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2020 (3) TMI 419 - AT - Income TaxLease-hold refurbishment expenses - Revenue expenditure - HELD THAT - Considering the decision of Tribunal on similar set of fact when the similar expenses were allowed as revenue expenditure in favour of assessee, no variation in facts nor any contrary law is brought is brought to our notice therefore, respectfully following 2017 (6) TMI 597 - ITAT MUMBAI this ground of appeal is allowed in favour of assessee. Disallowance of provision for depreciation on investment - HELD THAT - It was open to the ITO and the assessee to ascertain true and proper income while submitting income-tax returns. That, for valuing the closing stock, it was open to the assessee to value the stock at cost or market price whichever is lower. That, the assessee was valuing the stock-in-trade at cost for the purposes of statutory balance sheet but, for the purposes of income-tax return, the assessee was valuing the stock-in-trade at cost or market value whichever was lower and that practice was accepted by the Department for 30 years. Consequently, the Supreme Court allowed the appeal filed by UCO Bank 1999 (9) TMI 4 - SUPREME COURT . In our view, the judgment of the Supreme Court in UCO Bank's case (supra) squarely applies to the facts of this case. In fact, the present case before us is on a stronger footing because in the case of UCO Bank (supra), the loss was not debited to the profit and loss account whereas in this case, as can be seen from the working at pages 25 and 26 of the paper-book, the loss has been debited to the profit and loss account which is reflected as a provision for Liability in the balance sheet and shares and securities were valued at cost on the asset side. For the reasons given hereinabove, we answer the above quoted question in the affirmative i.e. in favour of the assessee-bank and against the Department. Disallowance under section 14A - HELD THAT - The assessee has not allocated any expenses for earning the said dividend income. The Assessing Officer invoked the provision of Rule 8D and calculated the disallowance under section 14A of ₹ 7,81,083/-. Admittedly, the provisions of Rule 8D is not applicable for the year under consideration. The ld. AR of the assessee prayed that disallowance under section 14A should be restricted to 2% of the total exempt income and strongly relied upon the decision of Hon ble jurisdictional High Court in Godrej Agrovet Ltd. 2014 (8) TMI 457 - BOMBAY HIGH COURT Hon ble jurisdictional High Court in Godrej Agrovet Ltd. (supra), while considering the disallowance under section 14A for A.Y. 2005-06 restricted the disallowance to the extent of 2% of total exempt income. Considering the decision of jurisdictional High Court, the disallowance for the year under consideration is restricted to 2% of the exempt income. Depreciation on printers, cables, routers and other connectivity charges - Assessing Officer while passing the assessment order allowed depreciation @ 15% against the claim of assessee of 60% - HELD THAT - We have noted that Hon ble Delhi High Court in DCIT vs. BSES Rajdhani Powers Ltd. 2010 (8) TMI 58 - DELHI HIGH COURT and in CIT vs. Bonanza Portfolio Ltd. 2011 (8) TMI 1058 - DELHI HIGH COURT held that computer peripherals and accessories form an integral part of computer system and eligible for depreciation @ 60%. Considering the decision of Tribunal, the Hon ble Delhi High Court is directed the Assessing Officer to allow the depreciation @ 60% on printers, cable lines and other connected peripherals. Hence, this ground of appeal is allowed. Disallowance under section 14A/Rule 8D(2)(iii) to 50% of administrative expenses - HELD THAT - Assessing Officer while making the disallowance considered the average value of entire investment made for earning exempt income. The ld. CIT(A) restricted the disallowance to 50% of the amount on estimation basis. Considering the decision of Special Bench of Delhi Tribunal in ACIT vs. Vireet Investment (P.) Ltd. 2017 (6) TMI 1124 - ITAT DELHI we direct the Assessing Officer to recompute the disallowance by considering only those investments which yielded exempt income during the year. Before making recomputation of disallowance under this clause, the Assessing Officer shall grant opportunity to the assessee. In the result, this ground of appeal is allowed for statistical purpose.
Issues Involved:
1. Leasehold refurbishment expenses. 2. Provision for depreciation on investments. 3. Provision for doubtful advances. 4. Disallowance under Section 14A. 5. Depreciation on printers, cables, routers, and other connectivity charges. 6. Deletion of addition on account of interest income. Detailed Analysis: 1. Leasehold Refurbishment Expenses: The assessee claimed ?4,49,08,640 as revenue expenditure for leasehold refurbishment expenses. The CIT(A) remanded the matter to the Additional CIT instead of deleting the addition. The Tribunal noted that similar expenses were allowed as revenue expenditure in the assessee's own case for AY 2006-07. The Tribunal found no material change in the facts for the year under consideration and allowed the expenses as revenue expenditure, following the precedent set in the earlier year. 2. Provision for Depreciation on Investments: The assessee claimed ?26,554,000 as a provision for depreciation on investments, which was disallowed by the Additional CIT on the basis that the investments were shown under the head 'Investments' and not 'Stock-in-trade.' The Tribunal observed that the assessee, being a non-banking finance company, held these investments as "current investments" with the intention to trade. The Tribunal referred to various judicial precedents, including the Bombay High Court's decision in CIT vs. Bank of Baroda, which supported the assessee's claim. Consequently, the Tribunal allowed the provision for depreciation on investments as a deductible expense. 3. Provision for Doubtful Advances: The assessee claimed ?22,000,000 as a provision for doubtful advances, which was disallowed by the CIT(A) and remanded to the Additional CIT. The Tribunal noted that the CIT(A) had already directed the Assessing Officer (AO) to verify if the provision was reversed and offered to tax in AY 2009-10. Accordingly, the Tribunal directed the AO to comply with the CIT(A)'s order and verify the facts. 4. Disallowance under Section 14A: The assessee earned ?35.50 lakhs in dividend income, which was claimed as exempt. The AO invoked Rule 8D to calculate a disallowance of ?7,81,083 under Section 14A. The Tribunal noted that Rule 8D was not applicable for the year under consideration (AY 2007-08) and restricted the disallowance to 2% of the exempt income, following the Bombay High Court's decision in CIT vs. Godrej Agrovet Ltd. 5. Depreciation on Printers, Cables, Routers, and Other Connectivity Charges: The assessee claimed depreciation at 60% on printers, cables, routers, and other connectivity charges, which the AO restricted to 15%. The Tribunal referred to various decisions, including the Delhi High Court's decision in DCIT vs. BSES Rajdhani Powers Ltd., which held that computer peripherals and accessories form an integral part of the computer system and are eligible for 60% depreciation. The Tribunal directed the AO to allow the depreciation at 60%. 6. Deletion of Addition on Account of Interest Income: The revenue challenged the deletion of ?18,76,06,128 related to interest income not offered to tax. The Tribunal noted that in the assessee's own case for AY 2006-07, the issue was remitted to the AO for verification. The AO had subsequently granted relief to the assessee. The Tribunal directed the AO to verify the facts in accordance with the directions given in the earlier year and allow relief accordingly. Conclusion: The Tribunal allowed the assessee's appeals on leasehold refurbishment expenses, provision for depreciation on investments, and depreciation on computer peripherals. It remanded the issues of provision for doubtful advances and disallowance under Section 14A for verification. The revenue's appeals were partly allowed, with directions for the AO to verify and recompute the disallowance under Section 14A and the addition on account of interest income.
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