9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (11) TMI 264 - AT - Income TaxApplicability of provisions u/s 14A r.w Rule 8D Held that - In Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT 2010 (8) TMI 77 - BOMBAY HIGH COURT it has been held that Rule 8D is application from AY 2008-09 - disallowance for earlier period to be determined on reasonable basis U/s 14A the AO is directed to re-compute the disallowance U/s 14A of the Act after providing reasonable opportunity of being heard to the assessee. Depreciation on investment in respect of securities shifted from Held For Trading category to Available for Sale category disallowed Held that - All the banks are regulated by the RBI and all instructions issued by the RBI are binding on every banks - The RBI also prescribed the valuation method of securities as per the circular should be done at the acquisition cost/book value/market value on the date of transfer, which is the least and the depreciation if any on such transfer should be fully provided for - CIT(A) referred the CBDT instruction No. 17/2008 vide letter no. F.No.228/3/2008-ITA-III dated 26/11/2008 wherein RBI guideline dated 26/10/2000 had been clarified - CIT(A) has not controverted the calculation made and claimed by the appellant that there is no net depreciation - Since the appreciation of securities in the category of Available for Sale is more than the depreciation of securities in the same category i.e. Available for Sale - the assessee had rightly claimed depreciation on transfer from securities Held for Trading category to Available for Sale category following the decision in State Bank of Mysore Vs. DCIT 2009 (5) TMI 610 - ITAT BANGALORE Decided in favour of assessee. Prior paid expenses and Misc. expenses disallowed Held that - The period expenses were claimed by the assessee have been crystallized during the year - The assessee has number of branches in all over the India and certain expenses of previous year were claimed after the closing of books of account, which has been clarified by the auditor in audit report - The genuineness of the expenses has not been doubted by the lower authorities the expenses were allowable in respective year to which they pertained but information of expenses with evidence received by the appellant from the various branches after closing of books of account as decided in assessee s own case for the earlier assessment year, it has been held that such difference cannot be categorized as an error or omission As decided in assessee s own case for the earlier assessment year, it has been held that the refusal to the department by the committee as the income from interest on Government securities/debentures etc. is thus directed to be taxed on due basis - The effect of this for the year, be that the income assessed by the A.O. would increase by ₹ 2,26,89,880/- Decided in favour of assessee.
Issues Involved:
1. Applicability and quantification of disallowance under Section 14A. 2. Disallowance of depreciation on investment in securities shifted from "Held for Trading" to "Available for Sale" category. 3. Reduction in depreciation claim under Section 32. 4. Disallowance of prior period expenses and miscellaneous expenses. 5. Deletion of addition by taking interest income on government and other securities on an accrual basis instead of a due basis. Issue-wise Detailed Analysis: 1. Applicability and Quantification of Disallowance under Section 14A: The assessee challenged the disallowance of Rs. 11,21,00,000 under Section 14A, arguing that Rule 8D, introduced on 24/03/2008, should not apply retrospectively to the assessment year 2004-05. The Tribunal noted the Hon'ble Bombay High Court's ruling in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT, which held that Rule 8D is applicable prospectively from A.Y. 2008-09. Thus, the Tribunal set aside the issue to the Assessing Officer to recompute the disallowance under Section 14A on a reasonable basis, providing the assessee a reasonable opportunity of being heard. 2. Disallowance of Depreciation on Investment in Securities Shifted from "Held for Trading" to "Available for Sale" Category: The Assessing Officer disallowed Rs. 6,98,07,032 as depreciation on securities shifted from "Held for Trading" to "Available for Sale," arguing that the depreciation should be set off against the appreciation in the same category. The Tribunal upheld the assessee's method, which followed RBI guidelines, stating that the depreciation should be fully provided for at the time of shifting categories and that the appreciation should be ignored as per RBI's prudential norms. The Tribunal allowed the assessee's appeal on this ground, referencing the ITAT Bangalore Bench's decision in State Bank of Mysore Vs. DCIT. 3. Reduction in Depreciation Claim under Section 32: The Assessing Officer reduced the depreciation claim by Rs. 5,86,050, aligning it with the auditor's report. The Tribunal referenced its own decision in the assessee's case for A.Y. 2003-04, which held that the opening WDV should not be altered due to changes in depreciation rates. The Tribunal directed the Assessing Officer to work out the depreciation without shifting the opening WDV of plant and machinery to the WDV of furniture and fixtures, thus allowing the assessee's appeal on this ground. 4. Disallowance of Prior Period Expenses and Miscellaneous Expenses: The Assessing Officer disallowed Rs. 34,23,944 as prior period expenses and Rs. 28,85,358 as miscellaneous expenses. The Tribunal noted that these expenses crystallized during the year under consideration and were claimed after the closing of books of account. The Tribunal, following its decision in the assessee's case for A.Y. 2003-04, allowed these expenses, noting that the genuineness of the expenses was not doubted by the lower authorities. 5. Deletion of Addition by Taking Interest Income on Government and Other Securities on an Accrual Basis: The Assessing Officer added Rs. 4,56,60,998 by taking interest income on an accrual basis, while the assessee had offered it on a due basis. The Tribunal referenced its consistent rulings in the assessee's favor from A.Y. 1991-92 to 2001-02 and noted the Committee on Disputes' decision that there was no loss of revenue to the department. The Tribunal upheld the CIT(A)'s deletion of the addition, dismissing the Revenue's appeal. Conclusion: The Tribunal partly allowed the assessee's appeal, directing the Assessing Officer to recompute disallowance under Section 14A reasonably and to work out depreciation without altering the opening WDV. The Tribunal allowed the depreciation on securities shifted categories and prior period expenses, while dismissing the Revenue's appeal regarding interest income on an accrual basis.
|
