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2015 (7) TMI 529 - AT - Income TaxDisallowance of deduction in respect of loss in the value of shares of ICO Global Holdings Ltd. in the computation of its business income - assessee has raised an alternative ground that the loss on the shares of ICO Global Holding Ltd. is admissible as a capital loss - Held that - Transfer within the meaning of section 2(47) of the Act is an inclusive term including extinguishment of any right in an asset as held inter alia in CIT vs. Collis (2001 (2) TMI 9 - SUPREME Court) Karthikeya V. Sarabhai vs. CIT (1997 (9) TMI 2 - SUPREME Court) Sath Gwaldas Mathuradas Mohata Trust vs. CIT (1987 (1) TMI 78 - BOMBAY High Court ) and DCIT vs. BPL Sanyo (2008 (2) TMI 386 - KARNATAKA HIGH COURT). Further relinquishment is also a transfer u/s 2(47)(1)(i), as is exchanged. The ld. CIT(A) has himself held it to be a case relating to liquidation (page 9 last line of the impugned order). However the ld. CIT(A) has not considered that the shares of I.C.O. Global Holdings Ltd. were actually transferred. The loss was on investment in the shares. The shares were received from the company/liquidator as noted by the ld. CIT(A). Therefore we hold that the loss is a capital loss. Pertinently the issue raised by the assessee that it was a business loss stands decided against the assessee Denial of claim made u/s 80IA of the Act in respect of earth station - Held that - This issue stands consistently decided against the assesee by the Tribunal for the assessment years 1996-97 to 2000-01. Therefore the facts remaining the same for the year under consideration also this issue is decided against the assessee.The assessee had also claimed deduction u/s 80IA of the Act in respect of internet. It is seen that for assessment years 1999-2000 and 2000-01 the Tribunal has set aside this issue to the file of ld. CIT(A). Here also the facts remaining the same and in keeping in view the said appeal Tribunal order this issue is remitted to the file of ld. CIT(A) to be decided afresh on affording due opportunity of being heard to the assessee. Liability to pay interest under section 234D - Held that - Levy of interest u/s 234D would be applicable in these years in view of the decision of Hon ble Bombay High Court in CIT vs. Indian Oil Corporation Ltd.(2012 (9) TMI 517 - BOMBAY HIGH COURT). - Decided against the assessee. Interest u/s 244A needs to be excluded while computing the interest u/s 234B of the Act and this computation needs to be done for the period beginning on 1-6-2003. We order accordingly and remit the issue to the A.O. for the purpose to be decided afresh in accordance with law keeping in consideration the above decisions. Reduction in the cost of depreciable fixed asset by 4.28 crores and in taxing the non-adjustment of cost of fixed asset the depreciation of 1.07 crores on the amount of 4.28 crores - Held that - Here it is not disputed that the assessee had in the succeeding year suo motu made the necessary adjustments and reduction in the cost of depreciable fixed asset. It is only a question of time taken. In fact there is no revenue loss. Therefore directing the A.O. to make necessary verification and grant relief accordingly. Disallowing certain late remittances of Provident Fund (PF) concerning the contribution by the management towards PF and pension fund - Held that - Such contributions are covered under the provisions of section 43-B of the Act as held in CIT vs. Alom Extrusion Ltd. 2009 (11) TMI 27 - SUPREME COURT - Decided in favour of assessee. Disallowance of claim being the amount paid to use the land at Bandra Kurla Complex for 80 years as a business expenditure - Held that - The first alternative claim of amortization in this regard has also been decided against the assessee in CIT vs. Khimline Pumps Ltd. (2002 (9) TMI 94 - BOMBAY High Court) holding such expenditure to the capital in nature. Accordingly this alternative claim is also rejected.The assessee has further raised a second alternative claim i.e. of depreciation in this regard. Since the nature of the expense has already been held to be capital as above the A.O. is directed to allow the depreciation thereon in accordance with law.The issue of allowability of repairs and maintenance expenses (prior deductions being expenses pertaining to the year under consideration) amounting to 3, 41, 222/- as raised on the additional ground stands decided in favour of the assessee by the Tribunal in its case for assessment years 1997-98 1999-2000 and 2000-01. The facts remaining the same the issue of allowability of repairs and maintenance expenses i.e. prior period expenses being expenses pertaining to the year under consideration is decided in favour of the assessee.The assessee has also claimed write-back of repairs and maintenance expenses disallowed in A.Y. 1999-2000 since the expenses related to prior period. These expenses are of 49, 99, 521/- for A.Y. 2000-01. Under similar circumstances the A.O. should verify whether this write-back of repair and maintenance expenses was also subjected to tax for A.Y. 1999-2000 being disallowed in the assessment order and to take steps to avoid double taxation of the same amount as per the Tribunal order for A.Y. 2000-01 for the year under consideration also we remit the matter to the file of the A.O. for making a similar verification and to allow relief accordingly. Levy of penalty u/s 271()(c) - disallowance of claim of business loss on account of ICO Global Holdings Ltd. - Held that - Disallowance of a claim which is not found bogus or inherently incorrect or patently untenable would not ifso facto lead to the conclusion that the assessee has furnished inaccurate particulars of income or concealed particulars of income attracting levy of penalty U/s 271 (1)(C). The assessee has disclosed all the relevant facts and details in respect of the claim during the assessment proceedings and the claim has been specifically explained through the notes of the return of income. Therefore we find that the penalty on the disallowance of claim of business loss on account of written down value of shares of ICO Global in the facts and circumstances of the case does not warrant levy of penalty. Accordingly we delete the penalty on this account. - Decided in favour of assessee. Disallowance of deduction u/s 80IA of the Act on income from earth station undertaking - Held that - As regards the penalty against the disallowance of deduction u/s 80IA on earthstation it is to be noted that the question of law involved in the claim of the assessee is a highly complexed and debatable one as it was finally decided by a larger bench of this Tribunal. Since the issue was referred to the larger bench (SB) of this Tribunal for adjudication which itself manifests that there was possibility of more than one view on this issue. Accordingly the disallowance of claim which involves a highly debatable issue and based on the difference of opinion would not amount to furnishing incorrect particulars of income or concealment of particulars of income on the part of the assessee. Hence levy of penalty on such a debatable legal issue is not warranted and accordingly deleted. - Decided in favour of assessee. Wrong full claim of advance rent as revenue expenditure - Held that - The claim was never shown to be malafide. The A.O. did not elaborate any reasons by recording the finding in the assessment order as to why the assessee was being disbelieved. The claim invited a difference of opinion. All this did not attract levy of concealment of penalty and the ld. CIT(A) has correctly deleted the same. Therefore ground No. is also rejected. Decided in favour of assessee.
Issues Involved:
1. Deduction of loss in the value of shares of ICO Global Holdings Ltd. 2. Claim under section 80IA of the Act for earth station and internet. 3. Charging of interest under section 234D of the Act. 4. Adjustments in the cost of depreciable fixed asset. 5. Late remittances of Provident Fund (PF) contributions. 6. Claim of business expenditure for land use at Bandra Kurla Complex. 7. Allowability of repairs and maintenance expenses. 8. Depreciation on undersea Flag Cable System. 9. Disallowance under section 36(1)(va) and section 43B of the Act. 10. Penalty under section 271(1)(c) of the Act for various claims. Detailed Analysis: 1. Deduction of Loss in the Value of Shares of ICO Global Holdings Ltd.: The Tribunal upheld the CIT(A)'s decision that the assessee was not entitled to a deduction of Rs. 5.17 crores for the loss in the value of shares of ICO Global Holdings Ltd., as it was considered a capital loss. This decision was consistent with the Tribunal's order for A.Y. 2000-01. The Tribunal admitted the alternative claim of the loss being a capital loss, as it was made in the return of income and dealt with by the A.O. and CIT(A). The Tribunal held that the loss was indeed a capital loss, following the CIT(A)'s earlier determination that it was related to liquidation. 2. Claim under Section 80IA of the Act for Earth Station and Internet: The Tribunal dismissed the assessee's claim under section 80IA for the earth station, citing consistent decisions against the assessee for previous years. However, the claim for the internet was remitted to the CIT(A) for fresh consideration, in line with the Tribunal's earlier orders for A.Y. 1999-2000 and 2000-01. 3. Charging of Interest under Section 234D of the Act: The Tribunal rejected the assessee's ground against the charging of interest under section 234D, following the jurisdictional High Court's decision in "CIT vs. Indian Oil Corporation Ltd." However, the Tribunal directed the A.O. to exclude interest under section 244A while computing interest under section 234D, based on relevant case laws. 4. Adjustments in the Cost of Depreciable Fixed Asset: The Tribunal accepted the assessee's grounds regarding the reduction in the cost of depreciable fixed assets and directed the A.O. to verify and grant relief, as the necessary adjustments were made in the subsequent year, resulting in no revenue loss. 5. Late Remittances of Provident Fund (PF) Contributions: The Tribunal accepted the assessee's ground, citing various judicial decisions that contributions made before the due date of filing the return of income are covered under section 43B of the Act. 6. Claim of Business Expenditure for Land Use at Bandra Kurla Complex: The Tribunal rejected the assessee's claim of Rs. 55,64,52,500/- as a business expenditure, following the decision in "M/s Wadhwa & Associates." The Tribunal also rejected the alternative claim for amortization but directed the A.O. to allow depreciation on the amount paid for the right to use the land for 80 years. 7. Allowability of Repairs and Maintenance Expenses: The Tribunal decided in favor of the assessee, allowing repairs and maintenance expenses as prior period expenses pertaining to the year under consideration, consistent with decisions for previous years. 8. Depreciation on Undersea Flag Cable System: The Tribunal rejected the Department's ground against allowing depreciation on the undersea Flag Cable System, following consistent decisions in favor of the assessee for previous years. 9. Disallowance under Section 36(1)(va) and Section 43B of the Act: The Tribunal rejected the Department's ground, consistent with its decision on the assessee's ground regarding late remittances of PF contributions. 10. Penalty under Section 271(1)(c) of the Act for Various Claims: The Tribunal deleted the penalties levied under section 271(1)(c) for the disallowance of the claim of business loss on ICO Global Holdings Ltd., and the disallowance of deduction under section 80IA for the earth station, following similar deletions for A.Y. 2000-01. The Tribunal also upheld the CIT(A)'s deletion of penalties for wrongful claims under sections 80IA, depreciation on GDS, advance rent as revenue expenditure, and depreciation on Interconnect System - TAS, as these were considered debatable issues with no malafide intent. Conclusion: The assessee's appeal in ITA No. 4221/Mum/2005 for A.Y. 2001-02 is partly allowed, the Department's appeal in ITA No. 4219/Mum/2005 for A.Y. 2001-02 is dismissed, the assessee's penalty appeal in ITA No. 1107/Mum/2008 for A.Y. 2001-02 is allowed, and the Department's appeal in ITA No. 1835/Mum/2008 is dismissed.
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