2015 (6) TMI 684 - HC - Income Tax

Disallowance u/s 14A read with Rule 8D - Held that - Question No.(i) stands concluded in favour of the respondent-assessee and against the appellant/revenue by the decision of this Court in M/s Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT reported in 2010 (8) TMI 77 - BOMBAY HIGH COURT - Decided in favour of assessee. Denial of exclusion of income exempt u/s 10(35) from the total income of the assessee for the purpose of calculating - whether 85% of the income had been applied for the objects of the trust or not as per the provisions of section 11(1)(a) - Tribunal in setting aside the order of the CIT(A) confirming the order of the AO denying exclusion - Held that - The order passed by the CIT (Appeals) has not dealt with the decisions cited by the respondent-assessee at the time of hearing before it in CIT (Appeals) Vs. Silk & Art Silk Mills Association Ltd. (1989 (10) TMI 35 - BOMBAY High Court) and in His Holiness Silasri Kasivasi Muthukumaraswami Thambiran & Ors. Vs. Agricultural ITO reported in (1977 (11) TMI 57 - MADRAS High Court ) and merely stating that the same are not relevant does not meet the requirement of natural justice viz. An order supported by reasons. In the above view of the matter, the impugned order of the Tribunal setting aside order of CIT (Appeals) and restoring it to him for fresh consideration cannot be found fault with. Disallowance of depreciation - Tribunal allowed claim - Held that - Amount spent on acquiring assets are taken as application of income for the purposes of Section 11 of the Act and the depreciation claimed thereafter on the same amount i.e. the value of fixed assets during the subsequent years is being granted on the user of the same. Accordingly, in view of the decision of this Court in Institute of Banking (2003 (7) TMI 52 - BOMBAY High Court) and Ville Parle Kelavani Mandal (2015 (5) TMI 220 - BOMBAY HIGH COURT ) rendered on 23 March 2015 and an earlier decision in The Watch Tower Bible and Tract Society of India 2015 (1) TMI 480 - BOMBAY HIGH COURT , the Question stands concluded in favour of the respondent/assessee and against the revenue Disallowance of carry forward of excess application of income of the earlier years against the income of the year under consideration - ITAT remanded issue - Held that - The Tribunal had restored the issue for the earlier years to the Assessing Officer to decide the matter afresh and to determine the application of income in terms of Section 11 of the Act. Consequently, the Tribunal set for the subject assessment year aside the order of CIT (Appeals) and restored the issue to the Assessing Officer to consider the same afresh in the light of the decision taken by the Assessing Officer in respect of the orders passed for the earlier assessment years. Thus, the question as framed by the revenue does not give rise to any substantial question of law. - Decided against revenue.

Summary

Issues:
- Appeal challenging common order dated 21 November 2012 passed by the Income Tax Appellate Tribunal for Assessment Year 2006-07 and 2007-08.
- Questions of law raised by the appellant regarding disallowance of expenses, exclusion of income exempt under Section 10(35), depreciation claim, and carry forward of excess application of income.
- Analysis of each question based on legal arguments and precedents cited.

Question No. (i):
The issue revolves around the Tribunal setting aside the order confirming disallowance made by the AO under Section 14A read with Rule 8D of the I.T. Rules 1962. The appellant argued that the Tribunal failed to appreciate the relevance of a previous Bombay High Court decision contested before the Supreme Court. However, the Court noted that the issue was already decided in favor of the respondent-assessee by a previous Court decision, and the SLP filed by the revenue was also dismissed. Consequently, Question No. (i) was not entertained due to lack of substantial legal question.

Question No. (ii):
This question concerns the exclusion of income exempt under Section 10(35) from the total income of the assessee for calculating the application of income under Section 11 of the I.T. Act. The Tribunal set aside the CIT (Appeals) order as it did not consider the relevant decisions cited by the respondent-assessee. The Court found fault with the CIT (Appeals) for disregarding the cited decisions without proper reasoning, leading to the Tribunal's decision being upheld. Therefore, Question No. (ii) did not raise a substantial question of law and was not entertained.

Question No. (iii):
The issue here pertains to the claim of depreciation on fixed assets already shown as application of income under Section 11. The Assessing Officer disallowed the claim, citing double deduction concerns. The Tribunal, following precedent, allowed the depreciation claim, emphasizing that it does not lead to double deduction. The Court supported the Tribunal's decision based on previous rulings and dismissed the revenue's grievance. Question No. (iii) did not give rise to a substantial legal question and was not entertained.

Question No. (iv):
This question involves the carry forward of excess application of income from earlier years against the income of the subject assessment years. The Assessing Officer disallowed the set off, but the Tribunal restored the issue for examination of exemption claim under Section 11 for earlier years. The Court upheld the Tribunal's decision, stating that the issue for the subject assessment year depended on the Assessing Officer's decision for earlier years. Consequently, Question No. (iv) did not raise a substantial question of law and was not entertained.

In conclusion, the High Court of Bombay dismissed the appeals filed by the revenue, upholding the Tribunal's decisions on various issues raised by the appellant. The Court's analysis focused on legal arguments, precedents, and the application of relevant sections of the Income Tax Act, resulting in the rejection of the appellant's contentions.