9911796707
TMI Blog2015 (5) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... d debts. 4. The facts related to this issue in brief are that the A.O. during the course of assessment proceedings noticed that the assessee had claimed bad debt written off amounting to Rs. 40,16,401/- in the P & L Account. The AO asked the assessee to justify the claim of bad debts. The AO observed that some of the bad debts were related to the sister concerns which by no stretch of imagination could be said to be bad debts. According to the AO, the assessee had not furnished any convincing explanation and had not established that the requisite conditions of Section 36(1) (vii) read with Section 36 (2) of the IT act 1961 (hereinafter referred to the Act) have been satisfied, so as to ponder over the allowability of the assessee's claim. The AO held that the claim of the assessee in respect of these amounts was pre-mature as the assessee by writing off of these debts in its books of accounts could not show the good debts as bad. Accordingly he disallowed a sum of Rs. 40,16,401/- and added back the same to the total income of the assessee reliance was placed on the following case laws :- "Travancore Tea Estates Co. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this regard CIT vs. Vistar Construction Pvt. Ltd, [2010 - TMI - 201401 Delhi High Court ] CIT vs. Modi Telecommunication Ltd, [2010] 325 ITR 291 (Delhi High Court) CIT vs. Bonanza Portfolio Ltd, [2010] 320 ITR 178 (Delhi High Court ) Star Drugs & Research Labs ltd. vs. ACIT [ITA No. 848 / Mad / 2007 dated 15.01.2010" 6. The Ld. CIT(A) after considering the submissions of the assessee deleted the addition by observing in para 5.1. of the impugned order as under : - "I have carefully considered the submissions made on behalf of the appellant, the findings of the Assessing Officer in the assessment order and the facts and circumstances of the case. The position in law is well-settled as far as the provisions of section 36(1) (vii) read with section 36(2) of the Act are concerned. After 1-4-1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee, subject to the provisions of section 36(2) that such debt or part thereof has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Ld. Commissioner of Income tax (appeals) is bad in law on the facts and circumstances of the case and is required to be quashed; 2(a) That the Ld. Commissioner of Income tax (Appeals) has gone wrong in disallowing expenses for earning Dividend Income to the extent of Rs. 4,41,02,912/-; 2(b) That the Ld. Commissioner of Income tax (Appeals) has gone in disallowing expenses for earning dividend Income to the extent of Rs. 4,41,02,912/- by considering those Investment on which no dividend has been received by the assessee company during the year; 2(c) That the Ld. Commissioner of Income tax (Appeals) has gone wrong in disallowing expenses for earning Dividend Income to the extent of Rs. 4,41,02,912/- by considering bank charges as interest; 2(d) That the Ld. Commissioner of Income tax (Appeals) has gone wrong in disallowing expenses for earning Divident Income to the extent of Rs. 4,41,02,912/- by cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strative expenses should have been attributable towards earning of dividend. The AO made a disallowance of Rs. 4,41,02,912/- u/s 14A of the Act read with Rule 8 D of the Income- Tax Rules in the following manner :- S. No. Disallowance Amount(Rs.) 1. The amount of expenditure directly relating to income which does not form part of total income 0 2. In a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula- AX B/C Where A= amount of expenditure by way of interest other than the amount of interest included in clause (1) incurred during the previous year B= the average of value of investment, income from which does not or shall not form part of the total income appearing in the balance sheet of the assessee, on the last day and the last day of the previous year C= the average value of total assets as appearing in the balance sheet of the previous year. A= 8,80,48,978/- B= 77,73,84,314/- C= 1,65,85,27,372/- Hence, disallowance= 4,12,70,283/- 3. An amount equal to on half ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts on which dividend is received during the year are required to be considered for the purpose of disallowance u/s 14A and not all the investments on which no dividend is received during the year. Chennai Tribunal has given its decision after considering the cases of Godrej & Boyce Mfg Co. Ltd. [328 ITR 81 (Bom)] and Walfort Share and Stock Brokers Pvt. Ltd. 233 CTR 42 (SC)." 14. The Ld. CIT(A) after considering the submissions of the assessee observed that the issue involved in the appeal was decided by Delhi Special Bench of the ITAT in the case of Cheminvest Ltd. Vs. ITO (2009) 121 ITD 318 (Delhi) (SB). He also referred to the judgment of the Hon'ble Supreme Court in the case of CIT, Mumbai vs. M/s. Walfort Share & Stock Brokers Pvt Ltd. (2010) 41 DTR(SC) 233 and Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. Mumbai vs. DCIT(2010) 328ITR81(Bom). Thereafter the Ld. CIT(A) observed that from the conjoint reading of the above judgments the following propositions emerged: (a) when the dividend is not taxable at all, the expenditure on rent, taxes, salaries, interest, etc. pertaining to that would also not be allowable because there is no taxable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in right prospective. It was pointed out that for the year under consideration the investment of Rs. 2,00,000/- only was made and no borrowing was taken. It was further stated that from the investment chart it was quite evident that no investment had been made by the assessee from borrowed funds and accordingly interest and financial charges should not have been considered for the purpose of calculation of disallowance u/s 14A of the Act read with Rule 8D. It was further, submitted that the Ld. CIT(A) had also not considered the facts in right prospective and wrongly applied the decision of the ITAT. It was submitted that those investment on which no dividend income was received by the assessee in current year should have been excluded from the investment while calculating the disallowance u/s 14A of the Act. The reliance was placed on the judgment of the Hon'ble Delhi High Court in the case of CIT vs. HOLCIM INDIA P. LTD. reported at [(2014) 90CCH0081 (Delhi)], copy of the said order is placed at page no. 71 to 77 of the assessee's compilation. The reliance was also placed on the following case laws :- 1. DCIT vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. M/s JM Financial Limited vs. ACIT ITA No. 4521/Mum/2012 (ITAT Mumbai) 20. M/s EIH Associated Hotels vs. DCIT In ITA No. 1503/Mds/2012 (ITAT Chennai) 21. CIT vs. Oriental structural Engineers Ltd. In ITA No. 605/2012 (Delhi High Court) 22. M/s GDA Finvest & Trade P. Ltd. in ITA No.3353/Del/2013 (Hon'ble ITAT) 23. CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. (2014) 42 taxmann.com 270. 24. CIT vs. UTI Bank Ltd. (2013) 32 taxmann. Com 370. (Gujarat High Court) 25. ACIT vs. Champion Commercial co. Ltd. ITA No. 644/Kol/2012 (ITAT Kolkata) 26. M/s DCIT vs. REI Agro Ltd. in 160 TTJ 107. (ITAT Kolkata) 17. In his rival submissions, the Ld. DR supported the orders of the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
