9911796707
TMI Blog2015 (11) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as deduction u/s 43B of the Act is not a requirement and the decision of the Hon'ble Calcutta High Court in the case of Associated Pigments Ltd. Vs CIT (1998 (9) TMI 78 - CALCUTTA High Court) supports the plea of the assessee in this regard. The only objection which remains for consideration is as to whether in the absence of a revised return of income filed by the assessee making claim for deduction on account of interest expenses the deduction can be allowed. The reliance placed by the revenue in this regard is on the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. (2006 (3) TMI 75 - SUPREME Court ) wherein it has laid down that the AO cannot consider a claim made by an Assessee before him, in the absence of such claim being made in the return of income or a revised return of income. As rightly contended by the ld. Counsel for the assessee, such a bar does not extend to the appellate authorities under the Act. The decisions referred to by the ld. Counsel for the assessee squarely support the stand of the assessee in this regard. We, therefore, hold that a sum should be allowed as deduction. - Decided in favour of assessee. Addition of interest on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rification by the AO and if factually it is found that there was such a write off than the deduction claimed by the Assessee had to be allowed as deduction as the conditions for allowability of such deduction laid down u/s.36(1)(vii) of the Act are satisfied. The decision referred to by the CIT(A) in the case of State Bank of Hyderabad (2005 (3) TMI 403 - ITAT HYDERABAD-B ) is a case where factually there was no write off as bad debts in the books of accounts. The said decision will not apply to the facts of the present case. We therefore allow ground of assessee subject to verification of the write off in the debtors account as stated above. Computation of interest under section 234C - Held that:- The plea of the Assessee that the charging of interest u/s.234C of the Act should be with reference to the tax on total income declared in a revised computation of income filed and not on the tax payable on the total income declared in the original return of income is contrary to the provisions of explanation to Sec.234C(1) of the Act. Charging of interest is mandatory and if there are good ground waive interest than it is for the Assessee to seek appropriate remedies open to it in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1283, 1283/Kol/2012, C.O.No.104/Kol/2012 - - - Dated:- 16-10-2015 - N. V. Vasudevan, JM And M. Balaganesh, AM For the Petitioner : Shri Rajat Subra Biswas, CIT(DR) Shri Pinaki Mukherjee, JCIT, Sr. DR For the Respondent : Shri J P Khaitan, Sr. Adv. Shri Ananda Sen, Adv. ORDER Per Shri N. V. Vasudevan, JM ITA No.388/Kol/2008 is an appeal by the assessee while ITA No.464/Kol/2008 is an appeal by the revenue. Both these appeals are directed against the order dated 21.01.2008 of CIT(A)-VI, Kolkata, relating to AY 2001-02. ITA No.388/Kol/2008 (Assessee's appeal): 2. Ground Nos.1 and 2 raised by the assessee read as follows :- I. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) erred in not granting relief u/s 43B of the Income tax Act 1961 in respect of interest aggregating to ₹ 14077397/- on term loan paid to ICICI during the previous year relevant to the assessment year 2001-02 when no claim for deduction was made by the Appellant on this account in any other assessment year. II. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) should have held that mistake in not recognizing i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit and loss account was not made owing to a mistake. CIT(A) however rejected the claim of the assessee on the ground that the amount in question was not debited in the profit and loss account and no revised return was filed by the assessee nor was the interest expenses in question shown as allowable or disallowable u/s 43B of the Act. 5. Aggrieved by the order of CIT(A) the assessee has raised ground nos.1 and 2 before the Tribunal. 6. We have heard the submissions of the ld. Counsel for the assessee and the ld. DR. The ld. Counsel for the assessee besides reiterating the submissions made before CIT(A), further submitted that the requirement of debit in the profit and loss account of interest expenses is not required and in this regard made reference to the decision of the Hon'ble Calcutta High Court in the case of Associated Pigments Ltd. Vs CIT (supra). With regard to the assessee not having filed the revised return of income, the ld. Counsel for the assessee referred to the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. Vs CIT 284 ITR 323 (SC) and submitted that the aforesaid decision only bars a claim being considered by AO without filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. The reliance placed by the revenue in this regard is on the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. (supra) wherein it has laid down that the AO cannot consider a claim made by an Assessee before him, in the absence of such claim being made in the return of income or a revised return of income. As rightly contended by the ld. Counsel for the assessee, such a bar does not extend to the appellate authorities under the Act. The decisions referred to by the ld. Counsel for the assessee squarely support the stand of the assessee in this regard. We, therefore, hold that a sum of Rs..1,40,77,397/- should be allowed as deduction. We hold and direct accordingly and allow the grounds raised by the assessee in this regard. ITA No.464/Kol/2008 (Revenue's appeal) 10. Ground No.1 raised by the revenue reads as follows :- 1. That the Ld. CIT(A) has erred in law as well as on facts by deleting the addition of interest of ₹ 1,24,31.423/- made on account of non-provision of interest on Nonperforming Asset (NPA). 11. The factual background with regard to the ground raised by the revenue are that the assessee had not recognized as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. It is also seen that section 43D of the Act is applicable in assessee's case. The relevant provisions of Sec.43D of the Act reads thus: Sec.43D: Special provision in case of income of public financial institutions, public companies, etc. Notwithstanding anything to the contrary contained in any other provision of this Act,- (a) in the case of a public financial institution or a scheduled bank or a State financial corporation or a State industrial investment corporation, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the Reserve Bank of India in relation to such debts; (b) in the case of a public company, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed700b having regard to the guidelines issued by the National Housing Bank in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or the State financial corporation or the State industrial investment corporation or the public company to its pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt or the year in which this is actually received whichever is earlier. The categories of bad or doubtful debts interest in respect of which is covered by section 43D have been prescribed by rule 6EA of the IT Rules 1962. The assessee's NPA falls within the purview of Rule 6EA. 16. In the assessment order for the assessment year 2001-02,. The AO following order of the CIT(A) for the assessment year 2002-03, held that the assessee did not fall in the categories of institution mentioned in section 43D. In the assessment order for the assessment year 2004-05 the AO held that the assessee did not fall under section 43D because it was not notified under section 4A(2) of the Companies Act, 1956. We are of the view that section 4A is in respect of public financial institutions only, a category separately covered by Explanation (c) of section 43D. The assessee, being a State Industrial Investment Corporation, it is covered by Explanation (f) and it is of no consequence that it is not a public financial institution within the meaning of Explanation (c). 17. It is also pertinent to mention that the entire interest on NP A was offered to tax in the assessment year 2006-07. At page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in judging whether there had been income or not. In Shiv Prakash Janak Raj's case (supra), for the assessment year 1968- 69, resolution for waiver of interest was passed during the previous year but for the assessment years 1969-70 to 1971-72, such resolution was passed after the expiry of the relevant previous year. The revenue did not press its case for the assessment year 1968-69. The Hon'ble Supreme Court held that interest for the assessment years 1969- 70 to 1971-72 had accrued to the assessee and the resolution for waiver after the expiry of the relevant previous year only meant that the assessee had given up the income which had accrued to it. As such, it was held that interest was chargeable to tax for the assessment years 1969-70 to 1971-72 on the basis of accrual. In that context, reliance was placed on State Bank of Travancores case to hold that the concept of real income cannot be employed so as to defeat the provisions of the Act and the Rules. Further there can be no dispute with regard to the proposition laid down in Tuticorin Alkali's case(supra) but the fact is that there is no accrual of income in so far as the assessee is concerned. 20. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire interest was accounted for and offered to tax by the assessee in the assessment year 2005-06. In this connection, attention is invited to Note 6 of the assessee's accounts for the financial year ended March 31, 2005 at page 33 of the Paper Book in ITA No. 1080/K/2009 for the assessment year 2005-06. It was submitted that in the event the grounds relating to interest on recurring deposit in the revenue's appeals for the assessment years 2001-02, 2003-04 and 2004-05 are adjudicated against the assessee, the AO should be directed to exclude such interest accounted for and offered to tax in the assessment year 2005-06 from the assessment for that year. 25. On behalf of the revenue, reliance was placed on the judgment of the Hon'ble Supreme Court in CIT v T.N.K. Govindarajulu Chetty, (1987) 165 ITR 231 (SC). That case related to interest on land acquisition compensation and it was held that such interest accrued on year to year basis. In the instant case, there was no accrual since the interest was neither due nor receivable until maturity. The decision of the Hon'ble Supreme Court in CIT v. A.Gajapathy Naidu, (1964) 53 ITR 114 (SC) sought to be relied upon on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I to III raised by the Assessee reads as follows: I. That on the facts and in the circumstances of the case, ,the Ld. CIT(Appeals) erred in holding that interest amounting to ₹ 503100000/- taxable in the hands of the Appellant with regard to deposit with Pay and Accounts Office, Government of West Bengal, when the right to receive such interest income was not finally determined during the previous year relevant to the assessment year 2003-04. II. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) erred in not following the Order of the jurisdictional Income Tax Appellate Tribunal in respect of interest income on deposit with Pay Accounts Office in the Appellant's own case for the immediately preceding assessment year 2002-03 on the same issue when facts in both the assessment years were identical. III. That the Ld. CIT(Appeals) erred in not following the Order of the jurisdictional Income Tax Appellate Tribunal in the Appellant's own case for the assessment year 2002-03 when the same was accepted by the Department. 32. The facts with regard to the aforesaid grounds of appeal are as follows: The assessee has made depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntified the same at ₹ 50.31 Crores which was quantified by the Comptroller and Auditor General in his comments u/s.619(4) of the Companies Act, 1956 on the accounts of the Assessee. Accordingly a sum of ₹ 50.31 Crores was added to the total income of the Assessee. 35. Before CIT(A) the Assessee pointed out that in AY 2002-03 identical issue was considered by the Tribunal in Assessee's own case in ITA No. 395/Kol/2006 and by order dated 25.8.2006 the addition made by the revenue authorities was deleted by the CIT(A). The CIT(A) was however of the view that the letter dated 13.6.2001 of the Principal Secretary, Government of West Bengal actually decided the rate of interest and therefore interest income should be deemed to have accrued to the Assessee as and from the said date. According to the CIT(A) the letter dated 5.3.2004 and 31.3.2204 was only a confirmation of what was already decided and was not a letter which creates liability of the Government to pay interest and the right of the Assessee to receive interest. On such reasoning, the order of the AO was confirmed by the CIT(A). 36. We have heard the rival submissions and perused the letters dated 13.6.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the factual background as above, we are of the view that there was no accrual of interest income in the previous year relevant to AY 2003-04 and the addition made by the AO and confirmed by the CIT(A) cannot be sustained. The same is directed to be deleted and grounds No.I to III are allowed. 38. Ground No.IV raised by the Assessee reads as follows: V. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) should have held that ₹ 264324776/- being interest income on loans credited in earlier financial years was an allowable deduction in computing the total income when the same was reversed following the RBI Prudential Norms and Directives on the relevant assets becoming Non-Performing Assets (NPA) and written off in the Profit and Loss Account and shown by way of reduction from the interest income in the previous year relevant to the assessment year 2003-04. 39. The material facts relating to the 4th ground are that during the previous year relevant to the assessment year 2003-04 the assessee had to reverse interest income of ₹ 26,43,24,776/- accounted for in earlier financial years since the assets concerned became NPA d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the rival submissions and are of the view that that if there is a write off the interest amount in question in the debtors account, than the deduction should be allowed. The facts show that there was a debit to the profit and loss account of a sum of ₹ 26,43,24,776 because the credit side of interest income shown in the profit and loss account was reduced to this extent and this has the effect of a debit to the profit and loss account. However as to whether the debtors account was reduced to the extent of ₹ 26,43,24,776 by way of write off of interest to that extent is a matter which requires verification by the AO and if factually it is found that there was such a write off than the deduction claimed by the Assessee had to be allowed as deduction as the conditions for allowability of such deduction laid down u/s.36(1)(vii) of the Act are satisfied. The decision referred to by the CIT(A) in the case of State Bank of Hyderabad (supra) is a case where factually there was no write off as bad debts in the books of accounts. The said decision will not apply to the facts of the present case. We therefore allow ground No.IV subject to verification of the write off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. The said provisions and provisions of Sec.,36(1)(viii) of the Act, in so far as it is relevant for the present appeal, read as follows: Sec.36: Other deductions. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28: (viia) in respect of any provision for bad and doubtful debts made by- (c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A): . Explanation : For the purposes of this clause- (v) State industrial investment corporation means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and eligible for deduction under clause (viii) of this sub-section (viii) in respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty per cent. of the profits derived from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses in India for residential purposes; (f) public company shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956); (g) infrastructure facility means- (i) an infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) of section 80-IA, or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette and which fulfils the conditions as may be prescribed; (ii) an undertaking referred to in clause (ii) or clause (iii) or clause (iv) or clause (vi) of sub-section (4) of section 80-IA; and (iii) an undertaking referred to in sub-section (10) of section 80-IB; (h) long-term finance means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years; 50. Both the grounds relate to the assessee's claim for deduction of provision made in accordance with section 36(1)(viia)(c) of the Act amounting to ₹ 1,45,93,510/-. The Assessing Officer held that the assessee having not been notified under section 4A(2) of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s subject to the ceiling laid down in the proviso to clause (viii). The creation and maintenance of the reserve and determination of amount of deduction are matters relating to allowance of the deduction under clause (viii) and have nothing to do with the eligibility for deduction. The CIT(A) was therefore wholly unjustified denying the assessee's claim by referring to the proviso to section 36(1)(viii) which is only for determination of the quantum of deduction. 54. The assessee is a specified entity in terms of Explanation (a)(ii) to section 36(1)(viii). The assessee being a Government company as defined in section 617 of the Companies Act 1956 is a public sector company as per section 2(36A) of the Act. The assessee is engaged in eligible business in terms of Explanation (b)(i) read with clauses (g) and (h) of the Explanation. The assessee is engaged in the business of providing long term finance for industrial and agricultural development and for development of infrastructure facilities in India. In this connection, attention is invited to clause (2) of the main objects of the assessee extracted hereinabove. The infrastructure facilities for the development of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits not to recognise the interest income on accrual basis in relation to the prescribed category of bad undoubtful debts. 60. The aforesaid grounds of appeal are identical to the grounds of appeal raised by the Revenue in ITA No.464/Kol/2008 for AY 2001-02 and arise under same facts and circumstances. For the reasons stated while deciding similar grounds of appeal in AY 2001-02, we do not find merits in these grounds of appeal raised by the revenue. Consequently, the appeal by the Revenue is dismissed. ITA No. 604/Kol/2012 ITA No. 324/Kol/2012: 61. ITA No.604/Kol/2012 is an appeal by the Revenue while ITA No.324/Kol/2012 is an appeal by the Assessee. Both these appeals are filed against the order dated 30.12.2011 and relate to AY 2006-07. ITA No.324/Kol/2012: (Assessee's Appeal): 62. The ground raised by the Assessee reads as follows: 1. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) should have held that write back of provision for Doubtful/Sub-standard Assets of ₹ 14593511/- by the Appellant could not be brought to tax again in the assessment year 2006-07 when the same was already taxed in earlier assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A in the past and now that the said interest income is considered as having accrued to the Assessee under the mercantile system of accounting, the same ought to be offered to tax and taxed and has been done so. The Assessee therefore cannot have any grievance whatsoever in this regard. The first additional ground is accordingly dismissed. 67. The second additional ground raised by the Assessee reads thus: For that in the event ground no.3 of appeal bearing ITA No.984/Kol/2011 being decided against the Assessee the learned Assessing Officer should be directed to exclude interest of ₹ 1,45,63,00,272/- from the income of the Assessment year 2006- 07. 68. This additional ground has been dealt with while dealing with ground No.3 in ITA No.984/Kol/2011 which is an appeal by the Assessee for AY 2007-08, in this very same order. For the reasons stated therein this additional ground of appeal is dismissed. 69. In the result, the appeal by the Assessee is dismissed. ITA No.604/Kol/2011 (Revenue's Appeal): 70. There is a delay of 14 days in filing this appeal by the Revenue. The same has been explained as owing to intervening public holidays and break down of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of the accepted revised computation, no interest under section 234C can be charged on the ground that the income shown in the original return was higher. Thus, the AO was directed to charge interest under section 234C on the basis of revised computation as per the past practice of charging interest with reference to the accepted basis of assessment. Aggrieved by the order of the CIT(A) the Revenue is in appeal before the Tribunal. 73. It was submitted that the CIT(A) was entirely justified in taking the view that he did. Interest under section 234C is payable in case of shortfall in payment of advance tax instalments with reference to the tax due on the returned income. It was submitted that in a case like the assessee's, delay occurs on account of statutory audit and CAG audit and subsequent adoption of accounts at the annual general meeting. After such audit and adoption, there is a likelihood of variation between the income shown in the original return filed within the due date on the basis of unaudited accounts and the income as per the audited accounts. By the time the audited accounts become available, even the period for filing the revised return expires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 208 has failed to pay such tax or,- (i) the advance tax paid by the assessee on his current income on or before the 15th day of September is less than thirty percent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than sixty per cent of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of 1932d[one per cent] per month for a period of three months on the amount of the shortfall from thirty per cent or, as the case may be, sixty per cent of the tax due on the returned income; (ii) the advance tax paid by the assessee on his current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income: Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of underestimate or failure to estimate- (a) the amount of capital gains; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA. (2) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years. 75. Interest u/s.234C is charged for deferment of advance tax and is charged with reference to tax due on returned income. Tax due on returned Income has been defined in explanation to 234C(1) as tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable. The plea of the Assessee that the charging of interest u/s.234C of the Act should be with reference to the tax on total income declared in a revised computation of income filed and not on the tax payable on the total income declared in the original return of income is contrary to the provisions of explanation to Sec.234C(1) of the Act. Charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessment year 2007-08. III. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) should have held that the interest income of ₹ 1456300272/- could not be brought to tax again in the assessment for the assessment year 2007-08 when the same was already taxed in the immediately preceding assessment year, i.e., assessment year 2006- 07, on the basis of materials brought before the Ld. Assessing Officer during the course of assessment proceedings for the assessment year 2006-07, the relevant order passed on 10th December, 2008. IV. That on the facts and in the circumstances of the case the Ld. CIT(Appeals) was not justified in treating a sum of ₹ 750000/- as not admissible under the Income Tax Act, 1961 when the same was claimed by the Appellant as normal revenue expenditure being 1/10th of the amortization expenses for change in Object Clause and the said amount had all along been granted to the Appellant upto assessment years 2006-07. V. That the Appellant craves leave to alter, amend and/or to take additional grounds before or at the time of hearing this appeal. 81. We shall first take up for consideration the first two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made on the basis of revised computation and audited accounts as there was delay in completing the audit. 84. The purpose of the assessment is to arrive at the proper figure of income and it would be a travesty of justice if audited accounts which become available during the course of assessment proceedings are ignored merely because of expiry of the time limit for filing revised return. Further, in the instant case, the assessee also submitted explanation for the difference between the revised return and the revised computation of income (Pages 108C and 108D of the Paper Book in ITA No. 984/K/11). One of the major items of difference was on account of interest of ₹ 145.63 crores on NPA which was offered to tax in the assessment year 2006-07 and therefore, excluded from the revised computation filed for the assessment year 2007-08 on June 23, 2009. The CIT(A) also rejected the assessee's additional ground in respect of the interest of ₹ 145.63 crores relying upon Goetze (India)'s case, which is subject matter of Ground 0.3 of the assessee's appeal. The assessee's submissions in respect of Goetze (India)'s case have been made while dealing with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 1,04,60,946/-. Therefore, the Assessing Officer made an addition of ₹ 48,68,050/- on this account. During the appellate proceedings, the appellant recalculated its disallowance at an amount of ₹ 63,22,363/-. 90. The Assessee had earned dividend of ₹ 41,02,847/- from investments in SBISHF Liquid Plus (Mutual Fund) during the financial year 2007-08, which had been considered as exempt income U/S 10(35) of the Income Tax Act for the assessment year 2008-09. It had invested ₹ 25 crore in SBI-SHF Liquid Plus Units - Institutional Plan Daily Dividend on 11.12.2007 which had since been realized on 5.3.2008. Dividend earned on the said investment was ₹ 39,29,933/- for a period of 88 days (from 11.12.2007 to 5.3.2008). A further sum of ₹ 25 crore was invested by the Assessee in SBI-SHF Liquid Plus Units- Institutional Plan Daily Dividend on 28.3.2008 and dividend aggregating to ₹ 172914/- accrued thereon for a period of 4 days (28.3.2008 to 31.3.2008). Thus, the Assessee had made investments of ₹ 25 crore for 92 days (88 days plus 4 days) in two tranches, on which dividend aggregating to ₹ 41,02,847/- had been earned. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Assessee, it had to realign the outstanding loan and accrued interest into investment which otherwise had been doubtful of recovery. Subsequent to the conversion of unsecured loan into Preference Shares, till date the Assessee Company had not received any amount as dividend on such Preference Shares. Accordingly, investments in Preference Shares of HPL had not been considered by the Assessee investment for the purpose of Rule 8D. 92. On the above submissions, the CIT(A), agreed with the submissions of the Assessee observing as follows: 4. I have carefully considered the observations of the Assessing Officer in the assessment order and submissions of the appellant. The issue is regarding disallowance of % % expenditure as per Rule 80 (2)(iii), relating to the investment in Haldia Petrochemical Ltd. The Appellant-Company is a wholly owned public sector enterprise of the Government of West Bengal. The Appellant is primarily engaged in the business of providing finance for infrastructural development in the State of West Bengal and the Appellant is required to follow the guidelines made by the State Government from time to time. HPL was formed near Haldia Port in the dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments as investments of ₹ 194.62 crores into Preference Shares of HPL. It has given it as a loan and as per the instructions of the West Bengal Government looking into the financial position of the debtor and the policy of the Government; the same was converted as preference shares. The debtor is still incurring losses and no dividend what so ever has been received ever by the appellant. The interest was also not received since long as discussed supra. Therefore, in these facts and circumstances where a loan as a compulsion is converted into preference shares which has not yielded any dividend, the plea of the appellant on equity principle is accepted that the expenses under rule 80(2)(iii) should not be disallowed on the said amount of ₹ 194.62 crores worth of preference shares of HPL. The appellant has accepted that an amount of ₹ 63,22,363/- is disallowable under rule 80(2)(iii) read with section 14A. These grounds of appeal are partly allowed. 93. Before the Tribunal, the revenue's ground of appeal relates to disallowance under section 14A read with rule 8D. It was submitted on behalf of the Assessee that as against dividend income of ₹ 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for, the learned counsel for the Assessee has placed reliance on the following decisions: CIT Vs. Winsome Textile Industries Ltd. 319 ITR 204 (P H) CIT Vs. Corrtech Energy (P) Ltd. 372 ITR 97 (Guj.) CIT Vs. Shivam Motors Pvt. Ltd. 545 Taxmann.com 262 (All) Order dated 26.2.2009 of the Hon'ble Bombay High Court in ITA No.110 of 2009 in the case of CIT Vs. Delite Enterprise Order dated 12.9.2014 of the Bangalore ITAT in the case of M/S. Alliance Infrastructure Projects Pvt.Ltd. ITA No.220,2324, 1043 and 1217/Bang/2013. CIT Vs. Holcim India Pvt. Ltd. 57 Taxmann.com 28 (Del) 97. We have given a careful consideration to the rival submissions and perused the decisions referred to by the learned counsel for the Assessee. The proposition laid down in the aforesaid decision is that in the absence of existence of tax free income there can be no disallowance u/s.14A of the Act. In the present case however there was exempt income and therefore provisions of Sec.14A of the Act have to be applied. The learned counsel for the Assessee has however argued that since no dividend was received on Preference shares the investment in preference share should not be considered for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. 100. Before CIT(A), the Assessee submitted that the claim of the Assessee had all along been accepted by the Department and therefore, on the same set of facts, the Ld. Assessing Officer can not disallow the claim. The Assessee relied on the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Hindusthan Motors Ltd [192 ITR 619} wherein it was held that it is true that there is no res judicata but there must be some substantial ground for one Income Tax Officer to differ from another Income Tax Officer in the earlier assessment year. Reliance was also placed on the decision in the case of Radhaswami Satsang vs. CIT [193 ITR 321} wherein the Hon'ble Supreme Court observed at page 329 that We are aware of the fact, strictly speaking res judicata does not apply for income tax proceeding. Again, each assessment year being unique, what is decided in one year may not apply in the following year but when' a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessment years, I feel that under the income tax law each assessment year is different and it is not necessary to follow a precedence year after year if it is not as per law. 16. In view of the above discussion and respectfully following the judgment of my Ld. Predecessor disallowance of ₹ 7,50,000/- is confirmed and this ground of appeal is dismissed. 101. We have heard the rival submissions. In Gujarat Narmada Valley Fertilizers Ltd. (2013) 215 TAXMAN 0072, the Hon'ble Gujarat High Court held on identical facts that the disallowance of expenses u/s.35D of the Act which is to be allowed over a period of 10 years cannot be disallowed in the 7th year. In that case, Preliminary expenses were amortized claimed as deduction u/s. 35D. The same was allowed in the first year and thereafter for the following 6 AYs. In the 7th AY, the AO restricted deduction on ground that only eligible expenses were allowed to be spread over u/s. 35D and therefore, expenses only to extent that had nexus to eligible projects were admissibl. However, Tribunal, noted that in last seven years, no such disallowances were made and directed such benefit to be granted. On appeal by the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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