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2023 (7) TMI 1500 - AT - Income TaxDisallowance of Bad debts written off u/s. 36(1)(vii) - assessee has failed to establish that debts that have been written off had in fact become bad - assessee purportedly has written off bad debts of nearly 9740 entities including companies, firms, individuals, etc. This includes bad debts of erstwhile Anagram Finance Ltd. (AFL), merged with the assessee - HELD THAT - The requirement to establish that the debts have become bad was done away vide amendment effective from 1st April, 1989. Under the old provisions of section 36(1)(vii) of the Act as were applicable prior to 1st April, 1989, it was mandatory to establish before writing off that the debts have become bad. After amendment (effective from 1st April, 1989) the requirement of section 36(1)(vii) as explained by Hon'ble Apex Court in the case of TRF Ltd 2010 (2) TMI 211 - SUPREME COURT is, it is sufficient if the bad debt is written off as irrecoverable in accounts of the assessee. The Act does not require the assessee to establish that the debts have in fact become bad before writing off. The CBDT vide Circular dated 30/05/2016 in an unambiguous manner explained the mandate of section and the law as explained by Hon'ble Apex Court in the case of TRF Ltd.(supra). Decided against revenue. Disallowance to business/capital loss - DR submits that during assessment proceedings the assessee failed to produce relevant documents in support of its claim - HELD THAT - A perusal of documents on record reveals that the assessee had furnished audit report in Form No. 64 before the Assessing Officer. CIT(A) has given a categoric finding that the Assessing Officer has selectively considered Form-64 furnished by the assessee for respective funds. AO has ignored various losses under respective heads of income and has taken only short-term capital gain of Rs. 32.00 lacs from ICICI Technology Incubator Fund. There is no justification for adopting such selective approach by the Ao - CIT(A) after examining the documents on record allowed assessee s claim on the basis of Form-64. We see no infirmity in findings of the CIT(A) on this issue. The ground No. 2 raised by the Revenue is devoid of any merit, hence, dismissed. Addition in respect of non-cash right back - assessee submits that the assessee has actually received the amounts, hence, the amounts are not taxable u/s. 41(4) - HELD THAT - Co-ordinate Bench vide order 2017 (11) TMI 1839 - ITAT MUMBAI dated 03/11/2017, common for the Assessment Year 2004-05 and 2005-06 placing reliance on the earlier orders of the Tribunal in the case of ICICI Ltd 2017 (11) TMI 1839 - ITAT MUMBAI restored the issue back to the file of Assessing Officer. Disallowance of expenditure u/s. 14A for earning income exempt from tax - HELD THAT - As in assessee s own case in appeal by the Revenue for Assessment Year 2004-05 2017 (11) TMI 1839 - ITAT MUMBAI if the investment made in exempt income yielding assets are made out of interest free funds available with the assessee, there cannot be any disallowance of interest expenditure. Therefore, what is required to be seen is whether sufficient interest free funds are available with the assessee to make investment in exempt income yielding assets. As per facts and material on record, surplus interest free funds available with the assessee far exceeds the investment made in tax free interest income yielding assets, therefore, no disallowance of interest expenditure can be made in view of the decision of Reliance Utilities and Power Ltd., 2009 (1) TMI 4 - BOMBAY HIGH COURT and CIT v/s HDFC Bank Ltd., 2014 (8) TMI 119 - BOMBAY HIGH COURT As far as disallowance of administrative expenses is concerned, it is the contention of the assessee that in the preceding assessment year, it has voluntarily disallowed 1% of the administrative expenditure attributable to earning of exempt income. However, we have noted, in assessment year 2001 02, the Tribunal while deciding the issue in Revenue s appeal 2016 (4) TMI 648 - ITAT MUMBAI has restored the issue to the Assessing Officer for considering afresh. The grounds allowed for statistical purposes in similar terms. Addition of depreciation on lease assets - HELD THAT - As for Assessment Year 2004-05 in assessee own case 2017 (11) TMI 1839 - ITAT MUMBAI allowed assessee s claim of depreciation as in the impugned assessment year, there is no new lease transaction. The assessee has claimed depreciation on its own fixed assets and depreciation claimed on leased assets were continuing from past lease transactions. Notional interest for the purpose of determining annual value u/s. 23(1)(a) - As submitted that the assessee has received deposit against let out property - notional interest on account of deposit has been considered by the Assessing Officer for arriving at the annual value under section 23(1)(a) of the Act - HELD THAT - We find that in assessee s own case for Assessment Year 2004-05, the Assessing Officer had made addition on account of notional rent on deposit while determining annual value u/s. 23(1)(a) - CIT(A) deleted the addition. The Revenue carried the issue in appeal before the Tribunal. The Co-ordinate Bench following its own order on identical issue in the case of ICICI Ltd for Assessment Year 2002-03 upheld the findings of CIT(A) in deleting the addition. Facts being identical in the impugned assessment year, we see no reason to take a different view. Thus, ground of appeal by Revenue is dismissed. Disallowance of deduction u/s. 36(1)(viia) - HELD THAT - We find that the CIT(A) has deleted the addition by following the order of CIT(A) in Assessment Year 2003-04 and 2004-05. Against the order of CIT(A) for Assessment Year 2004-05 the Revenue carried the issue in appeal before the Tribunal 2017 (11) TMI 1839 - ITAT MUMBAI as upheld the findings of CIT(A) wherein held ssessee is a Scheduled Bank and its accounts are maintained in conformity with the Generally Accepted Accounting Principle (GAAP) in India and the guidelines issued by the RBI from time to time. Further, it is evident from the annual report of the assessee that acquisition of assets including performing and non performing asset are as per the prescribed guidelines of RBI. That being the case, there is no reason for the Assessing Officer to presume that the assessee is not qualified to exercise option under the first proviso. Further, as per the second proviso to section 36(1)(viia) of the Act for the assessment year commencing on/or after 1st April 2003 and ending before 1st April 2005, the deduction allowable in terms of proviso 1 to section 36(1)(viia) of the Act is 10% instead of 5%. In view of the above, we do not find any infirmity in the order of the learned Commissioner (Appeals) on this issued.
Issues Involved:
1. Bad debts written off under Section 36(1)(vii) of the Income Tax Act. 2. Business/capital loss related to ICICI Information Technology Incubator Fund. 3. Non-cash write back addition under Section 41(4). 4. Disallowance of expenditure under Section 14A for exempt income. 5. Depreciation on leased assets. 6. Notional interest for determining annual value under Section 23(1)(a). 7. Deduction under Section 36(1)(viia) for doubtful assets. 8. Interest under Sections 234B and 234D. Detailed Analysis: 1. Bad Debts Written Off: The Revenue challenged the CIT(A)'s decision to allow the assessee's claim of bad debts written off amounting to Rs. 769,75,10,766/-. The Assessing Officer had disallowed this claim, arguing that the debts had not been proven to be irrecoverable. The CIT(A), however, followed precedents from previous assessment years and allowed the claim. The Tribunal upheld the CIT(A)'s decision, citing the Supreme Court's ruling in TRF Ltd. that post-1989 amendments, it is sufficient for debts to be written off in the books of accounts without proving they are irrecoverable. 2. Business/Capital Loss: The Revenue contested the allowance of losses amounting to Rs. 141,18,96,708/- related to the ICICI Information Technology Incubator Fund. The Assessing Officer had disallowed this due to lack of supporting documents. However, the CIT(A) found that the assessee had provided necessary documentation, including audit reports in Form No. 64, and allowed the claim. The Tribunal saw no error in the CIT(A)'s findings and dismissed the Revenue's appeal on this ground. 3. Non-Cash Write Back: The Revenue's appeal against the deletion of addition related to non-cash write back was dismissed. The Tribunal noted that this issue had been consistently decided in favor of the assessee in previous years, and thus, restored the matter to the Assessing Officer for reconsideration, in line with past Tribunal directions. 4. Disallowance of Expenditure Under Section 14A: The Revenue argued for the apportionment of interest expenditure related to exempt income under Section 14A. The Tribunal, however, followed its previous orders in the assessee's case, noting that the assessee had sufficient interest-free funds to cover investments yielding exempt income. Thus, no disallowance of interest expenditure was warranted, and the matter was restored to the Assessing Officer for fresh consideration. 5. Depreciation on Leased Assets: The Revenue's appeal against the allowance of depreciation on leased assets was dismissed. The Tribunal noted that this issue had been resolved in favor of the assessee in earlier years, and there was no new lease transaction in the relevant assessment year. The Tribunal upheld the CIT(A)'s decision to allow the claim. 6. Notional Interest for Determining Annual Value: The Tribunal dismissed the Revenue's appeal concerning the addition of notional interest for determining annual value under Section 23(1)(a). It followed its decision from the previous year, which was based on the principle that only actual rent received or receivable should be considered, not notional values. 7. Deduction Under Section 36(1)(viia): The Tribunal upheld the CIT(A)'s decision to allow deductions under Section 36(1)(viia) for doubtful assets, following its previous rulings in the assessee's favor. The Tribunal found no reason to deviate from its earlier decisions, which were based on compliance with RBI guidelines and Generally Accepted Accounting Principles. 8. Interest Under Sections 234B and 234D: The Tribunal noted that the charging of interest under Sections 234B and 234D is consequential and mandatory as per the provisions of the Act, and thus, dismissed the assessee's appeal on this ground. Conclusion: The appeals by both the Revenue and the assessee were partly allowed for statistical purposes, with the Tribunal largely upholding the CIT(A)'s decisions based on precedent and legislative amendments.
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