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2019 (9) TMI 935 - AT - Income TaxValidity of Adjustment of refund against interest payable and balance, if any, with the tax payable while computing the interest u/s. 244A - HELD THAT - on. The issue of whether refund shall be adjusted against interest payable and balance, if any, shall be adjusted towards tax payable has come up for consideration in assessee s own case for the A.Y. 2008-09 2015 (11) TMI 1058 - ITAT MUMBAI and the Coordinate Bench of the Tribunal held that the Assessing Officer while computing the interest u/s. 244A shall adjust the amount of refund already granted first towards the interest component and balance left, if any, shall be adjusted towards the tax component We find that this decision of the Coordinate Bench has been followed by the Ld.CIT(A) and directed to recompute the interest by first adjusting the refund towards interest and balance, if any, towards tax component. In the circumstances, we do not find any infirmity in the order passed by the Ld.CIT(A) in giving such direction. Thus, the ground raised by the Revenue is dismissed. Disallowance u/s. 14A - determining the reasonable expenditure attributable for earning exempt income - HELD THAT - We are not inclined to restore the matter once again to the Assessing Officer for determining the reasonable expenditure attributable for earning exempt income. The Mumbai Tribunal in the case of Shakuntaladevi Trade Investments Pvt. Ltd., v. ITO, 2013 (12) TMI 1579 - ITAT MUMBAI held that disallowance u/s. 14A for the period before the A.Y. 2008-09 should be restricted to 2% of the dividend income. Also in the case of CIT v. M/s. Godrej Agrovet Ltd. 2014 (8) TMI 457 - BOMBAY HIGH COURT upheld the order of the Tribunal in estimating the expenditure to the extent of 2% of total exempt income earned by the assessee - we direct the AO to compute the expenditure attributable for earning exempt income at 2% of the exempt income earned by the assessee during the A.Y.2007-08. Suo moto disallowance towards expenditure attributable for earning exempt income, to this extent, the expenditure shall be reduced from total disallowance and compute the balance disallowance accordingly. Validity of reassessment order passed u/s. 143(3) r.w.s. 147 - disallowance of deduction claimed u/s.36(1)(vii) being the bad debts written off on the ground that this cannot be allowed since the claim for deduction u/s. 36(1)(viia) being the provision for bad and doubtful debts exceeded the bad debts written off to that extent - HELD THAT - It is only from the records the Assessing Officer could collect the information that the provision for doubtful debts is inclusive of provision for standard assets and provision for restructuring of accounts. Nowhere in the reasons recorded, the Assessing Officer stated that any tangible materials/information to show that provision for bad and doubtful debts includes provision for standard assets and provision for restructuring of accounts have come on record subsequent to completion of assessment. In the reasons recorded the Assessing Officer states that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Except stating that there is a failure of the assessee, he has not pointed out what is the failure of the assessee to disclose fully truly all material facts. Nothing has been brought on record to suggest that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of assessment. Therefore, in the absence of any failure on the part of the assessee to disclose fully and truly all material facts for completion of assessment, assessment cannot be reopened beyond four years from the end of the relevant Assessment Year in view of proviso to section 147 of the Act - we hold that reopening of assessment. u/s. 147 of the Act is bad in law - Decided in favour of assessee Reopening of assessment u/s 147 - AY 2009-10 - Deduction u/s. 36(1)(viia) denied - HELD THAT - In this case the assessment was reopened within four years from the end of the Assessment Year as the relevant Assessment Year is 2009-10 and the notice u/s. 148 of the Act was issued on 28.03.2014 and the assessment was completed on 18.03.2015. Since the assessment for this Assessment Year i.e 2009-10 was reopened within four years from the end of the relevant Assessment Year the proviso to section 147 of the Act has no application. Whether the claim for deduction u/s. 36(1)(viia) has to be allowed on the provision made in the Books of Accounts or as per the statute provided in the section itself in the original assessment proceedings has bearing on the issue of allowance u/s. 36(1)(viia) in the reopened assessment, the issue thus in a way became consequential and should go back to the Assessing Officer for fresh adjudication depending upon the decision taken by the Assessing Officer in the original assessment proceedings which were set aside. Thus, we restore this issue on merits i.e. allowability u/s. 36(1)(viia) of the Act in the reassessment proceedings to the file of the Assessing Officer to decide afresh in view of our above observations. This ground is allowed for statistical purpose.
Issues Involved:
1. Adjustment of refund against interest payable under Section 244A of the Income Tax Act. 2. Disallowance under Section 14A read with Rule 8D. 3. Reopening and validity of reassessment under Section 147 of the Income Tax Act. 4. Deduction under Section 36(1)(viia) of the Income Tax Act. Summary: 1. Adjustment of Refund Against Interest Payable Under Section 244A: The Revenue challenged the order of the CIT(A) which held that refund should first be adjusted against interest payable and the balance, if any, towards tax payable while computing interest under Section 244A. The Tribunal noted that this issue was previously decided in favor of the assessee for earlier years, following the Delhi High Court's decision in India Trade Promotion Organisation vs. CIT. The Tribunal observed that the principle applied should be the same for both collection and refund of taxes. The Tribunal upheld the CIT(A)’s decision, dismissing the Revenue’s appeal. 2. Disallowance Under Section 14A Read with Rule 8D: For the Assessment Year (A.Y.) 2007-08, the assessee and Revenue both appealed regarding the disallowance under Section 14A. The Tribunal noted that Rule 8D was not applicable for A.Y. 2007-08 as per the Bombay High Court’s decision in Godrej & Boyce Manufacturing Co. Ltd. The Tribunal directed the Assessing Officer (AO) to compute the disallowance on a reasonable basis, restricting it to 2% of the exempt income, following precedents from the Bombay High Court and ITAT. Consequently, both the assessee's and Revenue’s appeals were partly allowed. 3. Reopening and Validity of Reassessment Under Section 147: For A.Y. 2007-08, the assessee challenged the reopening of assessment on the grounds that it was beyond four years without any failure on the part of the assessee to disclose fully and truly all material facts. The Tribunal found that the AO reopened the assessment based on information already on record and not on any new tangible material. Hence, the reopening was held to be beyond jurisdiction and bad in law. The reassessment order was quashed, and the Revenue’s appeal was dismissed. For A.Y. 2009-10, the assessee contended that the issue of deduction under Section 36(1)(viia) had already been decided by the ITAT. However, the Tribunal noted that the specific issue of inclusion of provision for standard assets and restructuring of accounts was not previously addressed. Since the reopening was within four years, the Tribunal upheld the reopening but restored the issue of deduction under Section 36(1)(viia) to the AO for fresh adjudication. Both the assessee’s and Revenue’s appeals were partly allowed for statistical purposes. 4. Deduction Under Section 36(1)(viia): For A.Y. 2007-08, the Tribunal noted that the issue of deduction under Section 36(1)(viia) was already decided by the ITAT in favor of the assessee, holding that the deduction should be based on the eligible amount as per the statute, not merely on the provision made in the books. The Tribunal directed the AO to follow this principle. The assessee’s appeal was allowed, and the Revenue’s appeal was dismissed. For A.Y. 2009-10, the Tribunal restored the issue to the AO for fresh adjudication, considering the earlier Tribunal’s direction to decide the issue based on the provision made in the books or as per the statute. Disposition of Appeals: - ITA. No. 2231/MUM/2018 (A.Y. 1991-92) - Dismissed - ITA. No. 1801/MUM/2018 (A.Y. 2007-08) - Partly allowed - ITA. No. 2233/MUM/2018 (A.Y. 2007-08) - Partly allowed - ITA. No. 1802/MUM/2018 (A.Y. 2007-08) - Allowed - ITA. No. 2232/MUM/2018 (A.Y. 2007-08) - Dismissed - ITA. No. 1803/MUM/2018 (A.Y. 2009-10) - Partly allowed for statistical purposes - ITA. No. 2234/MUM/2018 (A.Y. 2009-10) - Partly allowed for statistical purposes Order Pronounced: The order was pronounced in the open court on the 12th of July, 2019.
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