2017 (2) TMI 649 - HC - Income Tax

Disallowance on account of proportionate interest and administrative expenses - Held that - The assessee was already having enough fund for investment in tax free security and therefore, the learned CIT(A) directed to delete disallowance made on account of proportionate interest. The same has been confirmed by the learned tribunal. It is required to be noted that similar disallowance in the case of the very assessee for the A.Y. 2004-05 and the same has attained finality. The aforesaid has also been considered by the learned tribunal while passing the impugned judgement and order. So far as the disallowance of administrative expenses assessee itself voluntarily offered ₹ 6 Lacs towards administrative expenses before the A.O. The learned CIT(A) has restricted administrative expenses with respect to the balance of ₹ 4,54,333/-. The aforesaid has been confirmed by the learned tribunal. The relevant discussion has been made by the learned tribunal in para 21 to 27. We are in complete agreement with the reasons and the view taken by the learned tribunal. Under the circumstances, we see no reason to interfere with the impugned judgement and order passed by the learned tribunal so far as question No. A is concerned. - Decided against revenue. Addition on account of unutilized modvat/cenvat credit - Held that - Tribunal has taken note that with respect to modvat receivable account, there is corresponding less debit to the purchase account and hence to that extent there is already income offered for tax. If that be so, there was no question of further adding modvat/cenvat credit to the income of the assessee for the year under consideration. Under the circumstances, we see no reason to interfere with the impugned judgement and order passed by the learned tribunal confirming the order passed by the learned CIT(A) deleting the addition made by the A.O. on account of unutilised modvat/cenvat credit - Decided against revenue. Addition on account of project loss in relation to amount receivable from Mahanagar Gas Ltd. - Held that - The said issue is squarely covered against the revenue in view of the decision of the Hon ble Supreme Court in the case of T.R.F. Ltd. Versus Commissioner of Income Tax, reported in (2010 (2) TMI 211 - SUPREME COURT) wherein observed that with respect to bad debt claim, the assessee is required to establish only that the debt was written off and it is not necessary for the assessee to establish that the debt, in fact, had become non-recoverable. Under the circumstances, even the present appeal qua question No. C also deserves to be dismissed.- Decided against revenue.

Summary

Issues:
1. Disallowance of proportionate interest and administrative expenses
2. Addition on account of unutilized modvat/cenvat credit
3. Addition on account of project loss

Analysis:

Issue 1: Disallowance of proportionate interest and administrative expenses
The appellant disputed the disallowance made by the AO on the grounds of proportionate interest and administrative expenses. The AO had disallowed amounts under section 14A of the Income Tax Act, 1961. The CIT(A) partially allowed the appeal, setting aside the disallowance of proportionate interest and estimating administrative expenses at 2% of exempt dividend income. The tribunal confirmed the CIT(A)'s decision, considering the appellant's voluntary offer towards administrative expenses and past decisions in the appellant's favor. The High Court upheld the tribunal's decision, finding no reason to interfere.

Issue 2: Addition on account of unutilized modvat/cenvat credit
The AO made an addition on account of unutilized modvat/cenvat credit. However, the tribunal noted that there was already income offered for tax corresponding to the modvat receivable account. Therefore, the tribunal upheld the CIT(A)'s decision to delete the addition. The High Court agreed with the tribunal's reasoning and confirmed the decision.

Issue 3: Addition on account of project loss
The AO made an addition on account of project loss related to an amount receivable from a specific entity. The High Court observed that the issue was covered against the revenue by a Supreme Court decision. The Supreme Court had ruled that for bad debt claims, it is sufficient for the assessee to establish that the debt was written off, not necessarily that it had become non-recoverable. Therefore, the High Court dismissed the appeal on this issue as well.

In conclusion, the High Court dismissed the appeal, finding no substantial question of law. The court held that the decisions of the tribunal and CIT(A) were valid, and no costs were awarded in the case.