2019 (6) TMI 1225 - HC - Income Tax

Allowability of bad debts written off u/s 36(1)(vii) - Exclusion of the amount received as recovery of bad debts written off - taxability u/s 41(4) - in the earlier years deduction had not been allowed in respect of write off of such bad debts u/s 36(1)(vii) - Income earned from a foreign branch - whether could not be assessed in India in view of the tax treaty between India and the respective Country? - HELD THAT - Perusal of the impugned judgment of the Tribunal would show that the Tribunal had merely sent the issues back to the Assessing Officer for proper examination on the additional grounds raised by the assessee before the Tribunal. We are informed that the Assessing Officer has already given effect to such directions of the Tribunal and passed appropriate order, which of course has given rise to further dispute between the assessee and the department. Be that as it may, in facts of the case, we do not think that the Tribunal s decision gives rise to any substantial question of law. Depreciation on matured investments securities which were due for redemption in the relevant previous year - NPA - real income theory -Tribunal disallowed the Appellant s claim for deduction - HELD THAT - Tribunal has approved the observations of the CIT(A) that the real income theory cannot be so extended so as to negate accrual of an amount which is receivable by the appellant assessee. In support, reliance is placed upon the decision of this Court in Navin R Kamani Vs. Commissioner of Income Tax 1990 (3) TMI 40 - BOMBAY HIGH COURT . It also held that the concept of real income theory cannot be read so as to defeat the provisions of the Act. Further, the fall in value of security is not an ascertained liability and such adhoc deduction cannot be allowed. The impugned order places reliance upon the decisions of the Apex Court in Indian Molasis Company Pvt.Ltd. Vs. Commissioner of Income Tax, 1959 (5) TMI 5 - SUPREME COURT and of this Court in Standard Mills Company Vs. Commissioner of Income Tax 1997 (3) TMI 64 - BOMBAY HIGH COURT Impugned order of the Tribunal is based on various binding decisions of the Apex Court and this High Court not shown to be inapplicable. Thus, no substantial question of law arises.

Summary

Issues involved:
1. Entitlement to depreciation on leased assets
2. Claim for deduction of payment towards scientific research assistance
3. Reduction of exemption claimed under section 10(15)(iv)(h) and reliance on section 14A
4. Setting aside additional grounds relating to write off of bad debts, exclusion of amount recovered, and assessment of income from foreign branches
5. Deduction of depreciation on matured investments

Entitlement to depreciation on leased assets:
The appellant contested the Tribunal's decision to deny depreciation of ?61,75,59,746 on leased assets. The Tribunal's ruling was challenged, questioning the correctness of the decision. The issue was raised as a substantial question of law for consideration before the High Court.

Claim for deduction of payment towards scientific research assistance:
Another substantial question of law involved whether the Tribunal erred in not allowing the appellant's claim for deduction of ?26,44,876 as payment towards scientific research assistance. This issue was presented for review and consideration by the High Court.

Reduction of exemption claimed under section 10(15)(iv)(h) and reliance on section 14A:
The Tribunal's decision to uphold the reduction of exemption claimed by the appellant under section 10(15)(iv)(h) and relying on the provisions of section 14A was challenged. The appellant raised this issue as a substantial question of law for examination by the High Court.

Setting aside additional grounds and assessment of income from foreign branches:
The assessee raised additional grounds before the Tribunal, including the deduction in respect of write off of bad debts under section 36(1)(vii), exclusion of recovered amount, and assessment of income from foreign branches. The Tribunal referred these issues back to the Assessing Officer for further examination, leading to a dispute between the assessee and the department.

Deduction of depreciation on matured investments:
The issue of claiming deduction of ?18,35,53,508 in respect of depreciation on matured investments was brought before the High Court. This issue had been previously considered in a case involving the same assessee, where the Court ruled against allowing the deduction based on specific observations and legal precedents.

In the detailed analysis, the High Court reviewed each issue raised by the appellant, considering the arguments presented and the legal implications involved. The Court examined the Tribunal's decisions, previous judgments, and relevant provisions of the Income Tax Act to determine the correctness of the rulings and whether they raised substantial questions of law warranting further consideration. The Court's analysis focused on the specific legal aspects of each issue, including the interpretation of relevant statutes, precedents, and the application of legal principles to the facts of the case. Ultimately, the High Court provided a comprehensive assessment of each issue, addressing the appellant's contentions and the legal reasoning behind the decisions rendered by the Tribunal and previous courts in similar matters.