2017 (4) TMI 398 - AT - Income Tax

Appellate authority entertain the fresh claims on the basis of facts available on record without revision of the return of income under s.139(5) - Held that - The issue is no longer res integra. It is well settled that the assessee is entitled to do so. Reference may be made to the decision of CIT vs. Pruthvi Brokers & Shareholders (P) Ltd.(2012 (7) TMI 158 - BOMBAY HIGH COURT) in this regard. Accordingly, we find no infirmity in the order of the CIT(A) in accepting the claim of Assessee after appreciation of facts. - Decided against revenue Disallowance of interest expenditure u/s 36(1)(iii) - Held that - AO should have only disallowed the interest from the time when the capital goods were purchased till the time the capital goods were put to use. The above contention of the AR of the appellant appears justified. The AO has disallowed the interest because as per the AO since the appellant had not produced the bank account to show the utilization of funds for purchase of capital goods hence he disallowed the interest for the full year. The AR of the appellant was asked to furnish the complete working of the interest which was to be disallowed based on the date on which the funds were used for the purchase of the asset till the date when it was actually put to use. Vide submissions filed on 23.10.2013 the AR of the appellant has filed these details. The details filed show that the entire amount of interest which could be disallowed is ₹ 2,24,334/-.- Decided against revenue Admission of additional evidence in violation of Rule 46A of the I.T.Rules, 1962 - Held that - Notwithstanding Rule 46A of the IT Rules, the CIT(A) has inherent power under s.250(4) to call for and admit such evidence as necessary for the disposal of the appeal. Therefore, Rule 46A does not act as a fetter for exercising the power available to the CIT(A). Thus ground No.2(b) raised by the Revenue has no force in law and is accordingly dismissed.

Summary

Issues Involved:
1. Computation of book profit considering unabsorbed business losses and depreciation.
2. Disallowance of interest expenditure under Section 36(1)(iii).
3. Admission of additional evidence under Rule 46A of the I.T. Rules.

Issue-wise Detailed Analysis:

1. Computation of Book Profit Considering Unabsorbed Business Losses and Depreciation:
The Revenue contested the CIT(A)'s direction to recompute book profit by considering unabsorbed business losses or unabsorbed depreciation as per departmental records. The assessee initially reduced profits under the mistaken belief of being a sick industrial company. Upon realizing the error, the assessee revised the book profit computation to include deductions for unabsorbed business losses and depreciation. The AO denied this claim based on the Supreme Court decision in Goetze (India) Ltd. vs. CIT, arguing that the claim was not made in the original return. However, the CIT(A) held that the AO was obligated to compute the correct book profit under Section 115JB, which includes reducing unabsorbed business losses or depreciation. The Tribunal upheld the CIT(A)'s decision, referencing CIT vs. Pruthvi Brokers & Shareholders (P) Ltd., affirming that the appellate authority can entertain fresh claims based on available records. Thus, Revenue's ground No.1 was dismissed.

2. Disallowance of Interest Expenditure under Section 36(1)(iii):
The AO disallowed ?8,83,785/- of interest expenditure, claiming it should be capitalized as it was for capital assets not yet put to use. The CIT(A) reduced this disallowance to ?2,24,334/-, acknowledging that not all funds were used on 1.4.2009 and some suppliers were unpaid, thus not attracting interest disallowance. The Tribunal found the CIT(A)'s decision justified, as it was based on the actual dates and amounts of fund utilization for asset purchases. The Tribunal dismissed both the Revenue's appeal against the partial relief and the assessee's cross-objection against the remaining disallowance.

3. Admission of Additional Evidence under Rule 46A of the I.T. Rules:
The Revenue argued that the CIT(A) erred in admitting additional evidence in violation of Rule 46A. However, the Tribunal noted that the Revenue did not specify how Rule 46A was violated. It emphasized that the CIT(A) has inherent power under Section 250(4) to call for and admit necessary evidence for appeal disposal. Therefore, Rule 46A does not restrict the CIT(A)'s authority. Consequently, the Tribunal dismissed Revenue's ground No.2(b).

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection, upholding the CIT(A)'s decisions on all contested issues. The order was pronounced in Open Court on 31/03/2017.