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2017 (5) TMI 370 - HC - Income TaxAddition u/s 14A - Held that - It does not seem to be in dispute that assessee was already having a surplus reserve Interest free fund out of which investment was made. Therefore, Assessing Officer was not justified in making the disallowance of deduction under Section 14A. Learned Counsel appearing for the Revenue is not disputing that the assessee was having surplus reserved tax free fund, out of which investment was made. Under the circumstances, the learned ITAT has not committed any error in deleting disallowance of deduction under Section 14A of the IT Act. - Decided against revenue Disallowance of deduction of Bad Debts - Held that - The Revenue is not disputing that ₹ 12,00,000/- was towards Bad Debts due and payable by NIFCL with whom the assessee did the business upto 2000-01. It appears that thereafter the same was not recoverable and therefore, in the year under consideration the assessee treated it as a Bad Debt and claimed the deduction under Section 36(1) (vii) of the IT Act. Considering the decision of the Bombay High Court in the case of Shreyas S. Morakhia (2012 (3) TMI 103 - BOMBAY HIGH COURT ), such claim is allowable. Under the circumstances, no error has been committed by the learned ITAT in deleting the disallowance of deduction of Bad Debt - Decided against revenue Present Tax Appeal is ADMITTED to consider the following substantial question of law. Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in deleting the disallowance of deduction u/s 40(a)(ia) of Income Tax Act, 1961?
Issues involved:
1. Disallowance of deduction u/s 40(a)(ia) 2. Disallowance of deduction u/s 14(A) 3. Disallowance of deduction of Bad Debts Analysis: 1. The appeal challenged the ITAT's decision to delete the disallowance of deduction u/s 40(a)(ia) amounting to ?76,09,141. The High Court admitted the appeal to consider whether the ITAT was justified in deleting this disallowance. The Court heard arguments from both sides and concluded that the ITAT's decision to delete the disallowance was correct. The appeal was dismissed concerning this issue. 2. Regarding the disallowance of deduction u/s 14(A) of ?2,10,788, the Court found that the assessee had a surplus reserve interest-free fund from which investments were made. The Assessing Officer's disallowance was deemed unjustified as the assessee had surplus reserved tax-free funds. The Court agreed with the ITAT's decision to delete the disallowance under Section 14A of the IT Act. Consequently, the appeal on this issue was dismissed. 3. The final issue concerned the disallowance of deduction of Bad Debts amounting to ?12,00,000. The Revenue argued that certain requirements under section 36(2) of the IT Act needed to be fulfilled for such a deduction. However, referencing a decision of the Bombay High Court, the Court determined that the claim for bad debts was allowable as the debt was not recoverable and was treated as a Bad Debt by the assessee. The Court upheld the ITAT's decision to delete the disallowance of this deduction. Therefore, the appeal on this issue was dismissed as well. In conclusion, the High Court dismissed the appeal on the disallowance of deductions under sections 40(a)(ia), 14(A), and Bad Debts, upholding the ITAT's decisions in each case.
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