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2017 (6) TMI 68 - AT - Income TaxUnabsorbed depreciation brought forward to be carried forward in the year under consideration - Held that - The intention of the legislature is to provide the benefit of brought forward unabsorbed depreciation to be allowed for unlimited years. It is a fact that the amendment in section 32(2) by the Finance Act will be effective from 1st April 2002, but intention behind the amendment could only be interpreted as if it has the effect retrospectively. In addition to above we also find that the Hon ble jurisdictional High Court in the case of M/s India Jute And Industries Ltd. (2016 (8) TMI 1206 - CALCUTTA HIGH COURT) after having reliance in the case of General Motors (2012 (8) TMI 714 - GUJARAT HIGH COURT) we hold that the decisions of the Special Bench of ITAT in the case of Times Guarantee 2010 (6) TMI 516 - ITAT, MUMBAI has been overruled. Thus we find no reason to interfere with the finding of the Ld. CIT(A). Under the circumstances, this issue of Revenue s appeal is dismissed Addition u/s 40A(9) and 36(1) on account of staff welfare expenses Held that - The issue has already been decided by the Co-ordinate Bench of this Tribunal in assessee s own case to hold that the expenses incurred for welfare of the employees does not come within the purview of section 40A(9). We also find that the case of AO is not excessive or unreasonable expenses. In our view the AO before disallowing the school running expenses should have considered the earlier expenses. More over from the submission of the assessee before the ld. CIT-A, we find that the AO disallowed the expenses on the ground that the order of ITAT cited by the assessee at the time of assessment has not reached finality. The ld. DR has not brought anything contrary to the finding of ld. CIT-A. Accordingly respectfully following the precedent as above we hold that there is no infirmity in the order of the ld. CIT(A) - Decided against revenue Addition on account of gain on settlement of loan - Held that - In the instant case, the fact that the loan was utilized for the acquiring of fixed assets has not been disputed by the AO. Thus, it is clear that the instant loan was not utilized for the trading liability of the assessee and therefore the waiver off the same cannot amount to income which is chargeable to tax. In holding so, we find guidance & support from the judgment in the case of CIT v. Tosha International Ltd. 2008 (9) TMI 31 - HIGH COURT DELHI - Decided against revenue Depreciation on the amount of interest capitalized which was not claimed in the return of income - Held that - ITAT has decided the issue in favour of assessee 2011 (8) TMI 780 - ITAT, KOLKATA whereby it was directed to allow the depreciation on the amount of interest which was capitalized.- Decided against revenue Addition on account of bad debts written off in the computation of income - Held that - It is the established practice once the provision has been created in the books of account against the debtors then the actual bad debt will be written off to the amount of provision only against such provision. Thus, it cannot be inferred that the book debt has not been actually been written off in the books of account. - Decided against revenue Deduction of unabsorbed depreciation u/s. 115JB of the Act though brought forward loss was nil - Held that - The issue is decided by the Co-ordinate Bench of this Tribunal in assessee s own case 2011 (8) TMI 780 - ITAT, KOLKATA as held that assessee was entitled to deduction in terms of clause (iii) of the Explanation to section 115JB(2) of the Act the adjustment of debit balance in the Profit and Loss Account with share Premium Account and Revaluation Reserve made on September 30, 2000, which is required to be excluded from consideration and accordingly, AO is required to determine amount of loss brought forward or unabsorbed depreciation for each of years without taking said adjustment into consideration and allow deduction in respect of lesser of two amounts - Decided against revenue Disallowing the expense u/s 14A - Held that - When there is direct nexuses between the interest expenses and interest income. The ld. AR has not brought anything on record to establish the nexuses between the interest expenses and interest income. Therefore we are not inclined to accept the argument for netting off the interest. Hence, we reject the claim of the assessee. Alternative contention that even if section 14A read with Rule 8D is held to be applicable in the case of the assessee, the Assessing Officer may be directed to compute the disallowance as per Rule 8D of the IT Rules, by taking into consideration only those shares which have yielded dividend income in the year under consideration. Since this issue raised by the assessee as an alternative contention is squarely covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the case of CIT Vs. Teenlok Advisory Services Limited (2016 (8) TMI 682 - ITAT KOLKATA) we direct the Assessing Officer to compute the disallowance as per Rule 8D by taking into consideration only those shares, which have yielded dividend income in the year under consideration. The alternative contention of the ld. counsel for the assessee is accordingly accepted. Disallowances under the provisions of MAT in relation to exempted income we find that the disallowance needs to be made in terms of the clause (f) to the explanation 1 of the provisions of section 115JB of the Act. The provisions of the MAT are self contained code. Thus provisions of section 14A read with rule 8D are not applicable to expenses to be disallowed under clause (f) to the explanation 1 of section 115JB of the Act. In view of above we hold that the AO needs to work out the disallowances independently in relation to exempted income as envisaged in the MAT provisions under the Act. The working for the disallowance of the expenses in relation to exempted income shall be based on the expenses debited in the profit & loss account. Thus in our view the provisions of section 14A read with rule 8D cannot be applied under the provisions of MAT. Thus the assessee s appeal is partly allowed in terms of above.
Issues Involved:
1. Allowance of unabsorbed depreciation brought forward from assessment years 1992-93 to 1997-98. 2. Deletion of addition made under section 40A(9) and 36(1) on account of staff welfare expenses. 3. Addition of gain on settlement of loan under section 28(iv). 4. Allowance of additional depreciation on interest capitalized. 5. Disallowance of bad debts written off. 6. Computation of book profit under section 115JB. 7. Disallowance of expenses under section 14A of the Act. Issue-wise Detailed Analysis: 1. Allowance of Unabsorbed Depreciation: The Revenue contested the allowance of unabsorbed depreciation brought forward from assessment years 1992-93 to 1997-98. The original assessment allowed the carry forward of unabsorbed depreciation, but the CIT revised this, stating the allowance was only up to eight succeeding years. The CIT(A) allowed the appeal in favor of the assessee, referencing the Gujarat High Court's judgment in General Motors India (P) Ltd, which held that the amended section 32(2) allowed carry forward without time limit. The Tribunal upheld this decision, dismissing the Revenue's appeal. 2. Deletion of Addition under Section 40A(9) and 36(1): The Revenue challenged the deletion of additions made for staff welfare expenses. The AO disallowed these expenses, but the CIT(A) allowed them, following the Tribunal's decision in the assessee's own case for earlier years. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal, stating that the expenses were for employee welfare and did not fall under section 40A(9). 3. Addition of Gain on Settlement of Loan: The AO treated the gain from the settlement of a loan as business income under section 28(iv). The CIT(A) deleted the addition, referencing judicial decisions that remission of loan principal used for acquiring fixed assets does not result in taxable income under sections 28(iv) or 41(1). The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. 4. Allowance of Additional Depreciation on Interest Capitalized: The assessee claimed additional depreciation on interest capitalized, which was not claimed in the return of income. The CIT(A) allowed the claim, referencing the Tribunal's decision in the assessee's own case for earlier years. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. 5. Disallowance of Bad Debts Written Off: The AO disallowed the bad debts written off as they were not debited in the profit and loss account. The CIT(A) allowed the deduction, stating that the bad debts were written off against provisions created in earlier years, which were already offered to tax. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. 6. Computation of Book Profit under Section 115JB: The AO did not allow the deduction of brought forward loss while computing book profit under section 115JB. The CIT(A) allowed the deduction, following the Tribunal's decision in the assessee's own case for earlier years. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. 7. Disallowance of Expenses under Section 14A: The AO disallowed expenses under section 14A read with Rule 8D for earning exempt income. The CIT(A) confirmed the disallowance. The Tribunal directed the AO to compute the disallowance considering only those shares which yielded dividend income during the year, following the Tribunal's decision in the case of Teenlok Advisory Services Ltd. The Tribunal also held that the disallowance under section 14A should not be applied under MAT provisions, directing the AO to work out the disallowance independently. Conclusion: The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's cross-objection, directing the AO to recompute disallowances and deductions as per the Tribunal's guidance.
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