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TMI Blog2015 (2) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee in the present year in respect of write off of bad debts but consequently, he should examine the assessment of the concerned year in which the sale took place and for that year, the assessee should establish that these unrealized sales were not included in the export sales for the purpose of computing deduction u/s 80HH- Decided in favour of revenue for statistical purposes. Disallowance u/s 14A - CIT(A) deleted the addition - Held that:- Disallowance of interest expenditure of ₹ 7,57,380/- does not survive and in respect of disallowance out of administrative expenses, we feel that the disallowance was worked out by the Assessing Officer under Rule 8D to the extent of 0.5% of the average investments. As per the judgment of Hon'ble Bombay High Court rendered in the case of Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT), reasonable disallowance can be made before insertion of Rule 8D and in our considered opinion, disallowance of ₹ 50,000/- is reasonable in the facts of the present case. We, therefore, uphold the disallowance u/s 14A to the extent of ₹ 50,000/- and balance disallowance is deleted. - Decided partly in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent : Shri P. K. Kapoor, C.A. ORDER Per A. K. Garodia, A.M. There is one appeal of the Revenue for assessment year 2005-06 and Cross Objection is filed by the assessee for this assessment year and these are directed against the order of learned CIT(A)-I, Kanpur dated 27/10/2011. In addition to this, there are cross appeals of the assessee and Revenue for assessment year 2006-07, which are directed against the order of same CIT(A) dated 07/12/2011. There is one more appeal of the assessee for assessment year 2007-08, which is directed against the order of CIT(A)-I, Kanpur dated 29/12/2011. All these appeals and Cross Objection were heard together and are being disposed of by way of this common order for the sake of convenience. 2. First we take up the appeal of the Revenue for assessment year 2005- 06 i.e. I.T.A. No.58/Lkw/2012. 3. Ground No. 1 of this appeal reads as under: 1. The Ld. CIT(A) has erred in law and on facts in giving relief of ₹ 24,57,522/- on account of bad debts as the assessee company was not able to explain and give evidence how the debts in respect of export sales were declared as bad debts and whether any steps were taken to rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be allowed but if it is on account of capital goods, it should not be allowed. Now in the appeal, the Revenue has raised the issue regarding the relief allowed. Considering the facts of the present case, we are of the considered opinion that the disallowance of bad debts is to be allowed in the present year because it is not in dispute that debits were written off in the present year. Regarding the objection of the Assessing Officer that these bad debts are in respect of export sales, we are of the considered opinion that in consequence to the claim of the assessee regarding write off of bad debts in respect of export sales, it has to be seen as to whether such sale was considered for the purpose of allowing deduction u/s 80HHC in the year of sale. Normally export sales are reduced by the amount of sale, which was not realized within the prescribed period. Still we feel that in the interest of justice, the Assessing Officer should look into this aspect and examine the details of the year of sale for which debts were created and now written off. The assessee should furnish these details before the Assessing Officer and Assessing Officer should thereafter allow deduction to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered in the case of CIT vs. Hero Cycles Ltd. [2010] 323 ITR 518 (P H) and in the case of CIT vs. Winsome Textile Industries Ltd. [2009] 319 ITR 204 (P H) and following these judgments, it was held by him that since no nexus/proximity between the borrowed funds and investment made has been demonstrated by the Assessing Officer, no disallowance is called for out of interest expenditure. He has also referred to the judgment of Hon'ble Bombay High Court rendered in the case of CIT vs. Reliance Utilities Power Ltd. 313 ITR 340 (Mum) in which it was held that if interest free funds were sufficient to meet the investments, it has to be held that borrowed funds were not used for making investment. On this basis, he deleted the entire disallowance made by the Assessing Officer u/s 14A of the Act. 8. This is by now settled position of law that Rule 8D is not applicable in the present year because the same is applicable from assessment year 2008- 09. Therefore, the assessment order on this issue is not sustaiable because on this issue, the assessment order is as per Rule 8D. 9. Now we examine the applicability of various judgments followed by learned CIT(A) to delete this di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s set off against any interest income. In fact, there is no interest income in the present case as per profit loss account appearing on page No. 7 of the paper book. 9.3 Now we examine the applicability of the judgment on Hon'ble Bombay High Court rendered in the case of CIT vs. Reliance Utilities Power Ltd. 313 ITR 340 (Mum). Regarding this judgment, we find that this judgment is not in context of section 14A of the Act because in that case, the disallowance was made by the Assessing Officer u/s 36(1)(iii) and therefore, in our considered opinion, this judgment is not relevant in the present case where disallowance is made u/s 14A of the Act. 10. As per above discussion, we have seen that none of the judgments, followed by learned CIT(A) is applicable but still it has to be held that Rule 8D is not applicable in the present year and therefore, as per the judgment of Hon'ble Bombay High Court, reasonable disallowance has to be made. As per the balance sheet of the assessee company, available on page No. 6 of the paper book, we find that investment is to the tune of ₹ 505.99 lacs whereas capital and reserve were to the tune of ₹ 8,001.21 lacs. As on 31/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act 1961 ]. 2. BECAUSE for the reason that the Assessing Officer did not have the authority to make the above referred assessment order, various disallowances / short allowances as made by the Assessing Officer [and sustained also by the Ld.CIT (Appeals)-I, Kanpur] in terms of the appellate order dated 27.10.2011, as per particulars given below:- SI.NO. Particulars of disallowance / short allowance as sustained by the Ld. CIT(Appeals) Amount (Rs.) (i) Vehicle running expenses 5,12,925 (ii) Short allowance of deduction under section 80IB, by excluding duty draw back amounting to ₹ 49,01,555 from the computation of eligible profit for deduction under section 80IB 14,84,185 are wholly vitiated. 3. BECAUSE otherwise also, the assessee/Respondent being a corporate entity, no disallowance out of vehicle running expenses could have been made on the ground of 'personal user' and disallowance of ₹ 5,12,925/- as made/sustained by the 'Authorities' below is wholly erroneous. 4. BECAUSE as far as the assessee/respondent is concerned, expenses claimed under the head 'Vehicle Running Expenses', had been incurred, laid out and expended wholly and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue thereof can be added in the perquisites of the concerned director but no disallowance can be made in the hands of the company. Respectfully following this judgment of Hon'ble Gujarat High Court, we hold that in the present case also, no disallowance is justified on the basis of personal user of vehicle by the director. This ground is decided in favour of the assessee. Ground No. 3 4 of the Cross Objection are allowed. 17. Regarding ground No. 5, 6 7, it was fairly conceded by Learned A.R. of the assessee that this issue is now squarely covered against the assessee by the judgment of Hon'ble Apex Court rendered in the case of Liberty India vs. CIT [2009] 317 ITR 218 (SC). He However, submitted that another judgment of Hon'ble Apex Court rendered in the case of B. Desraj vs. CIT [2008] 301 ITR 439 (SC) was not brought to the notice of Hon'ble Apex Court in the case of Liberty India (supra) and therefore, instead of following the later judgment of Hon'ble Apex Court in the case of Liberty India, the judgment of Hon'ble Apex Court in the case of B. Deshraj (supra) should be followed. But we do not find any merit in this submission of Learned A.R. of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. It was fairly agreed by both the sides that the issues raised by the assessee in this appeal are similar to the issues raised by the assessee in its Cross Objection for assessment year 2005-06 and therefore, the same can be decided on similar line. We find that while deciding the Cross Objection of the assessee, we have decided the issue against the assessee regarding the validity of the assessment proceedings and deduction u/s 80IB raised by the assessee in the present year as per ground no. 1 to 4. Accordingly, these issues are decided against the assessee and ground No. 1 to 4 are rejected. 21. As per ground No. 5, the issue is regarding short deduction allowed by the Assessing Officer u/s 80G of the Act. We find that this issue was raised by the assessee before CIT(A) as per ground No. 8 but there is no decision of CIT(A) in respect of this ground. Before us also, no argument was made by Learned A.R. of the assessee with regard to this issue. As per the assessment order, we find that it is noted by the Assessing Officer that regarding the claim of ₹ 15 lac related to Shyam Behari Mishra Memorial Charitable Trust, no details have been filed by the assessee and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these facts, we are of the considered opinion that in the present year also, no disallowance is called for u/s 14A out of interest expenditure. In the present year, the Assessing Officer has made disallowance of ₹ 6,78,789/- out of interest expenditure as per Rule 8D and disallowance of ₹ 1,63,207/- was made u/s 14A in respect of administrative expenses to the extent of 0.5% of average investment. Since Rule 8D is not applicable, we feel that in the facts of the present case, the disallowance of ₹ 50,000/- in respect of administrative expenses will serve the interest of justice. We confirm the disallowance u/s 14A to the extent of ₹ 50,000/- and delete the balance disallowance. This issue is partly allowed. 25. In the result, the appeal of the Revenue stands partly allowed. 26. Now we take up the appeal of the assessee for assessment year 2007- 08 i.e. I.T.A. No.100/Lkw/2012. In this appeal, the assessee has raised the following grounds: 1. BECAUSE the 'return' filed by the assessee/respondent on 31.10.2007 having not been taken up for scrutiny, as per the provisions contained in clause (ii) of sub-section (2) of section 143, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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