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TMI Blog2012 (7) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... t is a case where estimation was required to be made - estimation at 5% of the dividend income made by the Ld. CIT(A) is reasonable Interest charged under section 234C of the Income Tax Act - plea of the assessee was that due to circumstances beyond its control and because of the events that happened after the date of payment of third installment of advance tax, there was a short fall in payment of advance tax leading to levy of interest u/s.234C of the Act – Held that:- Circumstances set out by the assessee have to be considered only in an petition for waiver of interest made to the administrative authorities and cannot be made in the appellate proceedings in which only liability to tax can be subject matter of the proceedings Deduction of contribution to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) - deduction is claimed by the assessee under the provisions of section 36(1)(xii) of the Act - whether the Trust Deed by which CGTMSE was constituted and the contribution made by the assessee to CGTMSE fall within the objection purpose authorized by the Act by which the assessee was constituted or established - matter remanded to AO Deduction on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Supreme Court for permission of Committee on disputes for filing appeals by public sector undertakings has failed and therefore had to be recalled and accordingly recalled the aforesaid directions. As a result, all the grounds raised by the assessee as well as by the Revenue are required to be considered. We proceed accordingly. 3. ITA No.6771/Mum/2008 is an appeal by the Assessee. Ground no. 1 raised by the assessee in its appeal is with regard to disallowance of Rs.56,99,160 being proportionate amortised amount of lease premium paid to Mumbai Metropolitan Regional Development Authority (MMRDA) in respect of leasehold land treating them as capital expenditure. The Assessee was incorporated on 2nd April 1990 by a special statute viz., The Small Industries Development Bank of India Act, 1989 ( SIDBI Act ). According to section 50 of the SIDBI Act, SIDBI was exempt from income tax till the amendment under section 142 of the Finance Act, 2001 which deleted the section 50 of the SDBI Act with effect from 1 April 2002 i.e. A. Y. 2002-03. Due to this amendment by way of deletion of section 50 of SIDBI Act, SIDBI became liable to income tax with effect from A. Y. 2002-03. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so follow the order of the Ld. CIT(A) in assessee s own case for the A.Y. 2002-03 and 2003-04 in Appeal No.209B/04-05 and 278/04-05 dated 17.03.2006. Before us, it is not in dispute that the Special Bench of the Tribunal in the case of Mukand Ltd. 106 ITD 231 (Mum) (SB) has already taken a view that similar expenditure was capital in nature. Though the dispute in the aforesaid case related to lease of land from MIDC, the same principle will apply to the lease in the case of the assessee as well. The Mumbai Bench of the ITAT in the case of National Stock Exchange of India Ltd. vs. ACIT in ITA No. 3799/Mum/2004 vide order dated 27.04.2011 was also pleased to hold that expenditure in respect of lease from MMRDA in the nature of premium paid was capital in nature. In view of the aforesaid decisions, we are of the view that ground no. 1 raised by the assessee in its appeal is without any merit, consequently the same is dismissed. 6. Ground No.2 raised by the assessee reads as follows :- 2. On the facts and in the circumstances of the case and in law the learned CIT(A) Commissioner of Income Tax (Appeals) [CIT(A)] erred in confirming the disallowances of Rs.50,00,000/- bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he computation of income. The A.O. however held that the Assessee company failed to bring any material on record to prove that no expenses were incurred to earn income which did not form part of the total income under the Act. He disallowed proportionate business expenses in the ratio of dividend and interest income to total receipts. Total receipts during the previous year was Rs.1151.39 Crores out of which income claimed exempt was Rs.10.59 Crores. The proportion of total receipts to income exempt was thus 0.92%. The AO therefore worked out proportionate disallowance of Rs.6,47,68,920 The administrative, interest and finance charges and other expenses during the previous year was Rs.704.01 Crores. Since the Assessee had worked out disallowance on its own at Rs.86,86,554 the difference amount of Rs.5,60,82,366 was added by the AO to the total income by way of disallowance u/s.14A of the Act. 7. On appeal by the assessee, the Ld. CIT(A) held that no part of the interest expenses can be disallowed u/s.14A of the Act, as the assessee had own funds which were sufficient to cover the investment and that there was no material brought on record to show that borrowed funds has been used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies (and even for the tax payer) would be estimation of such expenditure in a logical and rational manner looking to the facts and circumstances of the case. The AR has argued that the activity of earning of dividend income involves negligible expenses. I agree that the only activities which can be attributed to it are management s decision making process regarding investment and thereafter collection and deposit of dividend warrants. Towards these activities, in my view, the ends of justice would be served if the administrative expenditure the dividend income which would be around Rs. 50 lacs. I therefore uphold disallowance to the extent of Rs. 50,00,000/- and the balance amount is deleted. 8. Aggrieved by the relief granted by the Ld. CIT(A), the Revenue was preferred Ground No. 1 before the Tribunal. Aggrieved by the action of the Ld. CIT(A) in sustaining addition to the extent of Rs.50,00,000/- the assessee has raised Ground No. 2 in its appeal. 9. We have heard the rival submissions. As far as the disallowance of direct expenses in the form of interest is concerned, the finding by the Ld. CIT(A) is that borrowed funds on which interest was paid had not been used for mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect matter of the proceedings. Consequently, Ground No. 3 raised by the assessee is dismissed. 13. The assessee has filed an application for admission of the following additional grounds of appeal : ADDITIONAL GROUNDS OF APPEAL 4(a) On the facts and in the circumstances of the case the lower authorities ought to have considered and allowed the deduction of Rs.51,83,50,000/- paid as contribution to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) being expenditure incurred wholly and exclusively for the purpose of business, and not doing so is wrong and contrary to the facts of the case, the provisions of the Income Tax Act and the Rules and regulations made thereunder. b) The leanred Assessing Officer ought to have granted the said deduction irrespective of the fact that the Appellant had not made any such claim of deduction for contribution to CGTMSE of Rs.51,83,50,000/- in the Return of Income. c) The Appellant prays that deduction be allowed in light of the following : That the contribution is deductible being expenditure incurred for meeting the objects of the business of the appellant; The proposition laid down in National Thermal Pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the objection of the Revenue. We admit the additional ground, as the purpose of the proceedings under the Act is to determine the correct taxable income of assessee. Since the matter requires examination by the AO, we direct the AO to examine this claim after giving opportunity to the assessee and in the light of the additional evidence, which we admit because it is necessary for decision on the claim made by the Assessee. Ground No. 4 is accordingly, considered as allowed. 15. In the result, the appeal by the assessee is partly allowed. 16. ITA No. 7143/Mum/2008 is an appeal by the Revenue. Ground No. 1 has already been decided while deciding Ground No. 2 raised by the assessee for the reason stated therein. Thus ground no. 1 of the Revenue is accordingly, dismissed. 17. Ground No. 2 raised by the Revenue reads as follows :- 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing to grant deduction on account of bad debts written off at Rs.25,25,55,044/- u/s.36(1)(vii) of the I.T. Act, 1961 which was not claimed by the assessee in the return of income. 18. It was the claim of the Assessee before CIT(A) that during the capt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has become bad. The judgment of the management for this purpose and the actual write off of the amount in books of account is sufficient. 18.4 It was also submitted that the issue is now settled by special Bench of Mumhai Tribunal in the case of DIT v. Oman International Bank SAOG, 102 TTJ 207 wherein it was held that claim of had debt is to he allowed in the year in which such debt has been written off us irrecoverable in the accounts of the assessee. The assessee is not required to prove that the debt has become bad. 19. The Ld. CIT(A) held as follows : 8.2 I have carefully considered the above submissions as well as facts of the case. I have also gone through the material brought on record and order of the assessing officer. The facts of this issue have been discussed in detail in the case of the appellant in Assessment Years 2002-2003 and 2003-2004 in Appeal Nos. CIT(A)XXXII/IT 209B/04-05 and CIT(A)XXXII/IT 278/04-05 dated 17.03.2006 respectively. In those years this ground was not allowed. 8.3 However, I do not agree with my predecessor(s) on this issue. Further, it seems they failed to appreciate that the appellant is in the business of money lending. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal is not allowed. It is thus seen that my predecessor failed to consider the provisions of Section 36(2) and 36(I)(vii). 8.4 It was however also pointed out by the A.R. of the appellant that the decision in the case of State Bank of Travancore v/s Addi. CIT (ITA Nos. 465 466/COCH/1998) A.Y 1994-95 1995-96 is also applicable to the present case. In this case, the Tribunal accepted the contention of the assessee bank and held that the entire bad debts written off by the assessee bank are allowable u/s.36(1)(vii) as the opening balance in the provision account was only a debit balance. The appellant s case is also on similar lines. In the instant case the appellant has recast the account of the provision for bad doubtful debts. It is clear from the said provision account that the opening balance in the provision account as on 1.4.2003 is showing net debit balance of Rs.181.40 crores. Accordingly, the appellant was eligible to claim the entire deduction of bad debts written off of Rs.25,25,55,044/-. 20. The Ld. CIT(A) also held that the admission of the additional grounds for the first time before the Ld. CIT(A) can be admitted because it is a legal claim and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s High Court and also the Hon'ble Supreme Court relied upon by the Revenue were analysed and distinguished. Similarly, here also we are of the opinion that the proposition laid down by the Hon'ble Madras High Court in the case of S.S. Thiagarajan (supra) and by the Hon'ble Supreme Court in the case of Hariprasad Co. Pvt. Ltd. (supra) cannot be applied to the facts of the case. Coming to the second proposition that the assessee is a banking institution so second part of provisions of section 36(2) will apply is also correct. The assessee is a bank and amounts lent, which have become bad, represent the money lent in the ordinary course of business of banking and the condition that the bad debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such bad debt or part thereof is written off or of any earlier previous year does not apply, as the assessee is in banking or money lending business. Since the assessee s banking business is continuing from earlier years the amount of bad debt identified during the year is allowable as deduction under section 36(1)(vii) as it represents money lent in the ordinary c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof, which is written off is allowable to the assessee under section 36(1)(vii) r.w.s. 36(2) the A.O. is directed to examine the claim vis-a-vis the proviso, as deduction under section 36(1)(viia) was also allowed. The AO is directed to compute the deduction/claims keeping in view the provisions of the Section 36(1)(vii) and 36(1)(viia). With these directions, assessee s grounds are considered allowed in both the assessment years. 21. Aggrieved by the order of the Ld. CIT(A) the Revenue has raised Ground No. 2 before the Tribunal. 22. Before us, the learned DR submitted that the Assessee did not raise this ground before the AO and the issue was raised for the first time before CIT(A). It was his submission that the CIT(A) has powers u/s.250(5) of the Act to consider any ground provided the omission to raise the ground in the original grounds of appeal was not wilful or unreasonable. It was pointed out by the learned DR that there is no finding in the order of the CIT(A) that omission to raise the ground regarding deduction u/s.36(1)(vii) of the Act was not wilful or unreasonable. Therefore the issue has to go back to CIT(A) for fresh consideration. In this regard reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity of looking into such reconciliation. It was submitted that additional evidence without factual verification should not be admitted by appellate authorities and in this regard relied on the decision of Hon ble H.P. High Court and Bombay High Court in the case of CIT Vs. Shree Kangra Steel (P) Ltd. And Shriram DAgdulal (HUF) Vs. CIT, 320 ITR 691 (HP) and 161 ITR 42 (Bom) respectively. 24. Lastly it was submitted that the AO after giving effect to the impugned order of the Tribunal reopened the assessment of the Assessee and gave a finding that the Assessee has availed of double deduction u/s.36(1)(vii) of the Act and has sought to revoke the same. 25. In his reply the learned counsel for the Assessee submitted that the learned CIT(A) in his order has considered as to why he is admitting the additional ground raised before him for the first time and it is not correct to say that he has not given a finding in this regard. Our attention was drawn to the order of the CIT(A) from para 8.5 and 8.6 of CIT(A) s order. The CIT(A) has even considered the case of NTPC(supra) and Goetz India Ltd. 284 ITR 323 (SC) and several other decisions. The material on which the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument is regarding opportunity to the AO. In this regard, we find that the grounds of appeal of the revenue project the grievance of the revenue only with regard to the fact that the claim was not made in the return of income and therefore cannot be entertained. In this regard, we find that the CIT(A) has relied on Circular No.14 of 11.4.1955 of CBDT which says that Officers of the Department must not take advantage of ignorance of an assessee as to his rights and guide the Assessee of any rights available to him in law. In our view it is also in consonance with the principle that there shall be no tax without the authority of law. If in law an Assessee is not liable to be taxed on a particular income, the same cannot be foisted on the Assessee because of procedural lapses. The assessment and other proceedings under the Act are for determination of correct tax liability of an Assessee in accordance with law. Keeping the above spirit in mind, in our view the CIT(A) has rightly allowed the claim of the Assessee and the reasons given by the CIT(A) for doing so, in our view are acceptable and we agree with the same. 28. Even on merits of the claim of the Assessee, we are of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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