and 145A of the Act. In view of the above facts and circumstances, we are of the view that the allowability of deduction u/s 37(1) of the Act and deduction for the provisions for depreciation the assessee is entitled to. Thus we confirm the order of the CIT (A) deleting the addition made by the AO and dismiss the appeal of the Revenue - Decided in favour of assessee Disallowance of expenses relatable to exempt income by invoking the provisions of Section 14A of the Act read with Rule 8D - Held that - We find that assessee has not claimed any exempt income and hence this issue is covered in favour of assessee by the decision of Hon ble Delhi High Court in the case of Cheminvest ltd. (2015 (9) TMI 238 - DELHI HIGH COURT), wherein it is held that if there is no exempted income claimed by the assessee, no disallowance can be made by invoking the provisions of Section 14A read with Rule 8D of the Rules. - Decided in favour of assessee Disallowance of tds credit - Held that - The assessee fairly stated that he is ready to produce evidences before AO and AO may be directed to verify the same and allow credit for TDS. We find no reason not to direct the AO accordingly. Hence, we direct the AO to verify the evidences regarding credit for TDS and accordingly allow the same. Charge interest u/s 234C on returned income as against interest charged on the assessed income - Held that - We find that the provisions of Section 234C of the Act is very clear on this issue that interest u/s 234C of the Act is to be charged on returned income only. We direct the AO accordingly.
Issues Involved:
1. Deletion or confirmation of the addition made by the AO on account of the claim of reduction in value of investment as business loss. 2. Disallowance of expenses relatable to exempt income by invoking the provisions of Section 14A read with Rule 8D. 3. Credit for TDS amounting to ?75,49,506/-. 4. Charging of interest under Section 234C of the Act. Detailed Analysis: 1. Deletion or Confirmation of the Addition Made by the AO on Account of the Claim of Reduction in Value of Investment as Business Loss: The primary issue revolves around whether the reduction in the value of investment can be treated as a business loss. The assessee, a Non-Banking Financial Company (NBFC), claimed depreciation on investments in its profit and loss account, which the AO disallowed, arguing that the expenses were not actually incurred but were merely provisions. The CIT(A) allowed the assessee's claim, noting that the investments were stock-in-trade and the loss was actual due to the fall in market value. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee followed the mercantile system of accounting and valued its stock-in-trade (securities) as per RBI norms and AS-13. It was noted that the valuation method was consistent with Section 145 and 145A of the Act. The Tribunal cited the Supreme Court's decision in United Commercial Bank Ltd. Vs CIT and the Bombay High Court's decision in CIT Vs Bank of Baroda, which supported the assessee's method of valuing stock at cost or market value, whichever is lower. The Tribunal concluded that the assessee was entitled to the deduction for depreciation on investments, confirming the CIT(A)'s order and dismissing the Revenue's appeal. 2. Disallowance of Expenses Relatable to Exempt Income by Invoking the Provisions of Section 14A Read with Rule 8D: The second issue pertained to the disallowance of expenses related to exempt income under Section 14A read with Rule 8D. The assessee argued that no exempt income was earned during the relevant year, and hence, the provisions of Section 14A could not be invoked. The Tribunal agreed with the assessee, referencing the Delhi High Court's decision in Cheminvest Ltd. Vs CIT, which held that Section 14A would not apply if no exempt income was received or receivable during the relevant year. Consequently, the Tribunal allowed the assessee's appeal on this issue. 3. Credit for TDS Amounting to ?75,49,506/-: The assessee's appeal also included a claim for credit of TDS amounting to ?75,49,506/-. The Tribunal directed the AO to verify the evidences provided by the assessee and allow the credit for TDS accordingly. This issue was resolved by directing the AO to conduct the necessary verification. 4. Charging of Interest Under Section 234C of the Act: The final issue was related to the charging of interest under Section 234C of the Act. The CIT(A) had directed the AO to charge interest on the returned income rather than the assessed income. The Tribunal upheld this direction, noting that the provisions of Section 234C clearly state that interest should be charged on the returned income. The Tribunal directed the AO to comply with this provision. Conclusion: The Tribunal dismissed the Revenue's appeal and the assessee's cross objection, while allowing the assessee's appeal on the issues of disallowance under Section 14A, credit for TDS, and charging of interest under Section 234C. The judgment emphasized adherence to established accounting principles and judicial precedents in determining the allowability of claims and deductions.
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